Distribution systems of retail investment products across the European Union : final report.
Date: 2018-02-11
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union
Subjects: capital markets union, cost-benefit analysis, financial market, financial services, insurance, insurance company, investment, report

Distribution systems of retail 
investment products across the 
European Union 

Final report 

mmmll 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DISCLAIMER 

The information and views set out in this study are those of the authors and do not necessarily 
reflect the official opinion of the European Commission. The European Commission does 
not  guarantee  the  accuracy  of  the  data  included  in  this  study.  Neither  the  European 
Commission  nor  any  person  acting  on  the  European  Commission’s  behalf  may  be  held 
responsible for the use which may be made of the information contained therein. 

© European Union, 2018. 

Reproduction is authorised provided the source is acknowledged. 

April 2018          2 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents 

4.3 

4.1 

4.2 

1.1 
1.2 

4.2.1 
4.2.2 
4.2.3 

4.1.1 
4.1.2 
4.1.3 
4.1.4 
4.1.5 
4.1.6 

Table of Contents .............................................................................................. 3 
Introduction ................................................................................................ 5 
1 
Context and objectives of the Study ........................................................ 5 
Basic methodological considerations ........................................................ 6 
2  Mapping of the distribution systems for retail investment products ..................... 9 
2.1  Overview of financial assets of households in the European Union ............... 9 
2.2 
Financial assets of households by Member State ......................................12 
2.3  Mapping of products actively offered to retail investors online ....................17 
2.4  Mapping of products actively offered to retail investors through advice .......20 
2.5  Distribution strategies of financial institutions ..........................................25 
Findings ..............................................................................................32 
2.6 
3  Business case: Accessibility of ETFs to retail investors in the EU .......................34 
4  Overview of costs and charges of investment products ....................................43 
Cost and charges of products purchased at banks and insurance companies 43 
Investment funds ...........................................................................46 
ETFs .............................................................................................54 
Listed bonds & equities ...................................................................56 
Life insurance products ...................................................................59 
Pension products ............................................................................62 
Competition on costs & charges of investment products ......................67 
Costs and charges when investing online .................................................72 
Investment funds ...........................................................................72 
ETFs, bonds and listed equities ........................................................73 
Life insurance and pension products .................................................77 
Findings ..............................................................................................78 
5  Outcomes of different types of advice ............................................................81 
Assessment of the client’s investment objectives ......................................84 
Assessment of the client’s experience and knowledge ...............................86 
Assessment of the client’s ability to bear the investment ...........................88 
Level of information availability ..............................................................92 
Findings ..............................................................................................95 
6  Challenges for consumers with regard to investment products ..........................97 
6.1 
Perception and understanding of the benefits and risks of the different types of 
investment advice ..........................................................................................97 
6.2  Overview of consumer complaints on retail investment products .............. 105 
Findings ............................................................................................ 107 
6.3 
Initiatives to guide the distribution process of retail investment products ......... 110 
7 
8 
Impact  of  online  platforms  and  new  Fintech  solutions  on  retail  investment 
distribution .................................................................................................... 120 
Fund supermarkets, online brokers and banks’ online platforms ............... 120 
Target client segments .................................................................. 120 
Products and services ................................................................... 121 
Distribution strategy ..................................................................... 122 
Level of development .................................................................... 122 
Costs and account minima ............................................................. 123 
Suitability and appropriateness checks ............................................ 124 
Benefits and risks ......................................................................... 125 
Findings ...................................................................................... 127 
Robo-advisors .................................................................................... 128 
Target client segments .................................................................. 128 
Products and services ................................................................... 129 

8.1.1 
8.1.2 
8.1.3 
8.1.4 
8.1.5 
8.1.6 
8.1.7 
8.1.8 

5.1 
5.2 
5.3 
5.4 
5.5 

8.2.1 
8.2.2 

8.2 

8.1 

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8.3 

8.2.3 
8.2.4 
8.2.5 
8.2.6 
8.2.7 
8.2.8 

Distribution strategy ..................................................................... 132 
Level of development .................................................................... 133 
Costs and account minima ............................................................. 134 
Benefits and risks ......................................................................... 136 
Comparison with robo-advisors domiciled in North America and Asia .. 138 
Findings ...................................................................................... 140 
Social trading platforms ...................................................................... 141 
Target client segments .................................................................. 141 
Products and services ................................................................... 141 
Distribution strategy ..................................................................... 142 
Level of development .................................................................... 143 
Costs and account minima ............................................................. 143 
Benefits and risks ......................................................................... 144 
Findings ...................................................................................... 145 
Views of stakeholders regarding online investment platforms ................... 147 
9  Annex 1: Detailed Methodology .................................................................. 151 
9.1  Description of scope ........................................................................... 151 
Countries in scope ........................................................................ 151 
9.2  Definitions ......................................................................................... 152 
Retail investor, execution-only, discretionary management and investment 

8.3.1 
8.3.2 
8.3.3 
8.3.4 
8.3.5 
8.3.6 
8.3.7 

9.1.1 

8.4 

Products...................................................................................... 153 
Distribution channels .................................................................... 156 
9.3  Objectives and methodologies used ...................................................... 157 
Desk research & literature review ................................................... 157 
Online surveys & interviews ........................................................... 158 
Collection of information on retail investment products ..................... 158 
Mystery shopping ......................................................................... 162 

9.3.1 
9.3.2 
9.3.3 
9.3.4 

9.2.1 
advice  152 
9.2.2 
9.2.3 

April 2018          4 

 
 
  
 
 
 
 
 
 
1  Introduction 

1.1  Context and objectives of the Study 

The European Commission’s mandate for the current executive period focuses on 10 top 
priorities,1 one  of which is “Jobs, Growth and Investment”, which aims at stimulating 
investment for the purpose of job creation. Since November 2014, an all-encompassing 
policy  tool  has  been  deployed  to  ensure  that  Europe  achieves  these  objectives  of 
creating  a  market  with  better  jobs,  sustainable  growth  and  with  strong,  steady 
investment. This tool was meant to overcome and reverse the aftermath of the 2008-
2012 financial crisis with its Investment Plan for Europe (the Plan).  

This Plan aims at mobilising circa 315 billion EUR in three years (2015-2017) to support 
and  create  investment  in  the  real  economy.2  To  help  create  an  investment  friendly 
environment within the European Union, the Plan targets progress towards the Digital 
Single Market, the Energy Union and the Capital Markets Union. 

The Capital Markets Union is set to offer businesses greater choice of funding at different 
stages of their development and to provide more options and better returns for savers 
and retail investors.3 

The acceleration towards completing the Capital Markets Union was further emphasized 
in  the  communication  released  by  the  European  Commission  following  President 
Juncker’s 2016 State of the Union address. Specifically affecting the retail investment 
market,  the  European  Commission  highlighted  how  “the  CMU  aims  to  put  European 
savings to better use, improving the efficiency through which savers and borrowers 
are  matched,  and  increasing  the  performance  of  the  EU  economy.  Retail  investor 
engagement is a critical challenge for the development of a stronger capital market in 
the EU. This requires greater confidence among retail investors, and transparency 
to help investors to make the right investment decisions”.4 

The end-goal is to build an integrated capital market in the European Union by 2019. 
To achieve this, the European Commission has set up an Action Plan structured in 33 
separate actions. These actions are entrenched in the different pillars through which it 
deploys this Action Plan:  

  Financing for innovation, start-ups and non-listed companies;  
  Making it easier for companies to enter and raise capital on public markets;  
  Investing for long term, infrastructure and sustainable investment;  
  Leveraging banking capacity to support the wider economy;  

1 European Commission, ‘Priorities’. Accessed October 2016. Available at: https://ec.europa.eu/priorities/index_en  
2 European Commission, ‘Investment Plan’. Accessed October 2016. Available at: http://ec.europa.eu/priorities/jobs-
growth-and-investment/investment-plan_en  
3 Communication from the Commission to the European Parliament, The Council, The European Economic and Social 
Committee and the Committee of the Regions – Action Plan on Building a Capital Markets Union, COM (2015) 468 final, 
30.9.2015. 
4 European Commission (2016), “Communication from the Commission to the European Parliament, the Council, the 
European Central Bank, the European Economic and Social Committee and the Committee Of The Regions Capital Markets 
Union - Accelerating Reform”. COM (2016) 601 final. Available at: http://ec.europa.eu/finance/capital-markets-
union/docs/20160914-com-2016-601_en.pdf  

April 2018          5 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
  Facilitating cross-border investing; and 
  Fostering retail and institutional investment.5  

Generally, less than half of European households (43%) invest in any type of financial 
product with the notable exception of Sweden – where more than 60% of households 
invest – as Swedes seem to be culturally more open to making investments than the 
average  Europeans.6  In  line  with  their  rather  conservative  nature  in  terms  of 
investment, the vast majority of Europeans (80%) have savings to act as a buffer for 
emergencies and unpredictable expenses, see Table 1.  

Table 1: Proportion of households saving and investing across Member States 

Survey respondents 
who have savings (%) 

Survey respondents 
who invest (%) 

Belgium 

France  Germany 

Italy 

Netherlands  Spain 

Sweden 

UK 

Average 

83% 

87% 

75% 

79% 

78% 

81% 

75% 

79% 

80% 

42% 

33% 

44% 

45% 

27% 

44% 

61% 

43% 

43% 

Source: Blackrock 2017 Investor Pulse survey (2017) 

In  order  to  support  further  policymaking,  we  have  been  asked  by  the  European 
Commission to carry out a Study on distribution systems of retail investment products 
across the European Union, analysing specifically:  

  The supply of retail investment products through various distribution channels; 
  The access to financial advice by retail investors and related risks and benefits; 
  The impact of online distribution on the retail investment offering, notably on the 

breadth and terms of the offer, and on investor protection; and 

  The risks and benefits of new distribution models developed by Fintech companies. 

Therefore, with this Study we aim to provide a sound understanding of the market for 
retail investment products, covering its size and functioning, specifically in relation to 
the  type  of  distribution  and  intermediation  channels  available  for  retail  investment 
products.  The  Study  also  covers  the  access  to  and  quality  of  the  advice  delivered  to 
consumers. Finally, it will allow for an assessment of the information made available to 
the retail investor and its compliance with applicable regulations as well as the pricing 
and cost structures across representative European Union Member States. 
In summary, the expected principal outcomes of this Study are:  

  Comprehensive assessment of European markets for retail investment products; 
  Data on the costs of the retail investment products’ offering; 
  Information on the quality of advice services by advice type; and 
  Analysis of the impact of new online distribution models on the retail investor. 

1.2  Basic methodological considerations 

The purpose of this Study is to provide facts and figures on the current functioning of 
European markets for retail investment products. Member States in scope of the Study 

5 European Commission, ‘Capital Markets Union’. Implementation table. Accessed October 2016. Available at: 
http://ec.europa.eu/finance/capital-markets-union/implementation-table_en.htm  
6 Blackrock 2017 Investor Pulse survey 

April 2018          6 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
are the following: Belgium, Czech Republic, Denmark, Estonia, France, Germany, Italy, 
Luxembourg, the Netherlands, Poland, Portugal, Romania, Spain, Sweden and the UK. 
The tender requirements posed specific methodological challenges as this study had to 
cover different types of investments products that fall under different regulations. We 
were not able to identify a suitable  existing methodology  which would set  a common 
framework for all types of products and related regulations across the countries in scope. 
As a result, we needed to develop a methodology specifically for this project that would 
allow for a coherent study of the distribution of different types of investment products 
to retail investors as well as comparability with other previous studies on the topic. A 
major element of the methodology that will be described in detail over the whole report 
is the application of two data collection methods that explicitly mimicked the behavior 
of a financially less sophisticated retail investor seeking for information and advice on 
investment products. Furthermore we relied on classical methods of data collection, e.g. 
desk  research,  literature  review,  online  surveys  and  interviews  with  relevant 
stakeholders. Finally, the list of companies that were covered in the study was created 
with the intent to cover 80% of the retail market in terms of assets under management 
in each country.  

In  the  first  step,  we  mimicked  the  behaviour  of  a  retail  investor  that  was  seeking 
information  on  investment  products  offered  by  distributors  of  investment  products 
(banks,  insurance  companies,  fund  supermarkets,  robo-advisors  and  social  trading 
platforms). This would allow us to understand the breadth and diversity of products on 
offer  and  to  compare  fees.  Our  researchers  therefore  visited  the  websites  of  these 
distributors and recorded the information (particularly information on costs and charges) 
provided for each presented investment product under the “retail customer” sections. 
For  the  sake  of  this  study,  the  term  distributor  refers  to  a  financial  institution  that 
actively  proposes  and  sells  investment  products  to  retail  clients,  no  matter  whether 
these investment products are in-house products or manufactured by a 3rd party. 

In the second step, we mimicked a retail investor who was seeking advice/assistance in 
order to help him choose the investment product(s) that responded to his needs. Our 
researchers carried out a mystery shopping exercise covering different types of advice, 
i.e. non-independent advice through a bank or insurance company, independent advice 
through  independent  financial  advisors  (IFAs)  and  automated  advice  through  robo-
advice platforms. Mystery shops were executed in 10 Member States: Belgium, France, 
Germany, Italy, Luxembourg, the Netherlands, Poland, Spain, Sweden and the United 
Kingdom (UK). While we have undertaken all reasonable efforts to design and conduct 
the mystery shops with a view to capture and analyse the quantitative and qualitative 
aspects of the different types of advice, this method is limited. A detailed explanation 
of the method’s limits is given in the annex. 

This “retail investor view” allowed us to collect data that, within the limitations of the 
methods applied, reflect the experience a retail investor is confronted with when looking 
for information and advice on investment products. 

Annex 1 contains a detailed description of: 

  The  main  criteria  used  in  the  selection  of  the  Member  States  in  scope  of  this 
Study, as the panel of Member States aims to strike a balance between market 
sizes,  dates  of  integration  in  the  EU,  and  the  variety  of  policy  frameworks  in 
place;  

  Definitions used in the Study, relative to: 

- 

Investment  advice: 
management, investment advice; 

retail 

investor,  execution-only,  discretionary 

April 2018          7 

 
 
  
 
 
 
 
 
 
 
- 

Investment  products  in  scope:  investment  funds,  listed  bonds  and 
equities, life insurance products, pension products; 

-  Distribution channels in scope: banks, insurance companies,  IFAs,  fund 

supermarkets, robo-advisors, social trading platforms; 

  Data collection methods applied along the course of the Study, which are briefly 

described below. 

The specific analysis framework used to analyse the collected data is specified in each 
section. 

April 2018          8 

 
 
  
 
 
 
2  Mapping of the distribution systems for retail 

investment products 

In this section we assess the availability of different investment products to European 
retail investors. Results are based on publicly available data from Eurostat and OECD.  

Section 2.1 provides a high-level overview of the retail investment landscape in all 28 
EU  Member  States,  by  considering  statistics  on  the  financial  situation  of  households 
across the EU.  This information should help to set a general framework for the rest of 
Study which will provide a retail investor’s view of the supply of investments products, 
the access to financial advice and the impact of online and Fintech solutions. 

Section  2.2  provides  an  overview  of  the  Member  State-specific  composition  of  the 
financial  assets  of  the  average  household  in  the  15  Member  States  in  scope  of  this 
Study,  including  but  not  limited  to  the  investment  products  that  are  targeted  in  this 
Study. 

Sections 2.3 and 2.4 provide a bottom-up view of which types of products are actively 
distributed to retail investors, either through the webpages of the distributors or through 
advice given to customers. This part of the Study is based on the large data collection 
exercise  carried  out  on  the  websites  of  the  distributors  of  investment  products  (e.g. 
banks, insurance companies and robo-advisors) in the 15 member States as well as the 
Mystery Shopping exercise carried out in 10 Member States. 

In section 2.3 we give an overview of those products that are explicitly distributed by 
financial institutions through their websites. These products are therefore considered to 
be  easily  accessible  to  a  financially  non-sophisticated  retail  investor  seeking  for 
information. 

Section 2.4 maps the products that were proposed to mystery shoppers when seeking 
advice either through personal interaction with banks and insurance companies or robo-
advice platforms.  

For a detailed view of the products offered through fund supermarkets, online brokers 
and social trading platforms, please refer to Section 8. 

2.1  Overview of financial assets of households in the European Union 

Today the EU has a population of more than 511 million,7 with an average age of 42.6.8 
In 2015 the aggregated nominal GDP of EU-28 was above 14.8 trillion EUR,9 leading to 
a GDP per capita of 28,900 EUR.10 The average household’s annual income was slightly 
above 28,000 EUR.11 According to Eurostat data, EU-28 households own more than 33 
trillion  EUR  of  cumulated  financial  assets,  and  their  financial  liabilities  were  equal  to 
30%  of  their  financial  assets  on  average  in  2015.12  This  proportion,  however,  varies 

7 Eurostat: http://ec.europa.eu/eurostat/web/population-demography-migration-projections/overview 
8 Eurostat: http://ec.europa.eu/eurostat/statistics-explained/index.php/Population_structure_and_ageing 
9 Eurostat: http://ec.europa.eu/eurostat/statistics-explained/index.php/National_accounts_and_GDP 
9 IMF 
10 Eurostat: http://ec.europa.eu/eurostat/statistics-explained/index.php/National_accounts_and_GDP 
11 OECD 
12 Eurostat: http://ec.europa.eu/eurostat/statistics-explained/index.php/National_accounts_and_GDP 

April 2018          9 

 
 
  
 
 
 
 
 
 
 
 
 
 
                                           
 
 
significantly  across  Member  States.  For  instance,  households  in  Denmark  (45%), 
Portugal  (43%),  Luxembourg  (42%),  as  well  as  in  Estonia  (39%),  Spain  (38%),  the 
Netherlands  (38%),  and  Poland  (38%)  show  a  financial  asset-to-liability  ratio  well-
above EU average. Conversely, financial liabilities of households in Belgium (20%) and 
Italy (20%) represent a much lower proportion of their financial assets. 

Using pre-financial crisis figures (2007) as a baseline, Graph 1 illustrates the changes 
in  households’  disposable  income  and  the  seasonally  adjusted  GDP  per  capita  since 
2007.  Households’  average  disposable  income  has  experienced  a  continuous  growth 
from 2007 to 2015, increasing on average by 20% over 8 years across the EU. In Poland 
(52%), Estonia (44%), Czech Republic (32%) and Denmark (29%) this progression has 
been  especially  strong,  whereas  it  has  been  below  average  in  Portugal  (10%),  Spain 
(10%), the Netherlands (7%) and Italy (6%). 

Graph 1: Real GDP per capita and household disposable income per capita
Index 2007=100, seasonnaly adjusted

104,7

100,4

100,0
100,0

105,1

94,2

110,4

100,4

108,3

98,1

120,0

111,2

115,6

116,6

112,9

102,3

102,7

106,2

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: Eurostat (2007-2015), OECD (2007-2015)

Real GPD per capita

Real HDI per capita

To a lesser  extent, real GDP per capita has also increased. After a  sharp decrease  of 
6.20% in 2009, EU-28 average real GDP per capita has gradually increased and reached 
its  pre-crisis  level  in  2011.  The  upward  trend  continued  afterwards,  with  a  notable 
increase of 5% in 2015. 

