„The key issue is transparency,“ says SPD MEP René Repasi, making clear what matters most to him in the EU’s retail investor rules. One of the central elements of the Retail Investment Strategy is the regulation of financial advice for private investors. It is essential, he argues, that consumers receive sound and suitable guidance. „That also means costs – because proper advice requires effort, and that deserves fair compensation,“ says the chair of the SPD group in the European Parliament. „But consumers must be informed about those costs.“

Helge Lach, chairman of the Bundesverband Deutscher Vermögensberater (BDV), and board member at Deutsche Vermögensberatung (DVAG), agrees that costs should always be disclosed – „but they shouldn’t be the main criterion in investment decisions.“

Lach sees the Retail Investment Strategy as overly focused on costs, which he believes is misguided. „Its logic is – costs must be as low as possible for the client to achieve a reasonable return", he says. Yet it is well documented, he argues, that capital markets performance has a far greater impact on investment outcomes than fees.

Social Democrat Repasi also believes that capital market development is the main driver of returns. „But since it's impossible to predict how the markets will perform, high costs could, over time, eat into those returns.“ That’s why, he says, it’s important to be clear with clients about the level of costs and the services provided in return. What matters, he argues, is the quality and relevance of the information disclosed. In Brussels, Repasi observes a widespread belief – the more information consumers receive, the better their decisions will be. „I doubt that,“ says the MEP. Consumers are processing less and less information. The biggest lie we tell ourselves, he adds, is: Yes, I have read and understood the terms and conditions.

„What really matters is the right amount of information – information that actually provides value to the consumer,“ Repasi says. In the case of the retail investor rules, „we haven’t done a good job of finding that balance.“

Repasi and Lach hold particularly opposing views when it comes to the proposed ban on the payment of commissions. The European Commission had initially suggested banning inducements at least for execution–only transactions. However, that ban is no longer part of the current draft versions being negotiated between the European Parliament and the Council. „I still think it makes sense,“ says Repasi. While deliberate mis–selling is rare, many retail investors have an in-built fear that advisors may steer them toward certain products simply because they receive a commission. A ban, he argues, could help eliminate that concern.

Lach strongly disagrees, saying "I don’t consider a commission ban useful or effective at all.“ In his view, clients are only rarely pushed in the wrong direction because of commissions. The alternative to commission-based advice is fee-based advisory – „but charging a fee will only further deter already hesitant retail clients from engaging with capital markets investments.“

In the UK, Lach points out, people looking to invest less than 100,000 pounds can hardly get any advice at all. „So for me, the UK is actually the best counterexample for anyone claiming that fee–based advice works,“ he argues.

Repasi sees it differently. He finds it noteworthy that in countries where commissions have been banned, „the average returns for retail investors have likely been better over the same period – and the share of people investing in capital markets products higher than in Germany.“

There are also differing views when it comes to the Savings and Investment Union. Repasi points out that the EU has committed to building a Capital Markets Union for 15 years – yet Europe’s markets remain fragmented. Savings products are still designed purely at the national level, including their tax incentives. This means, for example, that a German consumer cannot benefit from advantages available in the Spanish market. That’s why, he argues, a European product should give consumers access to a portable financial instrument. However, the Pan–European Personal Pension Product (PEPP), launched a few years ago, failed to gain traction in the market. „So we have to learn from those mistakes and make changes – otherwise PEPP 2 will fail as well.“

Lach agrees in principle that consumers should be able to take a product with them across member states. But he takes a different view on PEPP: „I don’t see the point of a pan-European investment product", he says. “Anyone using a neobroker, he says, can invest in just 15 minutes – in the MSCI, European indices, individual stocks, or a Germany ETF. „It’s misguided to think that Brussels needs to launch a PEPP 2 and remove barriers so that Europeans can invest in financial products.“ The real question, he argues, is why people in Europe don’t invest – despite how easy it already is.