Based on Eurostat data, we analysed the composition of the financial assets held 
by  EU-28  households  (Graph  2).  The  categories  and  sub-categories  are  defined  as 
follows:13 

  Currency  and  deposits  includes:  currency  in  circulation,  transferable  deposits, 
inter-bank  positions,  other  transferable  deposits  and  other  deposits,  both  in 
national and foreign currencies. 

13 Please note that it is our understanding that there is no overlap between financial assets categories and for more details 
on classification of assets you may refer to : European system of accounts (ESA 2010): 
http://ec.europa.eu/eurostat/documents/3859598/5925693/KS-02-13-269-EN.PDF/44cd9d01-bc64-40e5-bd40-
d17df0c69334 

April 2018          10 

 
 
  
 
 
  
 
 
 
 
                                           
 
 
  Debt  securities  includes:  short-term  debt  securities  and  long-term  debt 

 

securities, including structured products. 
Investment  funds  includes:  money  market  fund  shares/units  and  non-MMF 
investment fund shares/units. 

  Life  insurance  and  annuity  entitlements  includes:  financial  assets  representing 
policy and annuity holders’ claim against the technical reserves of corporations 
providing life insurance. This category includes life insurance (both unit-linked 
and  non-unit  linked),  as  well  as  voluntary  pension  subscribed  on  individual 
initiatives (not linked to employment). 

  Pension entitlements includes: pension entitlements either from employer(s) or 
life  (or  a  non-life)  insurer,  claims  of  pension  funds  on  pension  managers  and 
entitlements to non-pension benefits. It is our understanding that this definition 
refers to funded occupational schemes, excluding entitlements from both state-
run  pension  systems  and  voluntary  private  pensions.  As  mentioned,  voluntary 
private  pensions  are  included  in  the  Life  insurance  and  annuity  entitlements 
category. 

  Equities includes: listed shares, unlisted shares and other equity. 
  Financial derivatives includes: financial derivatives (e.g.  options, forwards and 

credit derivatives) and employee stock options. 

  Other includes: loans, non-life insurance technical reserves and provisions, and 

monetary gold and special drawing rights (SDRs). 

Graph 2: Structure of households' financial assets in EU-28 since 2004

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Currency and deposits
Equity
Investment funds
Financial derivatives

Source: Eurostat (2004-2015) 

Pension entitlement
Life insurance and annuity entitlements
Debt securities
Other

Overall,  the  composition  of  households’  financial  assets  in  EU28  has  been  relatively 
stable since 2004. Currency and deposits has remained the largest asset class. After a 

April 2018          11 

 
 
  
 
 
 
 
 
period of increase from 29% in 2004 to 33% in 2008, this portion gradually decreased 
to 30% in 2015. 
After a long period of stagnation around 17% between 2004 and 2008, the proportion 
of  pension  entitlements  started  to  increase  gradually  and  reached  22%  in  2015.  The 
portion of equity has seen a brief period of increase between 2004 and 2007 when it 
reached its peak level at 21%. In 2008, the percentage of equity of total households’ 
financial portfolio fell to 19%, and stagnated around 15% in the following years. 

The percentage of investment funds has experienced downward trends, decreasing from 
9%  in  2004  to  7%  in  2015.  A  similar  trend  is  observed  for  debt  securities,  with  its 
portion dropping from 7% in 2004 to 3% in 2015. 

The proportion of life insurance and annuity entitlements have remained relatively stable 
at around 15%. In addition, less than 1% of households’ financial portfolio have been 
invested in financial derivatives over the period. 

2.2  Financial assets of households by Member State 

In this section, to determine the scope and diversity of the European market in a top-
down approach, the composition of households’ asset portfolio is observed across the 
15  Member  States  under  study.  As  clearly  visible  in  Graph  3,  the  allocation  of 
households’  assets  between  financial  and  non-financial  holdings  differs  significantly 
across Member States. Three groups can be identified among our sample. The first group 
shows  financial  assets  reaching  almost  70%  of  total  holdings,  with  Poland,  Belgium, 
Denmark  or  the  UK.  British  households  are  in  this  case  the  Member  State  with  the 
largest share of financial assets in their holdings (78%). Then, in Member States such 
as Italy, Luxembourg, the Netherlands and Sweden, financial holdings represent around 
60%  of  households’  total  assets  on  average.  Finally,  households  in  Czech  Republic, 
Estonia, France and Germany keep less than half of their assets in the form of financial 
holdings,  with  numbers  ranging  from  44%  in  Czech  Republic  to  35%  in  Estonia.  For 
Portugal, Romania and Spain, the breakdown  of households’ assets into financial and 
non-financial  holdings  is  available  on  neither  Eurostat  nor  OECD,  and  couldn’t  be 
retrieved from any alternate publicly-accessible source.  

April 2018          12 

 
 
  
 
 
 
 
 
 
 
Graph 3: European households’ asset portfolio per country, split between
financial and non-financial assets, in percentage

31%

28%

56%

65%

60%

58%

41%

37%

41%

33%

38%

69%

72%

44%

35%

40%

42%

59%

63%

59%

67%

62%

22%

78%

Source: Eurostat (2015), OECD (2015)
Please note that this chart is based on 2015 data for all countries except Belgium, Estonia and Poland, 
for which latest available year is 2014

Financial assets

Non-financial assets

Graph 4 presents the composition of financial assets held by households across the 15 
Member  States  under  study.  Note  that  the  asset  categories  used  in  this  section  are 
based  on  the  same  definitions  from  Eurostat  as  used  in  Graph  2.  Eurostat  has  been 
used  as  a  primary  data  source  for  this  analysis,  complemented  by  data  from  OECD. 
Please note that data on households’ financial assets exclude monetary gold and special 
drawing  rights  (SDRs),  loans,  and  other  accounts  payable,  which  are  not  considered 
investment  products  and  altogether  represent  less  than  5%  of  households’  financial 
holdings.  While  they  are  not  considered  investment  products  either,  currency  and 
deposits  are  still  included  for  reference,  given  their  predominant  weight  in  EU 
households’ financial portfolios. 

The  overview  of  households’  financial  holdings  gives  indications  on  retail  investors’ 
behaviours, their propensity to invest (or not) in investment products as well as on the 
level of availability of investment products for the general public in the different Member 
States.  Graph  4  shows  important  disparities  between  Member  States  in  the  way 
households allocate their financial wealth. 

Currency  and  deposits  generally  represent  a  very  high  proportion  of  households’ 
financial  holdings.  On  average,  they  constitute  36%  of  households’  financial  portfolio 
across the 15 Member  States analysed.  It is worth nothing, however,  that currencies 
and deposits amount to half or more of households’ cumulated financial assets in several 
Member States, including Portugal (49%), Luxembourg (51%), Romania (52%), Czech 
Republic  (53%),  and  Poland  (55%).  On  the  other  hand,  in  Sweden  (14%),  the 
Netherlands (19%), Denmark (20%) and, to a lesser extent, the UK (25%), a relatively 
low percentage of households’ financial wealth is under the form of currency and bank 
deposits. 

April 2018          13 

 
 
  
 
 
 
 
 
 
 
 
Graph 4: Structure of households' financial assets in EU Member States in
scope (in stock, in percentage)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Currency & Deposits
Investment funds
Financial derivatives

Equities
Pension entitlements

Life insurance & annuity entitlements
Debt securities

Source: Eurostat (2015), OECD (2015)

Equities are the second largest asset class in households’ financial portfolios across the 
15  Member  States  analysed,  representing  25%  of  cumulated  financial  assets  on 
average. Estonia (53%) is well above average in this regard, followed by Sweden (37%), 
and  Spain  (36%).  In  Luxembourg  (13%),  Germany  (11%),  the  UK  (9%)  and  the 
Netherlands (8%), the proportion of equities in cumulated household financial assets is 
low. 

Just like in Graph 2, it should be noted that in Graph 4 pension entitlements are defined 
(by Eurostat) as “entitlements either from employer(s) or life (or a non-life) insurers, 
claims of pension funds on pension managers and entitlements to non-pension benefits”. 
It  is  our  understanding  that  this  definition  refers  to  funded  occupational  schemes, 
excluding  entitlements  from  both  state-run  pension  systems  and  voluntary  private 
pensions. It is our understanding that voluntary private pensions are here included in 
the Life Insurance and Annuity entitlements category. Pension entitlements represent 
on average 16% of households’ financial assets across the 15 Member States analysed, 
making  them  the  third  largest  component  of  households’  portfolios.  This  number  is 
however  driven  up  significantly  by  two  Member  States,  where  pension  entitlements 
account  for  the  vast  majority  of  households’  financial  wealth:  the  UK  (52%)  and  the 
Netherlands (62%). This proportion is also relatively high in Sweden (30%), Germany 
(15%)  and  Estonia  (13%).  In  most  Member  States  in  scope,  however,  pension 
entitlements account for less than 10% of households’ financial assets. This disparity is 
due  to  important  historical  differences  between  Member  States  in  the  way  pension 
systems  were  introduced.  Two  systems  can  broadly  speaking  be  distinguished  in  the 
EU: the Beveridgean and the Bismarckian systems.14 The UK and the Netherlands inherit 
from the Beveridgean system, under which all citizens benefit from a flat-rate pension 

14 http://www.europarl.europa.eu/RegData/etudes/STUD/2014/536281/IPOL_STU(2014)536281_EN.pdf 

April 2018          14 

 
 
  
 
 
 
 
                                           
 
 
independent of earnings, supplemented with semi-mandatory occupational schemes as 
part of a contract with an employer or through collective bargaining. The other Member 
States  in  scope  of  the  Study  follow  various  forms  of  the  Bismarckian  system,  under 
which pension benefits are earnings-related and profession-related. Under Bismarckian 
systems,  private  funded  occupational  schemes  traditionally  play  a  much  lower  role, 
explaining the rift between the UK and the Netherlands on the one hand, and the rest 
of the Member States in scope on the other hand. 

Among  the  Member  States  presented  on  Graph  4,  life  insurance  and  annuity 
entitlements  account  for  13%  of  households’  financial  portfolio  on  average.  As 
mentioned  before,  note  that  the  life  insurance  and  annuity  entitlements  category 
includes voluntary private pension schemes, such as the investment products referred 
to as guaranteed/non-guaranteed pension products in the other sections of this Study. 
Like pension entitlements, their share is much larger in two Member States than in any 
other:  France  (36%)  and  Denmark  (34%),  where  they  are  the  largest  component  in 
households’  cumulated  financial  assets  due  to  various  forms  of  tax  privileges.  Life 
insurance  is  generally  a  much  less  popular  asset  class  in  Eastern  Member  States, 
including Czech Republic (6%), Poland (5%), Estonia (2%), and Romania (2%). 

On  average,  direct  holdings  of  investment  fund  shares  represent  a  relatively  low 
proportion  of  households’  financial  assets  (8%).  In  Portugal  (4%),  the  Netherlands 
(3%), the UK (2%) and Estonia (1%) this proportion is especially low. Nevertheless, in 
Belgium, Italy, Luxembourg and Spain, the proportion is above average between 10 and 
15%. 

Outside  of  financial  derivatives,  which  represent  less  than  0.10%  of  households’ 
financial assets in each of the Member States analysed, debt securities typically account 
for  the  lowest  portion  of  households’  financial  assets  (3%  on  average).  In  Italy, 
however,  this  portion  is  unusually  high  (11%),  in  part  due  to  the  particularly  high 
amount of bank bonds owned by Italian households. According to a 2016 report by the 
Bank  of  Italy,15  Italian  banks  have  relied  heavily  on  their  customers  for  funding,  by 
selling  31  billion  euros  worth  of  their  own  junior  debt  to  retail  clients,  which  has 
increased the risk borne by households in the event of a banking crisis. 

Before analysing the products that are actively16 offered to retail investors online by the 
various types of distributors, we first have a look at how many products are available 
to retail investors. Graph 5 shows the total number of share classes (including passive 
investment funds) available for sale to  retail investors, per Member State. The graph 
shows that there are substantial discrepancies between Member States, but the general 
trend is that the number of share classes correlates with the size of the Member State.  
For listed bonds & equities, retail investors can have access to any stock exchanges in 
the world, therefore a count of such securities being available would be difficult to make. 
In  addition,  the  number  of  life  insurance  and/or  pension  products  available  to  retail 
investors is difficult to estimate across all Member States analysed in our Study.   

15 https://www.bancaditalia.it/pubblicazioni/qef/2016-0359/QEF_359_16.pdf?language_id=1 
16 Products that are offered on financial institutions’ websites  

April 2018          15 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
Graph 5: Total number of share classes available for sale to retail investors 
in the analysed Member States

53458

53900

44171

39654

34054

28938

33635

26598

20032

13905

4195

1918

Source: Morningstar (2017)

10774

5378

494

Graph 6 shows the number of passive investment funds (in share classes) available for 
sale to  retail investors, per Member State.  Three Member States  show comparatively 
high  numbers  of  share  classes  available  to  retail investors,  namely  Germany,  the  UK 
and Italy.  

Graph 6: Total number of passive share classes available for sale to retail
investors in the analysed Member States

8452

5825

8296

355

86

480

4

1587

2353

1657

1410

1041

398

44

Source: Morningstar (2017)

April 2018          16 

 
 
  
 
 
 
 
 
 
 
2.3  Mapping of products actively offered to retail investors online 

For this part of the Study, our researchers mimicked the behaviour of a financially less 
sophisticated  retail  investor  seeking  for  information  on  suitable  investment  products 
through  the  websites  of  banks  and  insurance  companies.  The  methodology  used  in 
collecting this data is detailed in Annex 1 of this report. To remain coherent with Section 
4  detailing  the  costs  and  charges  of  actively  offered  investment  products,  we  only 
considered  here  those  products  where  information  on  costs  could  be  found  on  the 
distributor’s  webpage.  It  should  however  be  mentioned  that  the  availability  of 
information on costs and charges was found to be quite opaque and inconsistent across 
distributors and across Member States.  

The  sample  of  distributors  analysed  includes  on  average  the  10  largest  banks  and 
insurance companies in each market, in terms of AuM (assets under management). To 
ensure  data  quality,  the  aim  was  to  cover  at  least  80%  of  the  market.  While  asset 
managers were initially identified as potential distribution channel, evidence (from our 
mystery shopping activity) showed that for a “typical” retail investor  with investment 
levels  of  up  to  100,000  EUR,  this  distribution  channel  was  difficult  to  access.  As 
described above, the products identified are the ones listed under the retail section of 
each distributor’s website. Their categorization is based on that of the websites, in order 
to reflect the view of a retail investor. For example, mutual funds advertised specifically 
under the pension sections of websites were considered pension products and have been 
regrouped in the category “Pension Mutual Funds”, distinct from other investment funds 
and  other  pension  products.  Our  research  provides  a  conservative  estimate  of  the 
number of products actively offered to retail clients by banks and insurance companies 
through their websites, and reflects the view of retail investors doing their own research 
online in each market. Please refer to Annex 1 for the definitions of investment products. 

Graph  7  shows  the  number  of  products  identified  for  each  type  of  product  in  each 
Member  State  across  banks  and  insurance  companies.  Please  note  that  the  numbers 
presented in the table refer  only to the number of products for which applicable fees 
were  disclosed  on  distributors’  websites.  Cells  marked  “Not  Available”  in  the  table 
indicate  that  no  product  with  associated  costs  and  charges  could  be  identified  in  this 
category in this Member State. This does not entail that such products are not actively 
offered but the average retail investor will not be able to assess costs for these products. 
Finally, please note that although they are available through all banks’ websites, bonds 
and equities were excluded from Graph 7, since distributors typically do not advertise 
specific stocks  or bonds, but merely list the names of the stock  exchanges they give 
access to, with their applicable transaction fee. 

Although they represent a relatively modest share of households’ financial portfolio (c.f. 
Graph  4),  investment  funds  (excluding  ETFs)  are  by  far  the  most  widely-available 
product  category  across  the  distributors  analysed,  in  terms  of  number  of  products 
offered. This is probably due to the fact that distributors intend to respond to the large 
variety of customers’ expectations in terms of asset classes, risk profile, geographical 
and sectorial coverage, etc. Regrouping money market funds, bond funds, equity funds, 
mixed funds, and real estate funds, investment funds (excluding ETFs) represent over 
75%  of  all  products  identified  on  intermediaries’  websites  during  our  desk  research. 
Among them, equity funds are generally the most prevalent in intermediaries’ offering: 
they represent 32% of all products observed online. Within this category, less than 1% 
of the investment funds analysed are Index funds, with the exception of Sweden and 
the  Netherlands  where  Index  funds  represent  approximately  10%  and  7%  of  equity 
funds  respectively.  They  are  followed  by  bond  funds  (20%)  and  mixed  funds  (18%). 
Index funds also represent less than 1% for those two categories of investment funds 

April 2018          17 

 
 
  
 
 
 
 
 
 
in  all  Member  States,  with  the  exception  of  Spain  where  Index  funds  represent 
approximately 5% of the mixed funds analysed.  The number of money market funds 
(4% of all products) and real estate funds (1%) offered is much lower across Member 
States. Denmark, Romania and Portugal are the three Member States observed with the 
smallest range of funds available based on the website of main local distributors. It is 
also worth noting that real estate funds are absent altogether from the offering of main 
distributors in Denmark, Italy, Poland, Romania, and Spain. 

Furthermore  we  investigated  whether  distributors  actively  offer  their  own  in-house 
funds (managed internally by their own asset managers) or 3rd party funds (managed 
by  non-affiliated  asset  managers).  Overall,  we  found  out  that  distributors  mostly 
actively offer in-house products: 

 

Indeed,  banks’  webpages  in  the  Czech  Republic,  Denmark,  France,  Italy  and 
Poland almost exclusively display in-house funds, with very little amount of 3rd 
party  funds.  The  fund  supermarket  associated  with  one  Polish  bank  has  been 
disregarded for this analysis as it gives access to a very large number of funds. 
An analysis of fund supermarkets can be found in section 8.1. 

  Belgian, German, Dutch and Portuguese banks usually exclusively actively offer 
in-house funds. In our sample, 1 or 2 banks in those Member States mix both 
in-house and 3rd party funds. 

  Estonia  and  Luxembourg  are  two  Member  States  where  half  the  distributors 
analysed  offered  mostly  in-house  funds  and  the  other  half  mostly  3rd  parties’ 
funds.  

  Banks in Sweden and Spain mostly actively offer in-house funds. In contrast to 
the  above-mentioned  Member  States,  the  number  of  in-house  products  is 
substantially higher. Both Member States also host 1 bank that acts like a fund 
supermarket. In Spain, this bank gives the retail investor the possibility to search 
over  2,600  different  investment  funds  (mixing  both  in-house  and  3rd  parties’ 
funds). In Sweden, this particular bank offers the possibility to choose from more 
than  800  investment  funds,  also  mixing  in-house  and  3rd  parties  funds.  This 
bank’s fund selector also has a tick box where only the funds “selected by the 
bank”  are  shown,  reducing  the  number  to  100  funds  available.  For  those  two 
Member States, these two banks have been disregarded when making the count 
of products shown in Graph 7.17 

  Finally, the UK financial institutions mainly actively offer 3rd party funds through 
various types of Individual Savings Accounts (ISAs). As for Spain and Sweden, 
one bank in the UK is associated with a fund supermarket giving access to a very 
large  number  of  funds.  The  funds  actively  offered  through  this  bank’s  fund 
supermarket are not included in the Graph 7. 

ETFs represent about 12% of all products identified on the distributors’ websites across 
Member States, although their availability varies strongly across Member States.  The 
availability of ETFs for retail investors seems to be particularly limited in Czech Republic, 
Romania, Poland, and Italy.  

17 The business model of fund supermarkets is detailed in section 8.1. An overview of fees of fund supermarkets (no matter 
if associated with a bank or not) can be found under section 4.2 

April 2018          18 

 
 
  
 
 
 
 
 
                                           
 
 
Luxem-
bourg 

21 

86 

145 

71 

2 

56 

3 

12 

3 

6 

7 

UK 

8 

112 

224 

169 

11 

20 

s
d
n
u
f

t
n
e
m
t
s
e
v
n
I

e
f
i
L

e
c
n
a
r
u
s
n

i

i

n
o
s
n
e
P

s
t
c
u
d
o
r
p

Mixed funds 

Real Estate 
funds 

ETFs 

i
l

o
p

  with Guaranteed 
s
e
c

i

capital 
Non-guaranteed 
capital 
with Guaranteed 
capital 
Non-guaranteed 
capital 

Mutual funds 

Money market 
funds 

Bond funds 

Equity funds 

Mixed funds 

Real Estate funds 

ETFs 

i
l

o
p

  with Guaranteed 
s
e
c

i

capital 
Non-guaranteed 
capital 
with Guaranteed 
capital 
Non-guaranteed 
capital 

i

n
o
s
n
e
P

s
t
c
u
d
o
r
p

s
d
n
u
f

t
n
e
m
t
s
e
v
n
I

e
f
i
L

e
c
n
a
r
u
s
n

i

Graph  7:  Number  of  products  identified  on  the  webpages  of  top  banks  and 
insurance companies, by asset type 

Money market 
funds 

Bond funds 

Belgium 

Czech 
Republic 

7 

71 

11 

84 

Equity funds 

139 

176 

Denmark 

Estonia 

France 

Germany 

Italy 

3 

24 

40 

17 

Not 
Available 

13 

Not 
Available 
Not 
Available 

4 

13 

3 

5 

41 

99 

27 

2 

66 

Not 
Available 
Not 
Available 

2 

13 

8 

30 

70 

193 

106 

12 

91 

16 

15 

7 

8 

Not 
Available 

13 

53 

100 

98 

27 

105 

Not 
Available 
Not 
Available 

4 

Not 
Available 
Not 
Available 

15 

135 

105 

48 

Not 
Available 

7 

9 

21 

3 

10 

9 

37 

5 

76 

10 

12 

13 

13 

17 

72 

2 

Not 
Available 

3 

40 

1 

10 

Not 
Available 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

7 

64 

86 

20 

7 

79 

1 

6 

3 

1 

14 

37 

90 

42 

Not Available 

3 

Not Available 

26 

1 

14 

57 

10 

26 

38 

23 

5 

12 

10 

14 

3 

4 

10 

26 

34 

20 

32 

184 

181 

248 

Not Available  Not Available 

8 

78 

191 

50 

5 

16 

112 

2 

2 

Not Available  Not Available  Not Available 

17 

Not Available 

Not Available  

5 

30 

85 

2 

2 

10 

45 

Not Available 

Not Available 

6 

30 

Mutual funds 

22 

21 

Not Available   Not Available 

Source: Intermediaries’ websites (2017), Deloitte analysis (2017) 
Cells marked “Not Available” indicate that no products with associated costs and charges could be identified for this category 
in this Member State 

Within the sample of products that display fees on the webpages of distributors, pension 
products represent 9% of total number of products observed on distributors’ websites 
in the Member States in scope. The relatively high number of products in this category 
is  mainly  due  to  the  large  amount  of  mutual  funds  marketed  as  pension  investment 
products in Member States such as Poland, the Netherlands, and Portugal. However, no 

April 2018          19 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
pension mutual funds were identified in France, Germany, Romania or Czech Republic. 
Apart from pension mutual funds, pension products regroup guaranteed capital and non-
guaranteed capital voluntary pension schemes. Considering that we only include those 
products  for  which  costs  were  disclosed,  the  offering  for  such  schemes  is  relatively 
limited in all Member States except for Spain (where the vast majority of life insurance 
products are marketed by distributors as pension products), and is especially limited in 
the  UK, Germany, Romania, and the Netherlands. It must be noted however that there 
is no obligation for distributors to disclose fees for pension products on their webpages. 

Finally, life insurance products (both  with guaranteed  capital and without guaranteed 
capital)  make  up  for  4%  of  the  total  number  of  products  identified  on  distributors’ 
websites in the Member States observed. Please note that the sample of distributors did 
not include brokers. The products availability depends largely on the market analysed. 
In France, Italy, Czech Republic, Belgium and Portugal, a relatively wide variety of life 
insurance policies are offered. However, in Denmark, Estonia, Germany, Spain, Sweden, 
and the UK, no such products were identified with their associated costs disclosed. In 
the cases of Denmark and Germany, the lack of information on life insurance costs and 
charges,  although  well  known,  is  all  the  more  remarkable,  since  life  insurance  and 
annuity  entitlements  represent  a  very  significant  share  of  households’  financial  asset 
portfolio. It must be noted however that there is no obligation for distributors to disclose 
fees for life insurance products on their webpages. 

As far as Member States are concerned, Romania, Denmark, Portugal, and Estonia seem 
to be the Member States with the smallest range of products  offered across all asset 
types,  although  this  is  likely  due  to  the  limited  number  of  banks  and  insurance 
companies  operating  in  these  markets.  Spain,  France,  Luxembourg,  and  Sweden,  on 
the other hand, are the Member States where distributors present the widest offering 
of retail investment products (in terms of number of products disclosing fees). 

2.4  Mapping  of  products  actively  offered  to  retail  investors  through 

advice 

The  532  mystery  shops  conducted  across  10  Member  States  as  part  of  this  Study 
allowed  for  a  comparison  of  financial  advice  received  in  the  different  Member  States 
either by face to face contact or through robo-advisors. Two investment profiles were 
used as part of the mystery shopping exercise:  

  Profile A: a young, risk-averse teacher with 10,000 EUR to invest and no 

investment experience. 

  Profile B: a 50 year old freelancer with 100,000 EUR to invest, medium risk-

appetite and limited investment experience. 

For more details about the profiles and methodology used in the mystery shops, please 
refer to Annex 1 of this report, as well as to Section 5 where the results of the mystery 
shopping  exercise  are  analysed  in  greater  detail.  In  this  section  of  the  report,  the 
analysis is limited to the comparison of products offered by human advisors in face to 
face settings (of which 75% worked for banks and 25% for insurance companies) and 
robo-advisors to profiles A and B in each Member State. The mystery shopping exercise 
also covered face to face advice by Independent Financial Advisors (IFAs) in the UK and 
the Netherlands.  

April 2018          20 

 
 
  
 
 
 
 
 
 
 
 
Graph 8: Products actively offered by advisors to Profile A investors 

Belgium 

France  Germany 

Italy 

Poland 

Spain 

Sweden 

IFA UK 

Luxem-
bourg 

7% 

13% 

27% 

18% 

41% 

15% 

Money market funds 

Bond funds 

Equity funds 

Mixed funds 

Real estate funds 

ETFs 

Bonds 

Equities 

Life insurance 

Pension products 

Structured products 

6% 

6% 

28% 

31% 

11% 

11% 

8% 

3% 

8% 

89% 

Source: Deloitte analysis (2017) 

4% 

2% 

52% 

7% 

28% 

13% 

21% 

2% 

4% 

24% 

7% 

2% 

28% 

6% 

27% 

13% 

13% 

18% 

5% 

3% 

Graph 9: Products actively offered by advisors to Profile B investors 

Belgium 

France  Germany 

Italy 

Poland 

Spain 

Money market funds 

Bond funds 

Equity funds 

Mixed funds 

Real estate funds 

ETFs 

Bonds 

Equities 

Life insurance 

Pension products 

Structured products 

11% 

4% 

14% 

36% 

18% 

18% 

4% 

7% 

22% 

67% 

Source: Deloitte analysis (2017) 

5% 

3% 

90% 

3% 

10% 

59% 

8% 

8% 

5% 

Luxem-
bourg 

7% 

43% 

29% 

18% 

18% 

18% 

20% 

2% 

2% 

5% 

8% 

3% 

18% 

4% 

16% 

12% 

66% 

2% 

12% 

2% 

5% 

10% 

3% 

3% 

68% 

8% 

5% 

3% 

3% 

8% 

12% 

65% 

4% 

8% 

4% 

UK 

6% 

6% 

18% 

12% 

18% 

29% 

12% 

47% 

20% 

7% 

20% 

7% 

IFA UK 

37% 

5% 

5% 

21% 

32% 

Graph  10:  Products  actively  offered  by  robo-advisors  to  both  investment 
profiles 

Belgium 

France 

Germany 

Italy 

Luxem-
bourg 

Nether-
lands 

Spain 

UK 

Money market funds 

Bond funds 

Equity funds 

Mixed funds 

Real estate funds 

ETFs 

Bonds 

Equities 

Life insurance 

Pension products 

Structured products 

13% 

29% 

33% 

43% 

88% 

67% 

100% 

100% 

100% 

43% 

71% 

14% 

40% 

20% 

30% 

10% 

Source: Deloitte analysis (2017) 

April 2018          21 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 8 shows the breakdown of products offered to Profile A by advisors of banks and 
insurance  companies  for  each  Member  State.  Graph  9  displays  the  results  for  the 
mystery  shops  conducted  by  profile  B.  Finally  Graph  10  shows  the  distribution  of 
products offered by robo-advisors in each Member State, regardless of the investment 
profile. Our research showed that the specific profile only had a minor influence on the 
composition  of  the  offered  portfolio in  terms  of  different  types  of  products.  Based  on 
this data, the following observations can be made per Member State: 

In  each  Member  State,  non-independent  advisors  at  banks  and  insurance  companies 
almost exclusively proposed (one or a selection of a few) in-house products. Conversely, 
3rd  party  products  (e.g.  the  few  ETFs  offered  were  3rd  party  products)  were  only 
proposed in very rare cases. 

 

 

In Belgium, retail investors are offered quite a large portofolio of products with 
mixed funds as the most-offered products by bank and insurance advisors (31% 
for profile A, 36% for profile B). Robo-advisors analysed in our sample offered 
mainly ETFs (88%) with the rest being mixed funds. 

In France, life insurance is by far the most offered product, both from  face to 
face advice and robo-advice. Equities were offered more frequently to investors 
with  higher  investment  amounts.  Mutual  and  cooperative  banks  sometimes 
offered shareholding of their bank (as they are owned by their clients resulting 
in a comparativly large share of equities proposed (22% for Profile B). In contrast 
to  the  other  Member  States,  robo-advisors  analysed  in  our  sample  offer  to  a 
large  extent  life  insurance  products  (70%)  while  mixed  funds  account  for  the 
remaing 30% of the offered products.  

  Mixed  funds  are  by  far  the  most  offered  products  by  banks  and  insurance 
companies  to  both  investment  profiles  (above  50%  for  both  profiles)  in 
Germany. In terms of differences, life insurance products were offered by 24% 
of face to face advisors for profile A, significantly more than for profile B (8%). 
Profile B was also offered equity funds (10%) more regularly than profile A (2%). 
As a notable exception to most mystery shops in gerenal, the Profile B investor 
in Germany was advised to invest in ETFs by 3 banks (8% of products advised). 
Robo  advisors  analysed  in  our  sample  only  offer  2  types  of  products,  i.e.  a 
majority of ETFs and the rest in mixed funds. 

 

In Italy, mixed funds are by far the most offered products by bank and insurance 
advisors  to  profile  B investors.  In  contrast,  a  much  broader  range  of  products 
was offered to profile A investors with bond funds and life insurance the most 
frequent  products  (28%).  ETFs  were  the  only  products  offered  through 
automated channels. 

  For Luxembourg, we recorded differences in product recommendation by face 
to face advisors, as advisors for profile A investors offered 6 types of products, 
the majority of them being mixed funds and life insurance (accounting for 27% 
of the offered products). On the other hand, equity funds represented 43% of 
the total offered products to profile B investors. Robo-advice platforms analysed 
in our sample only offer 1 type of product, i.e. ETFs.  

 

In Poland, both profiles were mostly advised to invest in funds. Bond funds are 
actively  distributed  to  investors  following  profile  A  (41%)  whereas  profile  B 
investors  were  proposed  a  wider  range  of  mutual  funds.  Around  20%  of  the 
offered products were either money market, bond, equity or mixed funds. 

  Mutual  funds  were  the  main  category  products  proposed  to  both  profiles  in 
Spain.  For  profile  A  investors,  the  most  frequently-offered  products  are  bond 
funds (66% of the total offered products). Advisors for profile B investors tended 
to offer mixed funds (68%). Notably, ETFs constitute 8% of the products offered. 

April 2018          22 

 
 
  
 
 
 
Robo-advisors analysed in our sample only offer 2 types of products, i.e. mixed 
funds and ETFs. 

 

In Sweden, mixed funds are by far the most offered products by  face to face 
advisors (65% for Profile A). The second most offered products are equity funds, 
followed by life insurance contracts and bond funds.  

  In the UK, the investment advice landscape is very different from that of other 
Member  States  due,  to  a  large  extent,  to  the  Retail  Distribution  Review 
(RDR).The most significant change introduced by RDR is that financial advisers 
are  no  longer  permitted  to  benefit  from  commissions  from  fund  companies  in 
return for selling or recommending their investment products. Instead, investors 
now have to agree fees with the adviser upfront. Depending on the investment 
amount,  mystery  shoppers  were  limited  to  certain  types  of  advice.  Profile  A 
mystery shoppers (with 10.000 EUR to invest) were, as a result, turned down by 
all the banks and insurance companies for having too little money to qualify for 
advice. They were redirected to IFAs. IFAs indeed accepted to receive them and 
provide  advice  regardless  of  the  investment  amount.  While  profile  B (100,000 
EUR to invest) was turned down by all the the insurance companies, he was able 
to receive advice from both banks and IFAs. As a result, the analysis done here 
is based solely on advice from IFAs for profile A, and on advice from IFAs and 
banks for profile B. In the UK, the most offered products for Profile A investors 
by IFAs are mixed funds (representing 47% of the offered products) followed by 
ETFs and  Equities (20% each of the offered products). Please note that in the 
case of the UK, Mixed funds and Equities include Stocks and Shares ISAs  (i.e. 
Individual Saving Accounts).  

  Finally,  the  Netherlands  are  absent  from  the  graphs  8  and  9,  since  dutch 
banks  did  not  provide  advice  to  mystery  shoppers.  Due  to  the  recent  ban  on 
inducements,  the  investment  advice  landscape  in  the  Netherlands  is  quite 
different  from  other  Member  States.  When  contacting  financial  institutions  to 
receive investment advice, mystery shoppers were systematically redirected to 
the institutions’ websites where they could invest on their own, in execution-only 
mode. Banks also propose discretionary portfolio management services, even for 
investors  with  limited  financial  resources,  however  these  services  are  not 
considered advice and are thus not considered in this analysis. Unlike in the UK, 
our  shoppers  were  not  redirected  to  IFAs  by  banks  and  insurance  firms. 
Furthermore, mystery shops conducted with Dutch IFAs showed that, unlike in 
the  UK,  IFAs  do  not  replace  banks  and  insurance  companies  as  providers  of 
financial  advice.  Like  banks,  IFAs  only  proposed  discretionary  portfolio 
management services to our investment profiles. Those who did provide advice 
only would do so for investors with substantial capital to invest: depending on 
the  IFA,  qualifying  for  advice  required  minimum  investment  amounts  ranging 
from 250,000 EUR to 500,000 EUR. As a result, neither profile A or B qualified 
for advice in the Netherlands, regardless of the face to face channel used. Robo-
advice was however available, and offered exclusively ETFs.  

Overall, the following trends can be identified regarding the types of products offered to 
each profile through human advice or robo-advice: 

As  previously  mentioned,  the  overwhelming  majority  of  non-independent  human 
advisors only proposed in-house products. 

 

In  general,  mixed  funds  are  the  most  offered  products  by  advisors  across 
Member States and investment profiles by a considerable margin. They represent 
alone 35% of all products offered by advisors in the mystery shops. 

April 2018          23 

 
 
  
 
 
 
 
 
  On the other hand, life insurance is by far the most offered product category in 
France for both profiles, to the point of eclipsing all other product groups. France 
is the only Member State in this case, although life insurance policies are also 
quite commonly-distributed by advisors to both investment profiles in Belgium, 
Germany, Italy and Luxembourg. In the UK, Sweden, and Spain, however, they 
are rarely recommended by advisors. Altogether, life insurance policies represent 
close to 20% of all products distributed by advisors across Member States and 
investment profiles.  

  Robo-advisors  mostly  distribute  ETFs  to  both  investment  profiles,  except  in 
France, where robo-advisors do offer ETFs but these are most often wrapped into 
life insurance products.Banks and insurance advisors almost never recommend 
the purchase of ETFs: they are only recommended by IFAs in the UK, and in very 
few instances to profile B in Germany and Spain. As a result, ETFs represent less 
than 6% of the total number of products offered by human advisors. 

  Within  the  remaining  product  categories,  bond  funds  are  the  most  commonly-
distributed  product  group  (12%  of  all  products  offered  by  advisors).  This  is 
mainly  due  to  the  fact  that  Polish  and  Spanish  face  to  face  advisors  tend  to 
recommend bond funds rather than mixed funds to profile A investors.  

  Equity funds are quite commonly recommended to profile B investors, especially 
in Luxembourg and Belgium, and account for about 9% of all products distributed 
by advisors.  

  Pension  products  accounts  for  5%  of  the  overall  count  of  products  offered  in 
mystery  shops:  they  are  commonly  recommended  to  profile  B  in  Belgium  and 
the UK.  

  Money market funds (5%) and real estate funds (1%) are the least commonly-
recommended funds across Member States and profiles, although money market 
funds were offered to profile B on several occasions in Poland.  

  Although  they  represent  only  4%  of  advisors’  recommendations,  investing  in 
listed  equities  was  suggested  quite  commonly  to  profile  B  in  France.  Finally, 
direct investments into bonds (2% of all products offered) and the purchase of 
structured products (2%) were the least commonly recommended investments 
across profiles and Member States. 

Focus on offered products by robo-advisors: 

When  it  comes  to  analysing  the  recommended  portfolio  allocation  of  robo-advisors 
across  Europe,  it is  possible  to  identify  a  number  of  trends  and  patterns  in  the  data. 
Such  trends  are  particularly  noticeable  when  considering  the  asset  class  allocation 
(principally  equity,  bonds  and  cash  &  cash  equivalents18)  within  the  recommended 
portfolios. 

Most  robo-advisors  invest  exclusively  in  ETFs,  taking  advantage  of  the  lower  costs 
associated  with  these  passive  funds.  However,  some  occasionally  choose  other  fund 
types to invest their funds in. Nevertheless, the level of transparency of the fund type 
varies significantly; ranging from messages explicitly stating the investment in ETFs or 
revealing the names of the funds, to providing ambiguous or hard to find information 

18 Cash and cash equivalents refers to assets that are cash (for example, put aside by fund managers for investing flexibility) 
or can be converted in cash quickly (such as money market funds and short-term government bonds). 

April 2018          24 

 
 
  
 
 
 
                                           
 
 
about the funds invested in. Therefore, the majority of the data cited below are funds 
invested in ETFs, but the exact percentage allocated to ETFs cannot be provided. 

For  a  risk-averse  profile  A,  as  might  be  expected,  portfolios  where  weighted  heavily 
towards  lower-risk  asset  classes  such  as  bonds  and,  to  a  lesser  extent,  cash  &  cash 
equivalents,  compared  to  the  ‘riskier’  asset  classes  such  as  equity,  real  estate  and 
commodities. For the 29 robo-advisors analysed across Europe, the median allocation 
for the lower risk profile was 71% in bonds. This high weighting of bond allocation was 
typical for almost all robo-advisors across Europe, with robo-advisors in Germany and 
Italy  recommending  as  much  as  90%  and  even  100%  investment  in  bonds.  Portfolio 
allocations of Robo-advisors in France often list ‘fonds euro’ as significant proportions of 
their recommended portfolios. These are typically highly secure and guaranteed funds, 
composed  of  around  80%  bonds,  and  around  10%  in  equity,  and  are  offered  as  life 
insurance contracts, but the breakdown of which is often not visible.  

Cash & cash equivalents remained a relatively low portion of recommended portfolios 
even  for  this  low-risk  profile,  with  only  10  of  the  robo-advisors  offering  cash  &  cash 
equivalents, with a median allocation of 15.54% across them. The equity allocation for 
these  low-risk  portfolios  was  universally  low,  with  a  median  23%  of  recommended 
portfolios,  and  rarely  rising  above  30%.  We  found  that  UK  robo-advisors  were 
occasionally more willing to allocate equity to these lower risk profiles, going up to 46% 
in one case, but results varied significantly, and the median allocation across UK robo-
advisors was 24.3%. 

A similar, but inversed, trend is noticeable for the asset class allocation by robo-advisors 
for a profile more open to risk (profile B). These profiles, in contrast to those with lower 
risk appetites, were generally recommended portfolios with high percentages of equity 
allocated (a median of 61.6%), and significantly lower proportions of  bonds (29.9%). 
Indeed, every robo advisor allocated a higher percentage of the recommended portfolios 
to equity when comparing the risker profile to the risk-averse ones. The median change 
from profile A to B across the robo-advisors analysed was an increase of 37% of equity 
in their portfolios. For bonds, the change is much the same, with the median change of 
40% fewer funds allocated to bonds in the portfolios.  

In terms of geographic allocation of portfolios, we found a higher allocation in European 
assets  for  profile  A.  The  median  allocation  of  those  robo-advisors  that  supplied  clear 
geographical data  (which  was  the  case  for  at  least  one  robo-advisor  per  country)  for 
profile A was 47.35% in European assets compared to 40% for profile B. We find that 
as funds for profile B are less concentrated in European assets, they are moving most 
prominently  to  North  American  (a  +10.3%  median  change)  and  Emerging  Markets 
(+7.85% median change) assets.  

2.5  Distribution strategies of financial institutions 

In  this  section,  we  provide  a  very  high-level  overview  of  the  principal  distribution 
strategies of the different stakeholders. 

Distribution of funds 

When launching an investment fund, an asset manager will, first of all, define the target 
market(s), target clientele and the legal/fiscal framework under which the investment 
fund  will  be  incorporated.  Once  incorporated  and  the  necessary  authorisations  / 
registrations have been performed in accordance with European and local regulations, 
the  investment  funds  are  then  marketed  through  various  distribution  channels.  In 

April 2018          25 

 
 
  
 
 
 
 
 
continental Europe, the distribution model is still largely based on the commission-based 
remuneration  model  with  banks  and  insurers  as  the  most  prevalent  end-client 
distributors. The below exhibit shows a simplified view of the distribution of funds from 
manufacturer to the retail investor.  

Asset  managers  rely  on  various  types  of  distribution  channels.  Their  distribution 
strategies in terms of types of products and fees are described in detail in sections 2, 4 
and 8 of this Study. Institutions providing advice (i.e. banks, insurance, IFAs and robo-
advisors) usually have teams of investment experts constructing, on an ex-ante basis, 
a rather limited portfolio of products that, to a large extent, are suitable to cover the 
different needs of many retail investors, in terms of knowledge and experience, financial 
situation,  investment  horizon,  objectives  and  risk  tolerance.  The  main  role  of  the 
advisor/algorithm merely consists in choosing the product(s) out of this limited portfolio 
which  is/are  deemed  as  the  most  suitable  for  the  specific  investor  depending  on  the 
outcome of the discussion with the retail client and the suitability checks. Our research 
showed that the vast majority of banks propose their own in-house actively-managed 
investment funds to their clients.  

The upper part of the exhibit shows the flow of the amount being invested by the retail 
investor  (“the  subscription”)  and  the  different  types  of  fees  that  are  paid  out  to  the 
various  actors  in  the  fund  distribution  value  chain.  The  recurring  expenses  of  an 
investment fund are typically paid for out of the investors’ fund assets and not billed to 
investors directly. However, by reducing the returns that would have been received on 
those  assets,  fund  investors  still  pay  indirectly.  As  shown  in  section  5  of  this  Study, 
recurring fees vary across the different fund types and across Member States, but are 
typically composed of the following fees: 

(1)  management fees covering investment and portfolio management services but 
also the cost of marketing, supporting and servicing distribution organizations; 

(2)  distribution retrocessions; and  
(3)  administrative  /  other  expenses  which  include,  but  are  not  limited  to,  client 

administration, accounting, custody, and transfer agency fees.  

According to a study of fund fees19 in Europe, fund managers retain 42% of the total 
recurring fees. Through retrocessions, distributors are paid 41% of the total recurring 
fees.  The  balance  of  17%  is  used  to  cover  operating  services  such  as  custody, 
administration and transfer agency. The same holds true for the insurance sector. The 
thematic review by EIOPA20 found that retrocessions are widespread and significant. It 
provides  evidence  for  concluding  in  general  that  poor  or  inconsistent  mitigation  of 
conflicts  of  interest  could  lead  to  material  consumer  detriment.  81%  of  participating 
insurance  undertakings  received  monetary  incentives  and  remuneration  from  asset 
managers. For those undertakings that engage in these monetary practices, monetary 
incentives  and  remuneration  received  represent  a  median  value  of  0.56%  of  assets 
under management and 46% of fund management charges. ETFs generally do not pay 
retrocessions  and  are  thus  substantially  cheaper  than  actively-managed  investment 
funds. On the other hand, this reduces the attractiveness for distributors like banks and 
insurance companies to propose ETFs to retail investors. In contrast to other types of 
distributors, IFAs directly charge a fee for the provision of advice to investors. 

19 FUND FEES IN EUROPE: ANALYZING INVESTMENT MANAGEMENT FEES, DISTRIBUTION FEES, AND OPERATING EXPENSES, 
2011, EFAMA, 
https://www.efama.org/Publications/Statistics/Other%20Reports/EFAMA_Fund%20Fees%20in%20Europe%202011.pdf 
20 Report on Thematic review on monetary incentives and remuneration between providers of asset management services 
and insurance undertakings, EIOPA; 2017 

April 2018          26 

 
 
  
 
 
 
 
 
                                           
 
 
In contrast to much of continental Europe, cultural habits and the ban on inducements 
have led to a noticeable shift towards IFAs and execution-only online platforms in the 
UK and the Netherlands over the last few years. 

Distribution of investment funds to retail investors can be characterized effectively by 
two distribution channels - captive and third party distribution. The distribution through 
institutional channels does not directly touch upon retail investors hence is considered 
as out of scope for the purposes of this Study. 

The distribution through captive channels is characterized by funds being sold through 
the distribution network of the company itself or affiliated companies. Captive channels 
are dominant in southern Europe with almost two thirds of market share in Spain and 
about 50% in Italy. While the proportional market share of captive distribution is also 
high for Germany (50%) and for the Netherlands (where it is driven by execution-only 
platforms of distributors), it is substantially lower for France with only about one third 
of funds sold, the UK (25%) and Sweden (15%).21 

The  distribution  through  third  parties  covers  funds  sold  to  the  direct  end  investor 
through an intermediary. Based on our research, we can identify the following trends 
across Member States, where reliable and comparable data exist:  

  Third party distribution is much smaller in France where only approximately 5% 
of funds are sold by IFAs through B2B platforms and insurance companies. 

 

In Germany, third party distribution accounts for roughly one third of the market. 
In  terms  of  intermediaries,  retail  banks,  private  banks  and  IFAs  largely 

21 Deloitte analysis 

April 2018          27 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
                                           
 
 
dominated  with  roughly  20%  each  with  insurance  companies  trailing  close 
behind. 

 

Italian third party distributors account for about 30% of the market. The share 
among  distributors  is  roughly  the  same  as  for  Germany  with  banks  and  IFAs 
covering about two thirds of the market. 

  For Spain, the share is  around 25% with a large dominance of  retail banks at 
almost 40% of the market closely followed by private banks at about 30%. IFAs 
and insurance companies each cover little more than 10%. 

  For  Sweden,  third  party  distribution  accounts  for  approximately  25%  of  funds 
sold  by  manufacturers.  In  contrast  to  other  Member  States,  there  is  no 
dominating type of intermediary and the market is almost evenly shared between 
banks, IFAs and insurance companies. 

  This channel is dominant in the United Kingdom with more than half of funds sold 
by the manufacturers. The main intermediaries are IFAs through B2B platforms 
and  private  banks  while  the  distribution  through  D2C  platforms  is  growing 
strongly.  Distribution  through  insurance  companies  and  retail  banks  jointly 
accounts for only 15%. 

For  the  sake  of  completeness,  the  institutional  distribution  channel  covers  funds  sold 
directly  to  large  financial institutions  (e.g.  insurers  and  pension  funds)  which  are  not 
affiliated  with the  fund  manufacturer.  This  channel is largely  dominant  in  France  and 
Sweden  with  more  than  half  of  funds  sold  directly  to  large  financial  institutions.  In 
contrast, institutional distribution accounts for only about one fifth of funds sold in the 
United Kingdom, Germany and Italy with Spain trailing at around 10%. 

Graph 11: Proportion of cross-border funds out of all investment funds
available to retail investors, in each Member State

83%

17%

99% 94% 99%

1%

6%

1%

83%

17%

95% 89% 90%

98% 91% 96% 100%

81%

83%

96%

5%

11% 10%

2%

9%

4%

0%

19%

17%

4%

Share classes available for sale in this Member State as well as in other markets
Share classes available for sale in this Member State only

Source: Morningstar (2017)

While  cross-border  distribution  of  investment  funds  is  subject  to  a  large  number  of 
different national, regional and fiscal environments, it also allows for economies of scale 
which  are  more  difficult  to  achieve  when  staying  within  the  borders  of  one  single 
country. Graph 11 shows the percentage of retail investment funds only available for 
sale  in  the  Member  State  (in  blue)  compared  to  funds  that  are  available  for  retail 
investors in other countries too. The graph shows that only a small fraction of the retail 
funds available for sale in one country are only available in that Member State. All other 

April 2018          28 

 
 
  
 
 
 
 
funds are available for retail investors in other countries too. In Belgium, France, Spain 
and the UK, about a fifth of all funds are only available in that particular country. This 
share is even lower in the Czech Republic, Estonia, the Netherlands and Romania where 
the fraction of funds available only in the country is close to zero. 

Graph  12  shows  the  country  of  domiciliation  of  investment  funds  available  to  retail 
investors (including passive investment funds). For each Member State in scope of the 
Study, the majority of funds are domiciled in Luxembourg.  Ireland is usually the second 
most prevalent country of domiciliation except for France, Poland and Sweden  where 
the home Member State is the second most occurring domicile (e.g. 23% of investment 
funds available for sale to French retail investors are domiciled in France).  

Graph 12: Split by domicile of all
investment funds available to retail
investors in all Member States (AIF & UCITS) by total number of share
classes available for sale in the given Member State

6%

9%

4%

1%

3%

12%

9%

4%

10%

6%

2%

6%

13%

5%

7%

12%

68%

72%

87%

96%

15%

11%

16%

7%

3%

1%
2%

58%

16%

23%

60%

60%

71%

87%

77%

87%

82%

21%

21%

6%

10%

22%

2%

3%
9%

13%

4%

4%

60%

43%

70%

25%

20%

16%

19%

19%

4%

Source: Morningstar, Deloitte 
analysis (2017)

Home Member State

Ireland

Luxembourg

Other

Graph  13  shows  the  countries  of  domiciliation  of  passive  investment  funds.  Across 
Member  States,  passive  investment  funds  are  mostly  domiciled  in  Ireland  and 
Luxembourg.  

April 2018          29 

 
 
  
 
 
 
 
 
Graph 13: Split by domicile of all passive investment funds available to retail
investors in all Member States by total number of share classes available for sale
in the given Member State

5%

14%

1%

41%

10%

36%

23%

30%

29%

28%

1%

9%

8%

5%

0%

5%

23%

27%

35%

68%

73%

62%

23%

77%

4%

14%

100%

13%

86%

34%

89%

38%

54%

41%

42%

23%

18%

31%

9%

1%

3%

5%

56%

18%

3%

45%

27%

7%

6%

Source: Morningstar, Deloitte 
analysis (2017)

Home Member State

Ireland

Luxembourg

Other

Distribution of life insurance products 

Insurance is sold either directly by insurers or through a number of different channels, 
the most common of which are brokers, agents and bancassurance. The popularity of 
each  channel  varies  depending  on  both  the  market  and  the  insurance  product.  This 
diversity of channels, which makes it possible for insurers to adjust to differing cultures, 
needs  and  preferences  in  different  markets,  reflects  the  historical  development  of 
insurance markets across the various Member States. 

Among the largest life insurance markets, most products were sold via bancassurance 
in Italy (79% of gross written premiums), France (64%) and Spain (63%), while in the 
UK and Germany22 most life products were sold by agents and brokers (83% and 73% 
respectively).  The  market  in  which  agents  and  brokers  were  most  dominant  was 
Bulgaria (85%). Agents alone were the main distribution channel in Slovenia (82%) and 
Slovakia (63%). The distribution channels for life insurance products differ substantially 
from non-life insurance policies which are mainly distributed through agents and brokers 
in both large and small markets. 

22 UK data is 2013. For Germany, the data is for new business 

April 2018          30 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
Graph 14: Distribution channels of life insurance products23 

Source: European Insurance in Figures (2015) 

Types of products offered 

As described in the sections 2.3 and 2.4; banks, insurance companies and robo-advisors 
offered  a  variety  of  investment  products  to  their  clients.  What  is  common  across  all 
Member States (except for the UK) is that the investment funds offered by banks, either 
through their webpages or through face to face advice, are almost exclusively in-house 
products. Our shoppers had in many instances the impression that, in non-independent 
(as well as independent) advice settings, the impact of the discussion (more specifically 
the  “suitability”  questions)  on  the  actual  product(s)  proposed  was  quite  limited.  As 
frequently  explained  by  the  advisor,  the  institution’s  team  of  investment  experts 
constructed ex-ante a small portfolio of in-house products that, to a large extent, are 
suitable  to  cover  the  different  needs  of  retail  investors,  in  terms  of  knowledge  and 
experience, financial situation, investment horizon, objectives and risk tolerance. The 
job  of  the  advisor  merely  consisted  in  picking  product(s)  out  of  this  limited  portfolio 
which  he  deemed  the  most  suitable  for  the  specific  shopper.  A  correct  ex-ante 
identification of the target market combined with a thorough suitability assessment of 
the particular client should ensure that the product ends up with the ‘correct’ type of 
customers  for  whose  needs  and  objectives  it  had  been  designed,  instead  of  another 
group of clients with which the product may not be compatible. While this approach, on 
one  hand,  potentially  reduces  the  risk  of  the  customer  to  be  exposed  to  unsuitable 
products  it  highlights  on  the  other  hand  the  often  reported  bias  of  non-independent 
advice due to the incentive schemes in place. 

This is particularly relevant in view of the associated fees (analysed in Section 4) which 
differ  widely  across  Member  States.  According  to  our  research,  fees  for  funds  in  the 

23 European Insurance in Figures, 2015 data 

April 2018          31 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
Netherlands are among the lowest across the different types of funds. This is probably 
a consequence of the ban on inducements as well as of the average Dutch client having 
become more cost-sensitive. In contrast, banks in Poland seem to charge substantially 
higher fees to their retail clients for products of the same type.  

Our research also showed that it is quite common practice for banks to charge a custody 
fee when investing in a 3rd party investment fund. This custody fee is charged on top of 
the  recurring  and  one-off  fees  of  the  investment  fund  and  represents,  to  our 
understanding, an additional “distribution” fee for investing in a 3rd party fund instead 
of an in-house fund. Table 2 shows the average annual values for custody fees across 
Member States. When computing the below values, we considered only those custody 
fees where the central tariff sheet of the distributor explicitly mentions that they relate 
to third party funds.  

Table 2: Annual custody fees for 3rd party funds  

Belgium 

Estonia 

Germany 

Italy 

Luxembourg 

Portugal 

Spain 

0.24% 

0.28% 

0.17% 

0.45% 

0.20% 

0.28% 

0.35% 

Custody charges for 
3rd party funds 

2.6  Findings 

  Currency and deposits are generally the most common form of financial assets 
owned  by  households  in  EU  Member  States.  The  rest  of  households’  financial 
assets is comprised of the various investment products in scope of this Study, all 
of  which  seem  to  be  available  in  all  the  Member  States  analysed.  However, 
substantial  differences  in  the  average  financial  portfolio  of  households  can  be 
noticed  between  Member  States.  Specifically,  the  representation  of  asset 
categories such as Pension entitlements and Life insurance entitlements varies 
dramatically  across  Member  States.  These  differences  can  be  explained  by 
various  factors,  including,  but  not  limited  to,  cultural  preferences,  taxation, 
pension systems, and distribution systems. 

  Looking at the offering presented on distributors’ websites, it is worth mentioning 
that  the  most  widely  available  investment  products  for  retail  investors  across 
Member  States  are  generally,  in  order:  equity  funds,  bond  funds,  and  mixed 
funds.  On  the  other  hand,  the  level  of  availability  of  products  such  as  ETFs, 
pension products and life insurance policies is much more Member State-specific.  

  Overall,  information  on  nearly  all  products  is  available  on  intermediaries’ 
websites in the different Member States, however the documentation provided 
is not systematically transparent (especially regarding costs to be supported by 
the  investor  after  the  acquisition  of  said  products),  is  in  no  way  standardized 
across Member States, and proves difficult to comprehend for retail clients who 
are financially less sophisticated. Specifically, for some products, e.g. bonds and 
equities, information needs to be retrieved from a “central” tariff sheet displaying 
all types of fees across the institution’s services. For other products, e.g. funds, 
the Key Investor Information Document (KIID) contains the essential information 
of the product, including costs and charges. However, in some cases, e.g. when 
buying a third party fund, a retail investor would need to combine fee information 
from  the  KIID  with  the  custody  charges  of  the  tariff  sheet.  KIIDs  are  also  not 
systematically available on the distributors’ websites, and investors would need 
to retrieve them using other sources. Quite frequently, distributors do not display 
any  or  only  partial  information  on  applicable  costs  and  charges  (at  least  the 
information could not be found on a best efforts basis on the webpage). These 

April 2018          32 

 
 
  
 
 
 
 
 
 
 
elements  make  it  very  difficult  for  a  retail  investor  to  independently  gather 
information  and  be  able  to  choose  the  suitable  product  or  channel.  Note  that 
there is no legal obligation for distributors to display fees to non-clients. 

  Advice from banks and insurance companies (including bancassurance) results 
in relatively similar investment recommendations across Member States in terms 
of products. The vast majority of products offered are in-house investment funds, 
followed by life insurance policies. 

  Seeking advice from non-independent advisors (at banks and insurers) remains 
the norm for the average investor, except in the UK and the Netherlands. In the 
UK profile A mystery shoppers (with 10.000 EUR to invest) were redirected by 
all the banks and insurance companies to IFAs who indeed accepted to receive 
them  and  did  provide  advice  regardless  of  the  investment  amount  (the  first 
meeting is generally free, while subsequent investments made through the IFA 
are typically subject to a fee, expressed as a percentage of the invested amount). 
In  the  Netherlands,  mystery  shoppers  were  systematically  redirected  to  the 
institutions’  websites  where  they  could  invest  on  their  own,  in  execution-only 
mode. Banks also propose discretionary portfolio management services, even for 
investors  with  limited  financial  resources,  however  these  services  are  not 
considered  advice.  IFAs  only  proposed  discretionary  portfolio  management 
services to our investment profiles. 

  ETFs are amongst the most commonly-available products on websites in many 
Member  States,  but  seem  to  be  almost  completely  absent  from  traditional 
distributors’ online offering in markets such as Czech Republic, Romania, Poland, 
and Italy. Although marketed through online, ETFs were almost never proposed 
by  human  advisors  across  Member  States,  the  only  exceptions  being  a  small 
number of banks in Germany and Spain, as well as IFAs in the UK. 

  Concerning  investment  profiles,  advisors  proposed  broadly  the  same  kinds  of 
products to both A and B mystery shoppers, namely in-house investment funds, 
with  the  notable  of  exception  of  France  where  life  insurance  policies  are 
dominant. Generally, equity funds were offered more regularly to profile B than 
profile  A,  in  accordance  with  its  higher  risk-appetite  and  performance 
expectations. Conversely, profile A was offered safer investments such as bond 
funds  on  a  more  regular  basis  than  profile  B.  Finally,  although  the  most 
commonly  offered  products  for  both  profiles  were  mixed  funds  (which  are 
diversified  thus  more  suitable  for  retail investors),  it  should  be  noted  that  the 
strategy  followed  by  these  mixed  funds  varied  based  on  each  profile’s  risk-
appetite: profile B was often proposed more dynamic funds than profile A. 

  Overall,  robo-advisors  recommended  relatively  similar  products  across 
investment  profiles  and  Member  States.  ETFs  are  by  far  the  most  commonly 
recommended  products,  followed  by  mixed  funds,  which  are  only  common  in 
Spain,  the  UK  and  Germany.  France  is  once  again  an  exception  in  terms  of 
products  offered,  since  the  vast  majority  of  products  offered  by  robo-advisors 
are  life  insurance  products.  While  the  transparency  in  terms  of  types  of  ETFs 
allocated greatly varies between  robo-advisors, they allocate  a larger  share of 
bond  ETFs  to  a  risk-adverse  profile  (profile  A)  while  the  share  of  equity  ETFs 
increases for more risk-seeking investors (profile B).  

  The share of funds distributed through captive and third party channels strongly 
depends on the Member State, with continental Europe dominated by distribution 
through banks and insurers in contrast to the UK where distribution through IFAs 
and online platforms is the most prevalent. 

  Generally, our research indicates that financial institutions almost exclusively 

offer in-house products to retail investors.   

April 2018          33 

 
 
  
 
 
3  Business case: Accessibility of ETFs to retail investors 

in the EU 

In  this  Section  we  investigate  the  accessibility  of  low-cost  exchange-traded  funds  by 
retail investors in Europe. An Exchange-Traded Fund (commonly referred to as “ETF”) 
is  an  investment  fund  investing  in  a  basket  of  securities  and  commodities  generally 
designed  to  track  the  performance  of  an  underlying  index.  At  their  core,  Exchange-
Traded Funds are hybrid investment products, with many of the investment features of 
mutual funds coupled with the trading features of common stocks. Like a mutual fund, 
an investor buys shares in an ETF to own a proportional interest in the pooled assets. 
Furthermore, ETFs are managed by an investment advisor for a fee and are regulated 
under the supervision of National Competent Authorities. But, unlike mutual funds, ETFs 
do not sell individual shares directly to, or redeem their individual shares directly from, 
retail investors. ETF shares are traded in continuous markets on global stock exchanges, 
can be bought and sold through brokerage accounts, and have continuous pricing and 
liquidity throughout the trading day. 
Introduced slightly less than 20 years ago in Europe, ETFs are now one of the fastest-
growing segments of the investment management business. Graph 15 shows the asset 
growth of ETFs and ETCs (Exchange-trade Commodities) over the past 14 years. ETFs 
assets’ started to significantly grow in 2009 and then constantly increased from 2011 
onwards, almost tripling their value in 2017 compared to 2009.  

Graph 15: European ETPs (ETF & ETC) asset growth 

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 
*Number of ETPs at the end of the year is net of delistings for the period. **As of July. 

The number of  ETFs available is small compared to the  number  of available actively-
managed investment funds, with ETFs representing only about 6% of all the investment 
funds available. 

Two  major  types  of  ETFs  currently  co-exist,  distinct  by  their  management  styles: 
synthetic  replication  ETFs  or  physical  replication  ETFs.  Physical  replication  ETFs  are 
considered as those where the ETF manager simply purchases the underlying assets of 
the index whether they are stocks, bonds, or even gold bars. ETFs applying synthetic 
replication are ETFs where the manager enters a swap contract with an investment bank 
that  agrees  to  pay  the  index  return  in  exchange  for  a  small  fee  and  any  returns  on 
collateral held in the ETF portfolio. 

April 2018          34 

 
 
  
 
 
 
 
 
 
 
 
Graph 16: Historical composition by ETF structure - Europe 

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 

As shown in Graph 16, total Assets under Management (AuM) of Synthetic ETFs has 
been stable since the economic crisis. On the other side, AuM of Physical ETFs increased 
substantially  since  2011.  As  of  July  2017,  approximately  80%  of  European  ETF  AUM 
were represented by physical replication. These trends are also reflected in the number 
of ETFs. The number of Synthetic ETFs decreased since 2012, whereas the number of 
Physical ETFs increased steadily to exceed Synthetic ETFs by 30%. This is due, on one 
hand, to the dominant market players favoring physical ETFs and, on the other hand, 
to  investors  who  seem  to  consider  physical  ETFs  as  less  risky  because  the  products 
minimize counterparty risk.24 In the past few years, this resulted in some ETF providers 
(such as Credit Suisse, Deutsche Bank, and Lyxor / Société Générale) that historically 
focused  on  offering  synthetic  ETFs,  to  move  their  ETF  business  into  their  asset 
management operations and to begin offering physical ETFs.  

Finally, it seems important to note the emergence of active ETFs. An active ETF is an 
exchange-traded fund that has a manager or team making decisions on the underlying 
portfolio allocation or otherwise not following a passive investment strategy. An actively 
managed  ETF  will  have  a  benchmark  index,  but  managers  may  change  sector 
allocations, market-time trades or deviate from the index as they see fit. This produces 
investment returns that will not perfectly mirror the underlying index. The first actively 
managed ETF came to market in 2008 in the United States, but active management has 
struggled to get much traction in the industry since then. Out of more than 583 billion 
in Europe-listed ETF assets as of July 2017, less than 1% was tied to actively managed 
funds. 

Diversity of ETFs in Europe 

As of the end of end of July 2017, the European ETF industry amounted to 583,111M 
EUR of AuM, with 1,563 products from 44 providers and listed on 25 exchanges across 
Europe.  The  European  market  is  characterized  by  a  high  concentration  of  the  top 

24 Hill, J.M., Nadig, D. and Hougan, M (2015) A comprehensive guide to exchange-traded funds (ETFs), CFA Institute  

April 2018          35 

 
 
  
 
 
 
 
                                           
 
 
players, with that concentration increasing over time. As of end of July 2017, the top 3 
players in Europe account for 67.70%, the top 8 accounted for 91.10% and the top 20 
for 99.40% market share. These trends are also reflected in terms of product offerings, 
as the largest manufacturers are also offering the largest variety of products. 

As Table 3 shows, the largest ETF manufacturer in Europe in terms of AuM (Blackrock 
/ iShares) accounted for 47.1% of the overall assets under management, far ahead of 
the next two manufacturers (Deutsche AM / db x-trackers and Lyxor).  

Table 3: Top 20 European ETF providers (All) – Assets and Products 

AUM 

Products 

BlackRock 
Deutsche AM 
Lyxor 
UBS 
Amundi 
Vanguard 
State Street 
Source 
Deka investment GmbH 
ComStage 
BNP Paribas 
Zuercher Kantonalbank 
HSBC 
Xact Fonder AB 
Ossiam 
PowerShares 
ETF Securities 
Julies Baer Inv 
ThinkCapital ETFs N.V. 
Wisdom Tree 

Total 

274,417 
60,653 
59,720 
38,084 
33,211 
25,956 
21,014 
18,032 
8,679 
7,613 
7,015 
6,642 
4,837 
3,147 
2,375 
2,276 
2,126 
1,957 
1,386 
710 

579,850 

295 
180 
225 
120 
114 
22 
99 
74 
42 
114 
45 
4 
27 
14 
12 
17 
29 
4 
14 
35 

1,486 

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 

Graph 17 shows the ten best-selling ETFs for the year 2016, led by iShares Core S&P 
500  UCITS  ETF  USD  which  accounted  for  net  inflows  of  4.1bn  EUR  or  10.88%  of  the 
overall net inflows. It was followed by Vanguard SP 500 UCITS ETF USD (+2.7 bn EUR) 
and iShares Core MSCI World UCITS ETF USD (+2.3 bn EUR). The flow pattern at the 
fund level confirms the concentration at the manufacturer level. Overall, nine of the ten 
best-selling  funds  for  2016  were  actively  offered  by  BlackRock  and  accounted  for 
45.09% of the net inflows in the European ETF segment. 

As for other types of investment products, the manufacturers are keen to anticipate the 
need for investors and continue to create new products. A large variety of ETFs have 
opened  up  for  retail  investors,  providing  an  extensive  product  range  in  which  retail 
investors can invest: 

  Equity ETFs 
  Fixed-income ETFs 
  Commodity and commodity equity ETFs 
  Currency ETFs 
  Alternative ETFs 

April 2018          36 

 
 
  
 
 
 
  
  
 
 
 
  Leveraged and inverse ETFs 
  Actively-managed ETFs 

Graph 17: Ten best-selling ETFs, 2016 (EUR millions) 

4,5

4

3,5

3

2,5

2

1,5

1

0,5

0

iShares Core
S&P 500
UCITS ETF
USD (Acc)

Vanguard S&P
500 UCITS ETF
USD

iShares Core
MSCI World
UCITS ETF
USD (Acc)

iShares Core
MSCI EM IMI
UCITS ETF
USD (Acc)

iShares
Ultrashort
Bond UCITS
ETF EUR (Dist)

iShares High
Yield Corp
Bond UCITS
ETF EUR (Dist)

iShares EM
Local Govt
Bond UCITS
ETF USD (Acc)

iShares $ TIPS
UCITS ETF
USD (Acc)

iShares J.P.
Morgan $ EM
Bond UCITS
ETF USD (Dist)

iShares Corp
Bond 1-5yr
UCITS ETF
EUR (Dist)

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 

On a side note, besides differing in asset classes they cover, ETFs also vary in the way 
they  treat  dividend  payments.  ETFs  always  collect  the  full  dividend  of  all  constituent 
stocks and pay out the dividends to the ETF shareholder. This pay-out, however, can 
either  be  in  the  form  of  a  cash  distribution  or  a  reinvestment  in  additional  fractional 
shares of the ETF. Some ETFs even focus on dividend-paying stocks as a strategy. 

As of end of July 2017, the key ETFs asset classes were as follows: 

Graph 18: European ETF asset growth by asset class 

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 
*Number of ETPs at the end of the year is net of delistings for the period. **As of July. 

April 2018          37 

 
 
  
 
 
 
 
 
 
 
 
As shown in Graph 18, ETFs asset classes besides Equity, Fixed-Income and Commodity 
tend  to  be  niche  products,  positioned  as  alternatives  to  classic  ETF  asset  classes  but 
attracting a very limited market share. 

Domiciliation in Europe 

Ireland  is  the  leading  European  country  for  passive  funds  domiciliation  thanks  to 
advantageous  double-tax  treaties,  in  particular  with  the  United  States.  The  largest 
providers of ETFs in the world being American firms (Blackrock, Vanguard, and State 
Street)  selected  Ireland  as  fund  domicile.  Dublin  is  a  historical  European  institutional 
platform for US funds and houses the European operational centres of the largest US 
funds services providers (e.g. fund administrators). 

Graph 19: Domiciliation of European ETFs 

200

180

160

140

120

100

80

60

40

20

0

47%

17%

180

63

10%

37

9%

36

17%

63

Ireland

Luxembourg

France

Germany

Others

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 

Key features for retail investors 

ETFs  show  some  specific  features,  distinguishing  them  from  traditional  investment 
funds, which are attractive to retail investors: 

  Enhanced access and diversification 

Investment  in  an  index  tracking  product  will  automatically  provide  diversification 
across  the  sector  covered  by  the  index,  the  actual  level  of  diversification  being 
determined by the specific index. Available ETFs cover indices on most major equity 
markets as well as regional, industry specific and country-specific sectors. ETFs also 
cover other asset classes such as fixed income securities with the range of available 
ETFs continuing to increase.   This means that with an ETF, an investor  can gain a 
broad exposure to any number of markets/sectors through the purchase of a single 
security.  Also,  most  ETFs  providers  disclose  their  entire  portfolio  on  a  day-to-day 
basis on their websites, so that investors are fully aware of how their investments 
are allocated.  

  Liquidity 

Due  to  the  fact  that  ETFs  are  exchange  traded,  investors  can  buy  them  on  the 
secondary market at multiple times during the trading days. Most ETFs are traded on 
highly  liquid  market,  making  possible  for  the  investors  to  realize  buy  and  sell 
operations  as  soon  as  the  market  changes.  Although  some  other  kinds  of  mutual 
funds (traditional closed-end funds, in particular) also trade on exchanges, ETFs are 

April 2018          38 

 
 
  
 
 
 
 
different. They typically disclose their holdings at the start of every trading day, so 
potential buyers and sellers can evaluate the traded ETF price versus the price of the 
underlying holdings.  

  Lower costs 

This is one of the main reasons why retail investors hold ETFs in their portfolios; their 
lower  costs.  Retail  investors  investing  in  ETFs  generally  pay  less  than  the  ones 
investing in traditional mutual funds.  

Costs associated with ETFs 

This section will break down the different costs associated with ETFs. The last few years 
have  seen  a  material  repricing  of  ETFs  in  Europe  due  to  increased  competition.  The 
weighted  average  recurring  fee  observed  on  the  European  market,  across  the  whole 
product offering and strategies is of 0.30%. The cheapest products track fixed income 
indices  at  an  average  of  0.27%.  Most  expensive  are  alternative  ETFs  at  average  of 
0.72%. 

Table 4: ETF recurring costs using AUM weighted average – Europe 

Asset Class 

Equity 
Fixed Income 
Alternative 
Commodity 
Currency 
Multi Asset 
Total 

TER 
0.31% 
0.27% 
0.72% 
0.39% 
N/A 
0.68% 
0.30% 

Source: Deutsche Bank, Bloomberg Finance, Reuters (2017) 

  Ongoing charges 

The cost advantage of ETFs comes, first and foremost, from the fact that most ETFs 
are index funds and, therefore, do not bear the costs of discretionary, active portfolio 
management. Such funds therefore generally do not charge portfolio management 
commissions, but rather apply commissions on potential positive returns achieved by 
the  fund.  But  index  ETFs  even  tend  to  be  cheaper  than  indexed  mutual  funds  for 
investors  operating  at  the  retail  level.  This  comes  from  the  fact  that  they  are, 
obviously, exchange traded. When you buy or sell an ETF as an individual investor, 
you  do  so  through  a  broker  on  an  exchange.  The  costs  of  recording  who  you  are, 
sending you prospectus documents, handling inquiries, and other factors are all borne 
by  the  broker.  From  the  ETF  manager’s  point  of  view,  it  only  has  a  handful  of 
“customers” (i.e. the brokerage firms where client accounts are kept). By contrast, 
in  the  mutual  fund  world,  individual  investors  can  interact  directly  with  the  fund 
company. Distribution and recordkeeping costs accrue to the fund, therefore raising 
the overall cost of ownership. 

  Other costs 

Although ETFs have lower ongoing charges than mutual funds, some costs could differ 
from  those  associated  with  mutual  funds.  With  exchange  tradability  comes  the 
burden  of  paying  commissions,  bid–ask  spreads,  and,  potentially,  premiums  and 

April 2018          39 

 
 
  
 
 
 
 
 
 
 
discounts  to  net  asset  value  (NAV).  As  with  trading  stocks,  these  costs  can  affect 
returns.  

o  Execution fee 

Since ETFs trade like stocks on an exchange, they may be subject to execution 
fees.  These  fees  can  be  significant,  especially  for  smaller  trades  and  are 
supported directly by retail investors. Of course, execution fees vary and some 
investors trade less frequently than others. However, commissions should always 
be considered when calculating the total cost of investing in an ETF. 

o  Trading costs 

  Bid-Ask spreads: 

A fund’s bid/ask spread is the difference between what other investors are willing 
to  pay  (bid)  and  accept  (ask)  for  a  given  transaction.  For  the  largest,  most 
actively traded ETFs these spreads can be quite narrow (e.g. 0.01%25), but for 
ETFs with lower assets or trading volumes, the spread may be much wider (e.g. 
1%26). 

  Discounts and Premiums: 

ETFs  represent an investment comprised of a  portfolio of underlying securities 
and, consequently, its price is derived from the prices at which the underlying 
securities are trading.  

There  can  exist  a  difference  in  the  quoted  price  of  the  ETF  and  the  combined 
value of the underlying securities otherwise known as the net asset value or NAV 
of the fund. The difference between the quoted price of the ETF and the NAV is 
expressed as either a premium (when the market price of the ETF is above the 
NAV) or as a discount (when the market price of the ETF is below the NAV).  

Generally, this premium/discount is negligible but it is important for investors to 
be aware that they may be transacting at levels inconsistent with the underlying 
securities  (especially  during  market  open  and  close  or  during  periods  of  high 
market volatility). 

ETFs: Europe vs. US 

Numerous and substantial differences exist between Europe and North America when 
considering the ETF industry.27 In the United States, the market is more homogeneous 
than  in  the  EU,  as  70%  of  the  trades  are  made  on  the  same  exchange.  In  contrast, 
there  are  many  different  exchange  places,  tax  and  regulatory  regimes  (as  each 
jurisdiction  can  modify  the  EU  guidelines  for  UCITS)  across  the  EU  Member  States. 
Further elements, which add to the complexity in Europe, are the different languages, 
currencies as well as the captive and tied distribution models.  

In  terms  of  offered  products,  in  the  US  only  a  few  ETFs  are  based  on  the  same 
benchmark (rarely more than three). In the EU, the approach is different, as most firms 
base their products on the same benchmarks thus replicating the same index. 

25 https://advisors.vanguard.com/VGApp/iip/site/advisor/investments/bidaskspread 
26 http://www.nasdaq.com/article/biggest-etf-myths-that-can-lead-to-investor-mistakes-cm345940 
27 Hill, J.M., Nadig, D. and Hougan, M (2015) A comprehensive guide to exchange-traded funds (ETFs), CFA Institute 

April 2018          40 

 
 
  
 
 
 
                                           
 
 
In the US, asset managers managing the ETFs work with banks and brokers that trade 
and distribute ETFs. Those stakeholders (asset managers and banks/brokerage firms) 
are not allowed to trade with affiliated entities due to  regulation. This is a significant 
difference with the EU, where banks and brokers often both manufacture ETFs, trade 
and distribute them. Thus, they are often both a competitor to other ETF providers and 
a partner (as market makers) to those providers. 

In the US, ETFs invest predominantly in a basket of physical securities or are physically 
backed with securities in the US. In the EU, as seen above, both synthetic and physical 
ETFs are offered. 

On average ETFs in the US tend to be 25% cheaper than in Europe as can be seen in 
Table 5 describing the differences in ongoing charge between the US and the EU (except 
for the “Alternative” and “Commodity” categories). This is partly due to the US market 
being a large homogenous market. ETF manufacturers do not have to deal with cross-
border distribution, as it can be the case in Europe with its multiple markets triggering 
additional fees (countries registration, local placing agents,  etc.).  On the other hand, 
ETFs  in  the  US  are  materially  larger  than  European  ETFs,  thus  the  operational  and 
administrative expenses of the ETF can be applied on a much more significant AuM. 

Table 5: Average ongoing charge by asset class and management style 

Asset Class 

Ongoing charge (US) 

Equity 

Fixed Income 

Alternative 

Commodity 

Currency 

Multi Asset 

All 

0,22% 

0,23% 

1,23% 

0,48% 

0,60% 

0,53% 

0,23% 

Ongoing Charge (EU) 
0,31% 

0,27% 

0,72% 

0,39% 

N/A 

0,68% 

0,30% 

Sources: Deutsche Bank, Bloomberg Finance LP (2017) 

Accessibility of ETFs to retail investors 

There  are  differences  in  terms  of  accessibility  of  ETFs  between  Europe  and  the  USA. 
ETFs are widely used by retail investors in the US because of their low price. In Europe 
ETFs are not very well known by retail investors. Therefore we estimate that only about 
10% to 15% are held by retail investors.28 In the US, 50% of ETFs are held by retail 
investors, according to iShares. 

Although  ETFs  are  easily  accessible  to  well-educated  retail  investors  through  online 
investment platforms, this type of investor only accounts for a small percentage of the 
market. The situation is different for a less sophisticated retail investor in Europe which 
will depend on advice by a bank or insurance agent or an IFA. Our research shows that 
the share of ETFs actively offered through the webpages of the financial institutions is 
coherently  small  across  Member  States  (approximatively  12%  of  all  investment 
products). Similarly, bank advisors only proposed our shoppers to invest in ETFs in very 
few cases, such as in Germany and Spain for profile B and in the UK by one single IFA 

28  “Distribution  And  Education  Key  To  European  ETF  Growth”,  http://www.etf.com/sections/features-and-news/9327-
distribution-and-education-key-to-european-etf-market-growth?nopaging=1 

April 2018          41 

 
 
  
 
 
 
                                           
 
 
for profile A. In a few other rare cases, ETFs were part of a larger portfolio of products 
proposed to the shopper but remained a small part of the portfolio. The low willingness 
of banks to propose ETFs to their retail clients may be due to the absence of an incentive 
scheme, as ETF managers do not pay commissions. 

Findings 

  The ETF market in Europe, predominantly domiciled in Ireland, has been strongly 
growing  over  the  last  few  years.  Although  dominated  by  a  handful  of 
manufacturers,  investors  have  the  choice  between  a  large  variety  of  ETF 
products. 

  ETFs in Europe are today on average 25% more expensive than in the US. 
  Only about 10 to 15% of total ETF assets in Europe are held by retail investors.  
  A  well-educated  and  self-directed  retail  investor  is  able  to  easily  access  ETFs 

 

through online platforms at a low cost. 
In contrast, a financially less sophisticated investor which relies on human-based 
advice through banks, will today only in rare cases be advised to invest in ETFs. 
In contrast, IFAs in the UK are offering ETFs to their clients. 

April 2018          42 

 
 
  
 
 
 
 
 
4  Overview  of  costs  and  charges  of 

investment 

products 

When choosing the most suitable investment product, associated costs are an important 
element of the decision making, albeit not the only one. In this Section we analyse the 
costs and charges of different types of investment products offered through the most 
frequently used distribution channels. The data collection, the fee definition and the fee 
computation methods are detailed in the next section. This method allows us to compare 
costs and charges for each type of product across the 15 Member States in scope of the 
Study.  In  a  first  section,  we  focus  on  products  offered  through  banks  and  insurance 
companies  which  represent  the  most  relevant  distributors  across  most  European 
countries.  In  the  following  section,  we  compare  costs  and  charges  encountered  by  a 
retail  investor  when  buying  products  through  online  platforms  of  banks  and  through 
investment  platforms  (fund  supermarkets,  D2C  platforms  and  online  brokers). 
Furthermore and to the extent possible, we compare these costs and charges with those 
encountered when buying products offline through a bank or an insurance company. 

4.1  Cost  and  charges  of  products  purchased  at  banks  and  insurance 

companies 

In this section, the different costs and charges of the investment products in scope are 
analysed, based on costs applicable when purchasing these products through banks and 
insurers. The findings are presented on a product-by-product basis to display differences 
and similarities across Member States.  

All information including on cost and charges was collected on intermediaries’ websites 
by mid-2017. The following steps were taken during the data collection process: 

  A  list  of  banks,  insurance  companies,  fund  supermarkets,  online  brokers  and 
social  trading  platforms  was  created  during  the  inception  phase  of  the  Study. 
The list was created with the intent to cover 80% of the retail market in terms 
of  assets  under  management  as  well  as  the  most  relevant  online  platforms. 
Depending on the country 8 to 15 of such entities were identified to be part of 
the scope of the Study.  

  Our researchers visited the webpages of said institutions and in a first step looked 
for  central  tariff  sheets.  Fees  such  as  custody  fees  and  execution  fees  are 
generally directly mentioned in these tariffs sheets. The values for each type of 
fee were then inserted into a global database. Some tariff sheets also disclosed 
information about fees related to investment funds. Such information was also 
added to the database. 

  Then researchers went to the pages / sections dedicated to retail investors. Here 
they  recorded  all  individual  investment  products,  including  type  of  product 
(according to the above-mentioned definition) under which they were marketed.  

  The next step of the methodology was to identify costs for all that were not listed 
in the central tariffs sheets. In the vast majority of cases, three products groups 
were  offered  whilst  not  being  specifically  mentioned  in  the  tariff  sheets: 
investment funds, life insurance products and pension products.  

  For  investment  funds,  information  on  costs  &  charges  was  gathered  from  the 
funds’  prospectuses  and  UCITS  KIIDs.  In  most  cases,  these  documents  were 
available on the websites; in a few cases, our researchers collected the required 
data from Morningstar using the ISIN of the relevant product.  

April 2018          43 

 
 
  
 
 
 
 
 
 
  The different fees were collected at share-class level for each type of fund (i.e. 
equity, bond, money market, mixed, ETFs, real estate). Every share-class was 
analysed, or, when an actor distributed more than  100 share classes per fund 
category,  a  representative  sample,  based  on  underlying 
investments, 
geographies, and managers, was taken ensuring to include around 50% of the 
available  share  classes.  The  median  value  of  the  fees  was  computed  for  each 
type  of  fee  (e.g.  ongoing  charges,  entry,  and  exit)  for  each  type  of  fund  (i.e. 
equity,  bond,  money  market,  mixed,  exchange-traded  funds,  and  real  estate 
funds). This resulting value was used to obtain a specific value for every type of 
investment fund in a given country.  

  Pension  products  and  life  insurance  fees  were  collected  using  the  same 
methodology as previously described for bonds & equities. Our researchers found 
that  life  insurance  providers  usually  presented  their  product  details  in  a 
downloadable sheet, where information on costs was also displayed. If an actor 
offered multiple life insurance contracts and pension products, an average of the 
different  fees  was  computed,  differentiating  capital  guaranteed  policies  form 
policies without a capital guarantee when possible. Note that all fees and values 
presented  in  this  report  are  solely  based  on  publicly  available  data,  which  is 
accessible to retail investors; they thus represent the view that retail investors 
have when conducting their own research. As a result, in some cases, the cost 
and  charges  data  represented  in  this  report  may  not  capture  the  entire  costs 
associated  with  the  different  products  if  the  information  provided  was  not 
complete. 

  Please note that in the few instances where fees were disclosed as absolute EUR 
amounts  (as  opposed  to  percentages),  they  were  translated  into  percentage 
points based on a 10.000 EUR investment amount. 

  All fees and values presented in this report are solely based on publicly available 
data, which is accessible to retail investors; they thus represent the view that 
retail investors have when conducting their own research/analysis. Any form of 
discount,  including  but  not  limited  to  commercial  gestures  and  promotional 
campaigns, have been excluded from the results. 

The following table summarizes the types of fees analysed per product category, as 
well as the source used to gather related cost data: 

April 2018          44 

 
 
  
 
 
 
 
 
Recurring fees 

Source  One-off fees 

Investment 
funds 

Ongoing 
charges 

Fees charged on a regular (annual) basis 
including  management  fees  of  the  fund, 
expressed as a percentage of the amount 
invested/held. The value is directly taken 
from the KIID. 

KIID 

Entry fee 

Entry fees are one-off fees charged by a 
provider  when  subscribing  into  a  fund. 
Each time an investor buys additional fund 
units, an entry fee is charged. 

Source 

KIID 

Exit fee 

Exit  fees  are  one-off  fees  charged  by  a 
provider when redeeming out of a fund. 

KIID 

ETFs 

Ongoing 
charges 

Fees charged on a regular (annual) basis 
including  management  fees  of  the  ETF, 
expressed as a percentage of the amount 
invested/held. The value is directly taken 
from the KIID. 

KIID 

Execution 
fee 

Bonds 

Custody 
fees 

Custody  fees  are  fees  charged  by  a 
provider (e.g. bank, insurance company) 
as a fee for the storage / safe keeping of 
the assets of an investor. 

Tariff 
sheets / 
websites 

Execution 
fee 

Listed 
equities 

Custody 
fees 

Custody  fees  are  fees  charged  by  a 
provider (e.g. bank, insurance company) 
as a fee for the storage / safe keeping of 
the assets of an investor. 

Tariff 
sheets / 
websites 

Execution 
fee 

Execution  fees  refer  to  fees  charged  by 
intermediaries  (such  as  banks)  for  each 
trade  executed  by  the  investor,  as  a 
percentage  of  each  amount  of  money 
invested  through  them.  Those  fees  only 
apply for listed products, including ETFs. 

Tariff 
sheets / 
websites 

Execution  fees  refer  to  fees  charged  by 
intermediaries  (such  as  banks)  for  each 
trade  executed  by  the  investor,  as  a 
percentage  of  each  amount  of  money 
invested  through  them.  Those  fees  only 
apply for listed products, including bonds. 

Tariff 
sheets / 
websites 

Execution  fees  refer  to  fees  charged  by 
intermediaries  (such  as  banks)  for  each 
trade  executed  by  the  investor,  as  a 
percentage  of  each  amount  of  money 
invested  through  them.  Those  fees  only 
apply  for  listed  products,  including  listed 
equities. 

Tariff 
sheets / 
websites 

Life 
insurance 

Ongoing 
charges 

Fees charged by the insurer on a regular 
(annual)  basis,  including  management 
fees  of  the  product,  expressed  as  a 
percentage  of  the  value  of  the  policy. 
Note  that  in  some  Member  States,  the 
life 
ongoing  charges  disclosed 
insurance  products 
include  ongoing 
charges related to the policy’s underlying 
assets. Such Member States have been 
listed in the Study. 

for 

Product 
sheets / 
websites 

Entry fee 

Entry  fees  are  fees  paid  by  the  investor 
upon  each  contribution 
life 
insurance policy.  

into  a 

Product 
sheets / 
websites 

Exit fee 

Exit  fees  are  charged  when  the  investor 
buys back his contract (if he does not hold 
it until maturity).  

Product 
sheets / 
websites 

Pension 
products 

Ongoing 
charges 

Fees charged by the insurer on a regular 
(annual)  basis,  including  management 
fees  of  the  product,  expressed  as  a 
percentage  of  the  value  of  the  policy. 
Note  that  in  some  Member  States,  the 
ongoing  charges  disclosed  for  pension 
products include ongoing charges related 
to the contract’s underlying assets.  

Product 
sheets / 
websites 

Entry fee 

Entry  fees  are  fees  paid  by  the  investor 
upon each contribution into a contract.   

Product 
sheets / 
websites 

Exit fee 

Exit  fees  are  charged  when  the  investor 
buys back his contract (if he does not hold 
it until maturity).   

Product 
sheets / 
websites 

The following considerations should be taken into account when reading this section: 

  Given  the  diversity  and  complexity  of  financial  instruments  and  the  various 
national  specificities,  this  assessment  can  only  be  indicative  of  the  costs  and 
charges of a given product and should allow for a general comparison between 
Member  States.  The  cost  projections  provided  here  should  not  be  used  as  an 
indication of actually charged costs while investing. 

April 2018          45 

 
 
  
 
 
 
 
 
 
  
  
  
  
  
  
  The  way  information  on  fees  is  displayed  (or  not)  on  distributor’s  webpages 
strongly depends on the type of product and the Member State. Information on 
fees for investment funds (money market, bond, equity and mixed funds) was 
usually  easy  to  gather  on  the  distributors  webpages.  In  roughly  10%  of  the 
cases, our researchers had to manually search for the relevant KIID in order to 
find  the  information  on  costs.  For  ETFs  and  real  estate  funds,  depending  on 
Member  States,  information  on  fees  was  slightly  more  difficult  to  access,  with 
some  distributors  only  displaying  partial  or  no  information.29  Furthermore,  we 
found  that  in  specific  cases  customers  would  need  to  gather  information  from 
different documents and, in some instances, be able to combine them correctly, 
e.g. when investing in 3rd party funds customers would need to cover additional 
custody  charges.  Fees  associated  to  listed  bonds  and  equities  were  always 
disclosed  by  distributors.  Finally,  we  found  that  the  amount  of  information  on 
fees  for  life  insurance  and  pension  products  was  varying  very  much  from  one 
Member State to another.  In some Member States information on fees for life 
insurance and pension products could not be found on any distributors’ website. 
Furthermore, if costs for life insurance and pensions products were displayed, it 
is difficult for a retail investor to discern whether the indicated fees include the 
costs for any underlying asset. 

  The  sample  size  varies  strongly  between  products  and  across  Member  States. 
Graph  7  gives  an  indication  of  the  number  of  products  analysed  for  each 
category and Member State. 

4.1.1  Investment funds 

The following steps were taken during the data collection process for investment funds: 

  For  investment  funds,  information  on  costs  &  charges  was  gathered  from  the 
funds’ KIIDs. In most cases, these documents were available on the websites of 
the distributors. In a few cases the websites did not give access to the KIID and 
did not display the relevant information, therefore our researchers collected the 
required data from other sources using the ISIN of the relevant product.  

  The different fees were collected at a share-class level. Fees were collected for 
every  share-class  displayed  by  the  distributor.  In  the  case  that  a  distributor 
displayed  more  than  100  share  classes  per  fund  category,  a  representative 
sample of 50% of the available share classes was collected, based on underlying 
investments, geographies, and manufacturers.  

  Actively-managed  investment  funds  constitute  the  vast  majority  of  funds 
analysed.  Passively-managed  investment  funds30  are  usually  below  1%  of  the 
products displayed on the webpages of distributors,  reaching  5-10%  for  some 
Member States at most (for more information, please see section 2.3).  

29 For ETFs, some distributors only disclosed information regarding execution fees and custody charges (that are found on 
the central tariff sheet of the distributors). Those distributors, while writing information on costs for ETFs in their tariff sheet, 
did not give the retail investor any list of ETFs (where information ongoing charges could have been found on the KIID) on 
their webpages. 
30 ETFs are analysed in the following section. 

April 2018          46 

 
 
  
 
 
 
 
 
                                           
 
 
 

In this section, the different costs and charges of investment funds are calculated 
based on costs applicable when purchasing these products through banks. 

The following considerations should be taken into account when reading the following 
sections: 

  The  exit  and  entry  fees  collected  represent  maximum  fee  values  potentially 
charged to retail investors since distributors usually disclose the value of each 
fee as an “up to x%” figure. 

  For  each  type  of  fee/charge  i.e.  ongoing  charges,  entry  fee  and  exit  fee,  the 
median value of the fees/charges was computed across all funds of a given type 
of all distributors in scope in the respective Member State. Median values have 
been calculated on the basis of those investment products that actually charge 
this fee type (i.e. a fee value larger than 0%). Thus funds that did not include a 
certain type of fee/charge were not considered in the calculation of the median. 

  For the UK, Spain and Sweden, less than half of the funds analysed actually show 
entry  fees.  In  these  Member  States,  the  analysis  shows  that  in-house  funds 
generally do not display entry fees in contrast to 3rd party funds which usually 
do. 

Note that for consistency and comparability reasons, certain other categories of fees, 
which had been identified by our researchers, have been excluded from this analysis. 
For money market funds, the following types of fees were excluded: 

  Performance fees. In 95% of the sample of funds researched, the funds’ KIIDs 
stated “None” for performance fees. Therefore, they have been disregarded. 

  Custody fees. As most fund distributors across the 15 Member States analyzed 
offer mostly in-house funds on their website, custody fees for funds (which only 
apply to not in-house funds) have been disregarded. 

  Carried  interest  (for  Real  estate  funds).  As  the  Study  does  not  take  into 

account funds performances, they have been disregarded. 

April 2018          47 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.1.1.1  Money Market funds 

The following table summarizes the different fees presented by distributors from 15 
Member States for money market funds. Please note that “Not applicable” written in a 
cell  means  that  no  values  were  found  for  the  particular  fee  for  all  the  share  classes 
analysed.  

Money market funds 

Member State 

Number of 
share classes 
analysed 

Entry fees31 

Exit fees32 

Ongoing charges33 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

7 

11 

3 

5 

30 

13 

15 

21 

7 

14 

10 

10 

32 

8 

8 

- 

Median  Max 
Min 

Median  Max 
Min 

Median  Max 
Min 

0.30% 

0.35% 

0.09% 

1.00% 

1.00% 

2.00% 

1.50% 

1.00% 

3.00% 
0.15% 

1.00% 
0.10% 

0.09% 
0.09% 

1.50% 
0.03% 

1.00% 
1.00% 

2.00% 
2.00% 

3.00% 
1.00% 

1.00% 
0.10% 

Not applicable 

0.59% 

5.00% 

0.09% 

0.53% 

5.00% 
5.00% 

0.09% 
0.09% 

0.53% 
0.53% 

0.48% 

0.43% 

0.45% 

Not applicable 

0.10% 

Not applicable 

0.16% 

0.40% 

0.40% 
0.40% 

0.48% 

Not applicable 

0.30% 

Not applicable 

Not applicable 

0.56% 

1.00% 

3.00% 
0.23% 

0.45% 

4.00% 
0.23% 

0.91% 

Not applicable 

Not applicable 

0.43% 

1.00% 

3.00% 

0.05% 

3.00% 
0.20% 

5.00% 
0.50% 

0.05% 
0.05% 

2.00% 

1.00% 

0.05% 

3.00% 
0.20% 

3.00% 
0.50% 

0.05% 
0.05% 

0.80% 

0.31% 

0.35% 

Not applicable 

Not applicable 

0.25% 

1.50% 
0.20% 

1.02% 
0.07% 

0.73% 
0.17% 

1.11% 
0.22% 

0.50% 
0.03% 

0.72% 
0.11% 

0.83% 
0.34% 

0.95% 
0.11% 

0.80% 
0.10% 

1.30% 
0.60% 

0.88% 
0.20% 

1.45% 
0.50% 

1.06% 
0.04% 

0.95% 
0.30% 

0.63% 
0.23% 

1.37% 

1.25% 

0.39% 

31 Entry fees are one-off fees charged by a provider when subscribing into a fund. Each time an investor buys additional 
fund units, an entry fee is charged 
32 Exit fees are one-off fees charged by a provider when redeeming out of a fund 
33 Ongoing charges: Fees charged on a regular (annual) basis including management fees of the fund, expressed as a 
percentage of the amount invested/held. The value is directly taken from the KIID. 

April 2018          48 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

Money  market  funds  are  generally  the  cheapest  actively-managed  funds  available  to 
retail investors.  Retail investors can buy the cheapest money market funds in France 
with ongoing charges on average at 0.10%. In contrast, fees displayed by distributors 
in Romania and Poland are 8 to 9 times higher. Substantial differences can also be seen 
in terms of entry and exit fees.  

4.1.1.2  Bond funds 

The following table summarizes the different fees presented by distributors from 15 
Member States for Bond funds. Please note that “Not applicable” written in a cell means 
that no values were found for the particular fee for all the share classes analysed.  

Bond funds 

Member State 

Number of 
share classes 
analysed 

Entry fees34 

Exit fees35 

Ongoing charges36 

Median  Max 
Min 

Median  Max 
Min 

Median  Max 
Min 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

71 

84 

24 

41 

70 

53 

2.50% 

2.50% 

0.31% 

3.00% 

1.00% 

3.00% 

135 

2.00% 

86 

64 

37 

26 

26 

2.00% 

3.00% 

2.50% 

3.00% 

3.50% 

3.00% 
0.30% 

5.00% 
0.10% 

0.80% 
0.08% 

5.00% 
0.30% 

4.50% 
0.15% 

6.00% 
1.00% 

6.00% 
0.50% 

4.00% 
1.50% 

5.75% 
0.10% 

5.00% 
0.75% 

6.00% 
2.00% 

5.00% 
1.50% 

Not applicable 

0.93% 

1.00% 

0.10% 

2.00% 

5.00% 
1.00% 

0.50% 
0.05% 

5.00% 
0.17% 

0.90% 

0.70% 

1.35% 

Not applicable 

0.98% 

1.50% 

2.20% 

1.00% 

1.00% 

2.00% 

1.00% 

2.00% 

1.50% 
0.50% 

3.50% 
0.40% 

1.00% 
0.50% 

1.00% 
0.10% 

5.00% 
0.75% 

2.00% 
0.50% 

3.00% 
0.50% 

1.07% 

1.30% 

1.08% 

0.68% 

1.52% 

1.10% 

1.09% 

2.50% 
0.50% 

2.03% 
0.25% 

1.15% 
0.20% 

1.95% 
0.35% 

1.67% 
0.10% 

2.04% 
0.21% 

2.25% 
0.27% 

2.24% 
0.39% 

2.33% 
0.10% 

3.56% 
0.67% 

2.35% 
0.52% 

2.05% 
0.60% 

34 Entry fees are one-off fees charged by a provider when subscribing into a fund. Each time an investor buys additional 
fund units, an entry fee is charged 
35 Exit fees are one-off fees charged by a provider when redeeming out of a fund 
36 Ongoing charges: Fees charged on a regular (annual) basis including management fees of the fund, expressed as a 
percentage of the amount invested/held. The value is directly taken from the KIID. 

April 2018          49 

 
 
  
 
 
 
 
 
 
 
 
 
                                           
 
 
Spain 

Sweden 

UK 

Average 

184 

5.00% 

6.38% 
1.00% 

5.00% 
0.15% 

5.25% 
1.00% 

1.00% 

1.00% 

5.00% 

5.00% 
0.20% 

1.00% 
0.15% 

5.00% 
5.00% 

1.03% 

0.81% 

0.66% 

2.61% 
0.10% 

1.95% 
0.11% 

1.44% 
0.28% 

3.00% 

3.00% 

2.87% 

1.69% 

1.01% 

78 

92 

- 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

Please  note  that  very  low  values  for  the  minimum  values  are  due  to  the  presence  of 
Index funds in the sample analysed. Those types of funds represent less than 1% of the 
sample  of  bond  funds  analysed  but  present  fees  that  are  substantially  lower  than 
actively-managed bond funds.  

Bond funds are also typically cheap in comparison to other types of mutual funds (such 
as  equity  funds,  see  below).  Bond  funds  display  highest  ongoing  charges  in  Poland, 
Estonia and Italy. In contrast, ongoing charges shown on the distributors’ websites are 
the  lowest  in  the  UK,  the  Netherlands  and  Denmark.  One-off  fees  are  the  lowest  in 
Denmark. 

4.1.1.3  Equity funds  

The following table summarizes the different fees/charges presented by distributors 
from 15 Member States for Equity funds. Please note that “Not applicable” written in a 
cell  means  that  no  values  were  found  for  the  particular  fee  for  all  the  share  classes 
analysed.  

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

Please  note  that  very  low  values  for  the  minimum  values  are  due  to  the  presence  of 
Index funds in the sample analysed. Those types of funds represent less than 1% of the 
sample  of  bond  funds  analysed  (with  the  exception  of  Sweden  and  the  Netherlands 
where they  represent respectively 10% and 7% of the sample) but present fees that 
are substantially lower than actively-managed bond funds. 

Equity funds are the most expensive subcategory of funds analysed in our study. Like 
bond  funds,  distributors  displaying  the  highest  ongoing  charges  are  from  Poland  at 
4.03%  which  is  about  4  times  higher  than  for  the  UK  and  the  Netherlands.  Danish 
distributors show the lowest one-off fees. 

April 2018          50 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity funds 

Member State 

Number of 
share classes 
analysed 

Entry fees37 

Exit fees38 

Ongoing 
charges39 

Belgium 

Czech 
Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

139 

176 

40 

99 

193 

100 

105 

145 

86 

90 

38 

34 

181 

191 

141 

- 

Median 

2,50% 

3,00% 

0,30% 

3,00% 

2,50% 

5,00% 

4,00% 

2,00% 

5,00% 

4,50% 

3,00% 

5,00% 

Max 
Min 

5.75% 
2.00% 

6.00% 
2.00% 

3.00% 
0.10% 

5.75% 
1.00% 

6.00% 
1.00% 

8.00% 
3.00% 

5.00% 
1.50% 

3.00% 
2.00% 

6.38% 
0.10% 

5.50% 
2.00% 

5.00% 
2.00% 

5.00% 
2.00% 

5,00% 

10.00% 
1.00% 

5,00% 

4,00% 

5.75% 
0.25% 

5.25% 
1.00% 

Median 

Max 
Min 

Median 

Not applicable 

5,00% 

0,31% 

1,00% 

0,75% 

2,00% 

0,40% 

0,50% 

1,00% 

4,00% 

1,00% 

2,00% 

2,00% 

1,00% 

5,00% 

6.00% 
5.00% 

2.00% 
0.10% 

5.00% 
0.50% 

1,00% 
0.50% 

5.00% 
1.00% 

0.40% 
0.40% 

1.00% 
0.50% 

3.00% 
0.10% 

5.00% 
2.00% 

5.00% 
0.91% 

5.00% 
2.00% 

4.00% 
0.50% 

2.50% 
0.25% 

5.00% 
5.00% 

1,96% 

1,86% 

1,54% 

1,86% 

1,80% 

1,80% 

2,07% 

1,98% 

1,10% 

4,03% 

2,17% 

2,01% 

2,12% 

1,66% 

0,94% 

Max 
Min 

3.09% 
1.00% 

2.80% 
0.95% 

2.80% 
0.55% 

2.85% 
1.26% 

3.40% 
0.75% 

2.80% 
0.94% 

2.86% 
1.03% 

3.61% 
1.23% 

2.72% 
0.45% 

4.66% 
1.72% 

3.82% 
0.50% 

4.16% 
1.20% 

3.67% 
0.14% 

3.30% 
0.20% 

1.87% 
0.48% 

3.65% 

2.01% 

1.89% 

37 Entry fees are one-off fees charged by a provider when subscribing into a fund. Each time an investor buys additional 
fund units, an entry fee is charged 
38 Exit fees are one-off fees charged by a provider when redeeming out of a fund 
39  Ongoing  charges:  Fees  charged  on  a  regular  (annual)  basis  including  management  fees  of  the  fund,  expressed  as  a 
percentage of the amount invested/held. The value is directly taken from the KIID. 

April 2018          51 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                           
 
 
4.1.1.4  Mixed funds 

The following table summarizes the different fees presented by distributors from 15 
Member States for mixed funds. Please note that “Not applicable” written in a cell means 
that no values were found for the particular fee for all the share classes analysed. 

Member State 

Number of 
share classes 
analysed 

 Mixed funds 

Entry fees40 

Exit fees41 

Ongoing 
charges42 

Median  Max 
Min 

Median  Max 
Min 

Median  Max 
Min 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

37 

72 

17 

27 

3.00% 

3.00% 

0.33% 

1.03% 

106 

2.00% 

5.50% 
1.50% 

5.00% 
1.00% 

1.00% 
0.15% 

5.75% 
0.53% 

6.00% 
0.50% 

8.00% 
1.50% 

4.00% 
1.50% 

3.00% 
2.00% 

5.00% 
0.08% 

5.00% 
1.63% 

5.00% 
1.05% 

5.00% 
2.00% 

6.38% 
1.00% 

5.75% 
1.00% 

5.25% 
1.00% 

Not applicable 

1.57% 

5.00% 

0.32% 

1.00% 

5.00% 
2.00% 

1.00% 
0.05% 

1.03% 
0.53% 

1.76% 

1.36% 

1.59% 

Not applicable 

1.49% 

2.00% 

2.13% 

0.50% 

0.11% 

3.25% 

1.00% 

4.00% 

3.00% 

1.00% 

5.00% 

3.00% 
0.50% 

2.90% 
1.75% 

1.00% 
0.50% 

1.00% 
0.05% 

5.00% 
1.63% 

5.00% 
1.00% 

5.00% 
2.00% 

5.00% 
0.10% 

2.00% 
1.00% 

5.00% 
5.00% 

1.70% 

1.87% 

1.78% 

0.82% 

3.26% 

1.60% 

1.76% 

1.21% 

1.36% 

1.02% 

2.00% 
0.87% 

2.84% 
0.50% 

1.97% 
0.82% 

2.20% 
0.70% 

3.23% 
0.03% 

3.57% 
0.45% 

2.65% 
1.29% 

2.93% 
0.63% 

1.33% 
0.29% 

4.26% 
0.20% 

3.30% 
0.73% 

5.20% 
0.62% 

4.00% 
0.19% 

2.30% 
0.20% 

1.91% 
0.44% 

5.00% 

3.50% 

2.00% 

0.18% 

4.00% 

2.00% 

5.00% 

5.00% 

5.00% 

5.00% 

3.77% 

2.73% 

1.51% 

98 

48 

71 

20 

42 

23 

20 

248 

50 

110 

- 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

40 Entry fees are one-off fees charged by a provider when subscribing into a fund. Each time an investor buys additional 
fund units, an entry fee is charged 
41 Exit fees are one-off fees charged by a provider when redeeming out of a fund 
42 Ongoing  charges:  Fees  charged  on  a  regular  (annual)  basis  including  management  fees  of  the  fund,  expressed  as  a 
percentage of the amount invested/held. The value is directly taken from the KIID. 

April 2018          52 

 
 
  
 
 
 
 
 
 
   
                                           
 
 
Please  note  that  very  low  values  for  the  minimum  values  are  due  to  the  presence  of 
Index funds in the sample analysed. Those types of funds represent less than 1% of the 
sample of bond funds analysed (with the exception of Spain where they represent ~5% 
of the sample) but present fees that are substantially lower than actively-managed bond 
funds. 

Polish  distributors  display  the  highest  ongoing  charges  at  3.26%  for  their  products 
compared to the other Member States in scope. In the Netherlands and the UK ongoing 
charges are the lowest at 0.82% and 1.02% respectively. One-off fees in Denmark are 
substantially lower than in other Member States. 

4.1.1.5  Real estate funds  

The following table summarizes the different fees presented by distributors from 15 
Member States for real estate funds. Please note that “Not applicable” written in a cell 
means that no values were found for the particular fee for all the share classes analysed. 
In addition, note that “Not available” written in a cell means that no real estate funds 
were found on the distributors’ webpages on a best-effort basis.  

Real estate funds 

Member State 

Number of 
share classes 
analysed 

Entry fees43 

Exit fees44 

Ongoing charges45 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

5 

2 

0 

2 

12 

27 

0 

2 

7 

0 

5 

Median  Max 
Min 

Median 

Max 
Min 

Median 

2.50% 

3.25% 

5.50% 
2.50% 

5.00% 
1.50% 

Not applicable 

2.42% 

5.00% 

5.00% 
5.00% 

1.14% 

Max 
Min 

2.52% 
1.71% 

1.86% 
0.42% 

Not available 

Not available 

Not available 

5.00% 

3.00% 

5.00% 

5.00% 
5.00% 

6.00% 
1.90% 

6.00% 
3.00% 

1.00% 

1.00% 
1.00% 

0.97% 

Not applicable 

2.09% 

4.00% 

7.00% 
3.00% 

1.01% 

1.84% 
0.09% 

2.90% 
1.25% 

1.86% 
0.50% 

Not available 

Not available 

Not available 

4.00% 

5.00% 

5.00% 
3.00% 

5.00% 
5.00% 

Not applicable 

1.94% 

Not applicable 

0.73% 

1.90% 
1.98% 

1.98% 
0.23% 

Not available 

Not available 

Not available 

1.50% 

1.75% 
0.50% 

2.00% 

2.00% 
0.25% 

1.16% 

1.21% 
0.35% 

43 Entry fees are one-off fees charged by a provider when subscribing into a fund. Each time an investor buys additional 
fund units, an entry fee is charged 
44 Exit fees are one-off fees charged by a provider when redeeming out of a fund 
45 Ongoing  charges:  Fees  charged  on  a  regular  (annual)  basis  including  management  fees  of  the  fund,  expressed  as  a 
percentage of the amount invested/held. The value is directly taken from the KIID. 

April 2018          53 

 
 
  
 
 
 
 
 
 
 
 
 
                                           
 
 
Romania 

Spain 

Sweden 

UK 

Average 

0 

0 

5 

11 

- 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

0.25% 

0.25% 
0.25% 

0.25% 

0.25% 
0.25% 

1.50% 

Not applicable 

Not applicable 

0.84% 

2.01% 
0.85% 

1.21% 
0.74% 

3.76% 

3.20% 

1.28% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

Financial institutions in Denmark, Italy, Poland, Romania, and Spain do not disclose real 
estate  funds’  fees  on  their  website.  Among  the  Member  States  analysed,  real  estate 
funds are the most expensive in Belgium, France and Luxembourg in terms of ongoing 
charges. Real estate funds analysed in our sample are the cheapest in the Netherlands 
the UK and Estonia. 

4.1.2  ETFs 

The following steps were taken during the data collection process for ETFs: 

  For ETFs, information on costs & charges was gathered from the funds’ KIIDs. In 
most cases, these documents were available on the websites; in a few cases, our 
researchers collected the required data from Morningstar using the ISIN of the 
relevant product. In addition, ETFs being listed products, distributors also charge 
an execution fee. Those types of costs were explicitly displayed on central tariff 
sheets.  

  The different fees were collected at a share-class level.  

 

In this section, the different costs and charges of ETFs are calculated based on 
costs applicable when purchasing these products through banks. 

  The  entry  and  exit  fees  collected  represent  maximum  fee  values  potentially 
charged to retail investors since distributors usually disclose the value  of each 
fee as an “up to x%” figure.  

  For  each  type  of  fee/charge  i.e.  ongoing  charges,  entry,  and  exit,  the  median 
value  of  the  fees/charges  was  computed  across  all  real  estate  funds  of  all 
distributors in scope in a given Member State.   

Note that for consistency and comparability reasons, certain other categories of fees, 
which had been identified by our researchers, have been excluded from this analysis. 
For ETFs, the following types of fees were excluded: 

  Performance fees. In 95% of the sample of funds researched, the funds’ KIIDs 
stated “None” for performance fees. Therefore, they have been disregarded. 

  Custody fees. As most fund distributors across the 15 Member States analysed 
offer mostly in-house funds on their website, custody fees for funds (which only 
apply to third-party funds) have been disregarded. 

April 2018          54 

 
 
  
 
 
 
 
 
 
 
 
 
 
The following table summarizes the different fees presented by distributors from 15 
Member States for ETFs. Please note that “Not applicable” written in a cell means that 
no values were found for the particular fee for all the share classes analysed. In addition, 
note that “Not available” written in a cell means that no ETFs were found on distributors’ 
webpages on a best-effort basis.  

ETFs 

Number of 
share classes 
analysed 

Execution 
fees46 

Ongoing charges47 

Member State 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

76 

0 

13 

66 

91 

Germany 

105 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

7 

56 

79 

0 

12 

0 

112 

16 

20 

- 

Median  Max 
Min 

Median  Max 
Min 

1.00% 

1.00% 
1.00% 

0.46% 

0.74% 
0.07% 

Not available 

Not available 

0.75% 

0.25% 

1.20% 

1.00% 

0.70% 

1.00% 

0.20% 

1.00% 
0.54% 

0.40% 
0.20% 

1.40% 
1.10% 

2.19% 
1.00% 

0.90% 
0.40% 

1.85% 
0.36% 

0.20% 
0.17% 

0.53% 

0.35% 

0.30% 

0.20% 

0.39% 

0.30% 

0.30% 

0.60% 
0.45% 

1.20% 
0.09% 

0.85% 
0.12% 

0.75% 
0.07% 

0.48% 
0.30% 

0.74% 
0.01% 

0.91% 
0.09% 

Not available 

Not available 

0.45% 

0.52% 
0.20% 

0.14% 

0.45% 
0.09% 

Not available 

Not available 

0.60% 

0.45% 

0.35% 

0.70% 
0.35% 

0.50% 
0.45% 

0.35% 
0.35% 

0.59% 

0.41% 

0.23% 

0.99% 
0.05% 

0.70% 
0.10% 

1.00% 
0.07% 

0.73% 

0.36% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

46 Execution fees: Fees charged by intermediaries (such as banks) for each trade executed by the investor, as a percentage 
of each amount of money invested through them. Those fees only apply for listed products, including ETFs. 
47  Ongoing  charges:  Fees  charged  on  a  regular  (annual)  basis  including  management  fees  of  the  ETF,  expressed  as  a 
percentage of the amount invested/held. The value is directly taken from the KIID. 

April 2018          55 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
In three Member States included in our sample, not a single distributor in the sample 
actively  discloses  their  fees  for  ETFs  on  their  websites  (Poland,  Czech  Republic  and 
Romania). 

Countries where investing in ETFs through banks is relatively inexpensive are Portugal 
and Germany, with ongoing charges of 0.14% and 0.20% respectively. ETFs distributed 
in the Netherlands and Estonia, while more expensive; typically bear very low one-off 
charges (e.g. 0.20% as execution fees for the Netherlands).  

4.1.3  Listed bonds & equities  

The  following  steps  were  taken  during  the  data  collection  process  for  listed  bonds  & 
equities: 

  For listed bonds & equities, information on costs & charges was gathered from 

central tariff sheets.  

  For each type of fee/charge i.e. execution and custody, the median value of the 
fees/charges was computed across all listed bonds & equities of all distributors 
in scope in a given Member State.   

4.1.3.1  Listed bonds  

The following table summarizes the different fees presented by distributors from 15 
Member States for listed bonds.  

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

Listed bonds are among the least expensive products of our sample. It is important to 
note that for listed bonds, the recurring fees shown include custody fees, and the one-
off fees include execution fees. 

Substantial  differences  across  Member  States  appear  in  terms  of  custody  fees. 
Distributors in the UK and the Netherlands are displaying the lowest custody fees. On 
the other hand, Spain is by far the most expensive Member State for retail investors 
willing to invest in listed bonds. 

April 2018          56 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Listed bonds 

Member State 

Number of 
distributors 
analysed 

Execution fees48 

Custody fees49 

Median  Max 
Min 

Median  Max 
Min 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

5 

5 

7 

6 

8 

7 

7 

5 

3 

2 

7 

3 

10 

6 

3 

- 

0.40% 

0.15% 

0.15% 

0.20% 

1.38% 

0.50% 

0.30% 

1.00% 

0.17% 

0.67% 

0.43% 

0.12% 

0.60% 

0.48% 

0.41% 

0.50% 
0.09% 

0.53% 
0.04% 

0.30% 
0.04% 

0.20% 
0.10% 

1.44% 
0.54% 

1.25% 
0.50% 

0.60% 
0.20% 

1.09% 
0.50% 

0.17% 
0.08% 

0.99% 
0.35% 

0.65% 
0.20% 

1.00% 
0.10% 

2.00% 
0.35% 

0.50% 
0.10% 

0.58% 
0.29% 

0.15% 

0.30% 

0.27% 

0.20% 

0.29% 

0.16% 

0.40% 

0.20% 

0.13% 

0.42% 

0.30% 

0.19% 

0.70% 

0.45% 

0.10% 

0.15% 
0.15% 

0.60% 
0.15% 

0.38% 
0.17% 

0.84% 
0.10% 

0.30% 
0.16% 

1.50% 
0.13% 

0.80% 
0.35% 

0.25% 
0.15% 

0.13% 
0.13% 

0.60% 
0.24% 

0.37% 
0.20% 

0.19% 
0.19% 

1.00% 
0.13% 

0.84% 
0.05% 

0.10% 
0.10% 

0.50% 

0.32% 

48 Execution fees: Fees charged by intermediaries (such as banks) for each trade executed by the investor, as a percentage 
of each amount of money invested through them. Those fees only apply for listed products, including bonds. 
49 Custody fees: Fees charged by a provider (e.g. bank, insurance company) as a fee for the storage / safekeeping of the 
assets of an investor. 

April 2018          57 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                           
 
 
4.1.3.2  Listed equities  

The following table summarizes the different fees presented by distributors from 15 
Member States for listed equities.  

Listed equities 

Member State 

Number of 
distributors 
analysed 

Execution 
fees50 

Custody fees51 

Median  Max 
Min 

Median  Max 
Min 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

5 

5 

7 

6 

8 

7 

7 

5 

3 

2 

7 

1 

10 

7 

3 

- 

1.00% 

0.40% 

0.75% 

0.20% 

1.38% 

1.00% 

0.35% 

1.00% 

0.17% 

0.68% 

0.45% 

0.40% 

0.60% 

0.45% 

0.35% 

1.00% 
0.35% 

0.80% 
0.11% 

0.75% 
0.25% 

0.35% 
0.20% 

1.44% 
0.54% 

1.80% 
1.00% 

0.90% 
0.20% 

1.85% 
0.45% 

0.17% 
0.08% 

0.95% 
0.40% 

0.65% 
0.20% 

0.40% 
0.40% 

0.70% 
0.60% 

0.50% 
0.05% 

0.41% 
0.29% 

0.24% 

0.24% 

0.25% 

0.25% 

0.29% 

0.16% 

0.40% 

0.20% 

0.13% 

0.42% 

0.29% 

0.19% 

0.70% 

0.45% 

0.10% 

0.24% 
0.24% 

0.72% 
0.06% 

0.38% 
0.16% 

0.84% 
0.12% 

0.30% 
0.16% 

1.50% 
0.13% 

0.80% 
0.35% 

0.25% 
0.15% 

0.13% 
0.13% 

0.60% 
0.24% 

0.37% 
0.20% 

0.19% 
0.19% 

1.00% 
0.13% 

0.84% 
0.20% 

0.10% 
0.10% 

0.64% 

0.32% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

50 Execution fees: Fees charged by intermediaries (such as banks) for each trade executed by the investor, as a percentage 
of each amount of money invested through them. Those fees only apply for listed products, including listed equities. 
51 Custody fees: Fees charged by a provider (e.g. bank, insurance company) as a fee for the storage / safekeeping of the 
assets of an investor. 

April 2018          58 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
Like for listed bonds, the most expensive distributors for listed equities are located in 
Spain, where custody fees are comparatively high at 0.70%. On the other hand, the UK 
is  the  cheapest  Member  State  to  invest  in  both  listed  bonds  and  equites  thanks  to 
relatively low custody fees at 0.10%. 

4.1.4  Life insurance products 

The  following  steps  were  taken  during  the  data  collection  process  for  life  insurance 
products: 

  Life  insurance  fees  were  collected  using  the  same  methodology  as  previously 
described  for  bonds  &  equities.  Our  researchers  found  that  life  insurance 
providers usually presented their product details in a downloadable sheet, where 
information on costs was also displayed. If an actor offered multiple life insurance 
contracts, an average of the different fees was computed, differentiating capital 
guaranteed policies from policies without a capital guarantee when possible. In 
most cases life insurance products could not be bought directly on the company’s 
website  but  interested  retail  clients  were  redirected  towards  an  affiliated 
intermediary.  Note  that  all  fees  and  values  presented  in  this  report  are  solely 
based on publicly available data, which is accessible to retail investors; they thus 
represent  the  view  that  retail  investors  have  when  conducting  their  own 
research. As a result, in some cases, the cost and charges data represented in 
this  report  may  not  capture  the  entire  costs  associated  with  the  different 
products if the information provided was not complete. 

  The  exit  and  entry  fees  collected  represent  maximum  fee  values  potentially 
charged to retail investors since distributors usually disclose the value of each 
fee as an “up to x%” figure.  

  For each type of fee/charge i.e. ongoing charge, entry and exit fees, the median 
value of the fees/charges was computed across all life insurance products of all 
distributors in scope in a given Member State.   

Note that for consistency and comparability reasons, certain other categories of fees, 
which had been identified by our researchers, have been excluded from this analysis. 
For life insurance products, the following types of fees were excluded: 

  Arbitrage fees. They are disclosed by distributors in some Member States and 
have  been  collected.  However,  as  no  assumption  was  made  regarding  the 
number of arbitrages occurring over the period, we can’t categorize them as one-
off or recurring. In addition, this fee is usually charged after the first arbitrage 
(meaning that the first arbitrage is free of charge). 

  Biometric  risk  premiums.  Such  fees  were  not  disclosed  for  life  insurance 

products with an investment component. 

4.1.4.1  Life insurance with guaranteed capital 

The following table summarizes the different fees presented by distributors (banks 
and insurance companies) from 15 Member States for life insurance with guaranteed 
capital. Please note that “Not  applicable” written in a cell means that no values were 
found  for  the  particular  fee  for  all  the  products  analysed.  In  addition,  note  that  “Not 
available”  written  in  a  cell  means  that  no  life  insurance  with  guaranteed  capital  was 
found on distributors’ webpages on a best-effort basis.    

April 2018          59 

 
 
  
 
 
 
 
 
 
 
 
 
Life insurance with guaranteed capital 

Member State 

Number of 
data points 

Entry fees52 

Exit fees53 

Ongoing charges54 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

10 

3 

0 

0 

16 

0 

9 

3 

0 

0 

10 

2 

0 

0 

0 

- 

Median  Max 
Min 

Median 

Max 
Min 

Median 

2.50% 

1.50% 

4.50% 
1.00% 

1.50% 
1.00% 

Not applicable 

0.18% 

Not applicable 

0.27% 

Max 
Min 

1.50% 
0.09% 

0.50% 
0.04% 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

4.00% 

5.00% 
2.00% 

Not applicable 

0.80% 

0.96% 
0.60% 

Not available 

Not available 

Not available 

2.75% 

3.00% 

4.00% 
1.50% 

3.00% 
2.00% 

2.00% 

2.15% 
1.05% 

1.79% 

Not applicable 

1.20% 

3.85% 
0.17% 

1.20% 
1.20% 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

2.00% 

2.60% 

2.50% 
1.50% 

2.60% 
2.60% 

1.25% 

4.00% 

1.50% 
1.00% 

4.00% 
4.00% 

1.00% 

0.70% 

1.20% 
0.50% 

1.10% 
0.30% 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

2.88% 

1.83% 

0.88% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

In the case of guaranteed capital life insurance products, it is important to note that the 
collected information on the webpages of distributors usually does not allow to assess 
whether cost and charges related to an underlying assets are included or not. The costs 
presented above are the ones displayed in the products’ information sheet, where the 
costs on underlying assets are not specified and only one value is given for the different 

52 Entry fees: Fees paid by the investor upon each contribution into a life insurance policy. 
53 Exit fees: Fees charged when the investor buys back his contract (if he does not hold it until maturity). 
54 Ongoing charges: Fees charged by the insurer on a regular (annual) basis, including management fees of the product, 
expressed as a percentage of the value of the policy. Note that in some Member States, the ongoing charges disclosed for 
life  insurance  products  include  ongoing charges related to the  policy’s underlying assets. Such Member States have been 
listed in the Study. 

April 2018          60 

 
 
  
 
 
 
 
 
 
                                           
 
 
types of fees incurred. Please also note that variation of fees can be explained by relative 
low sample sizes, since in some Member States only very few actors disclose cost data 
for guaranteed capital life insurance products.  

Considering  the  above  limitations,  Czech  Republic  and  Belgium  present  the  lowest 
ongoing  fees  for  life  insurances  with  guaranteed  capital  (respectively  0.27%  and 
0.18%). Italian distributors disclose much higher ongoing charges (1.79% on average). 

Please  also  note  that  for  several  Member  States  included  in  our  sample,  not  a  single 
financial institution in the scope of our study actively discloses guaranteed capital life 
insurances’  fees  (Sweden,  United  Kingdom,  Estonia,  Germany,  Denmark,  the 
Netherlands, Poland and Spain). 

4.1.4.2  Life insurance without capital guarantee 

The following table summarizes the different fees presented by distributors (banks 
and  insurance  companies)  from  15  Member  States  for  life  insurance  without 
guaranteed  capital.  Please  note  that  “Not  applicable”  written  in  a  cell  means  that  no 
values were found for the particular fee for all the products analysed. In addition, note 
that “Not available” written in a cell means that no life insurance without guaranteed 
capital was found on distributors’ webpages on a best-effort basis. 

Life insurance without guaranteed capital 

Member State 

Number of 
data points 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

12 

40 

0 

0 

15 

0 

21 

12 

6 

26 

Entry fees55 

Exit fees56 

Ongoing charges57 

Median 

2.50% 

0.69% 

Max 
Min 

5.00% 
1.00% 

3.00% 
0.16% 

Median 

Max 
Min 

1.00% 

1.00%        
0.60% 

0.38% 

0.38%        
0.13% 

Median 

1.03% 

0.90% 

Max 
Min 

2.00% 
0.12% 

1.85% 
0.05% 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

4.00% 

5.00% 
2.00% 

Not applicable 

0.95% 

1.00% 
0.70% 

Not available 

Not available 

Not available 

2.00% 

3.00% 

0.50% 

2.50% 

5.60% 
0.74% 

5.00% 
1.00% 

0.50% 
0.50% 

3.00% 
2.00% 

0.95% 

2.00% 

0.50% 

2.10% 
0.54% 

2.00% 
2.00% 

0.50% 
0.50% 

2.35% 

1.00% 

0.65% 

Not applicable 

2.14% 

4.50% 
1.08% 

1.20% 
0.70% 

0.92% 
0.25% 

4.37% 
0.99% 

55 Entry fees: Fees paid by the investor upon each contribution into a life insurance policy. 
56 Exit fees: Fees charged when the investor buys back his contract (if he does not hold it until maturity). 
57 Ongoing charges: Fees charged by the insurer on a regular (annual) basis, including management fees of the product, 
expressed as a percentage of the value of the policy. Note that in some Member States, the ongoing charges disclosed for 
life  insurance  products  include  ongoing charges related to the  policy’s underlying assets. Such Member States have been 
listed in the Study. 

April 2018          61 

 
 
  
 
 
 
  
 
 
 
 
 
                                           
 
 
Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

14 

17 

0 

2 

0 

- 

1.00% 

5.00% 

1.50% 
0.25% 

5.00% 
1.00% 

1.00% 

2.20% 

3.00% 
0.50% 

2.20% 
1.00% 

0.90% 

1.75% 

2.00% 
0.01% 

3.50% 
0.35% 

Not available 

Not available 

Not available 

Not applicable 

Not applicable 

1.09% 

1.64% 
0.55% 

Not available 

Not available 

Not available 

2.22% 

1.03% 

1.38% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

As  for  life  insurance  products  without  capital  guarantee,  the  product  sheets  in  most 
Member States do not clearly indicate whether or not the fees for the underlying assets 
are included. It is our understanding that fees relative to the underlying assets are most 
likely charged on top of what is disclosed to investors. However, the situation is different 
for Italy, Poland and Romania where the ongoing charges disclosed also include ongoing 
charges related to the policy’s underlying assets. Based on the information provided by 
the distributor, it was not possible to separate wrapper fees from fees relative to the 
underlying assets. Typically, underlying assets of life insurance contracts are investment 
funds, and most of the time mixed funds (however this depends on the risk profile of 
the investor).  

Considering  these  limitations,  Dutch  and  Czech  insurers  display  the  lowest  ongoing 
charges  regarding  life  insurances  without  capital  guarantee  (0.65%  and  0.90% 
respectively). Swedish distributors are the only ones not disclosing one-off fees. Those 
fees can be contrasted with the high level of ongoing charges (ranging from 1.75% to 
2.35%)  in  Poland,  Romania  and  Italy,  which  include,  as  stated  above,  the  ongoing 
charges linked to the policy’s underlying assets.  

In  several  Member  States,  no  financial  institution  actively  disclosed  fees  for  non-
guaranteed capital life insurance policies (UK, Estonia, Germany, Denmark and Spain). 

4.1.5   Pension products  

The following steps were taken during the data collection process for pension products:  

  Pension products fees were collected using the same methodology as previously 
described  for  bonds  &  equities.  Our  researchers  found  that  pension  products’ 
providers usually presented their product details in a downloadable sheet, where 
information  on  costs  was  also  displayed.  If  an  actor  offered  multiple  pension 
products, an average of the different fees was computed, differentiating capital 
guaranteed policies from policies without a capital guarantee when possible. Note 
that  all  fees  and  values  presented  in  this  report  are  solely  based  on  publicly 
available  data,  which  is  accessible  to  retail  investors;  they  thus  represent  the 
view that retail investors have when conducting their own research. As a result, 
in  some  cases,  the  cost  and  charges  data  represented  in  this  report  may  not 

April 2018          62 

 
 
  
 
 
 
 
 
 
 
 
 
capture the entire costs associated with the different products if the information 
provided was not complete. 

  The  exit  and  entry  fees  collected  represent  maximum  fee  values  potentially 
charged to retail investors since distributors usually disclose the value of each 
fee as an “up to x%” figure.  

  For each type of fee/charge i.e. ongoing charge, entry and exit fees, the median 
value  of  the  fees/charges  was  computed  across  all  pension  products  of  all 
distributors in scope in a given Member State.   

Note that for consistency and comparability reasons, certain other categories of fees, 
which had been identified by our researchers, have been excluded from this analysis. 
The list of such fees (for pension products) are:  

  Arbitrage  fees.  They  are  disclosed  by  some  Member  States  and  have  been 
collected.  However,  as  no  assumption  was  made  regarding  the  number  of 
arbitrages  occurring  over  the  period,  we  can’t  categorize  them  as  one-off  or 
recurring.  In  addition,  this  fee  is  usually  charged  after  the  first  arbitrage 
(meaning that the first arbitrage is free of charge). 

4.1.5.1  Pension products with guaranteed capital 

The following table summarizes the different fees presented by distributors from 15 
Member  States  for  pension  products  with  guaranteed  capital.  Please  note  that  “Not 
applicable” written in a cell means that no values were found for the particular fee for 
all the products analysed. In addition, note that “Not available” written in a cell means 
that no pension products with guaranteed capital were found on distributors’ webpages 
on a best-effort basis.  

Pension products with guaranteed capital 

Member State 

Number of 
data points 

Entry fees58 

Exit fees59 

Median  Max 
Min 

Median  Max 
Min 

Ongoing 
charges60 
Max 
Min 

Median 

Belgium 

13 

5.00% 

7.00% 
5.00% 

3.50% 

3.50% 
3.50% 

0.18% 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

1 

4 

2 

7 

4 

Not applicable 

Not applicable 

1.00% 

2.50% 

3.00% 
2.00% 

Not applicable 

4.75% 

1.50% 

5.00% 
3.50% 

1.50% 
1.50% 

Not applicable 

0.81% 

1.00% 

1.00% 
1.00% 

1.45% 

Not applicable 

0.96% 

Not applicable 

0.25% 

1.20% 
0.07% 

1.00% 
1.00% 

0.95% 
0.67% 

1.45% 
1.45% 

1.55% 
0.70% 

0.25% 
0.25% 

58 Entry fees: Fees paid by the investor upon each contribution into a contract. 
59 Exit fees: Fees charged when the investor buys back his contract (if he does not hold it until maturity). 
60 Ongoing charges: Fees charged by the insurer on a regular (annual) basis, including management fees of the product, 
expressed as a percentage of the value of the policy. Note that in some Member States, the ongoing charges disclosed for 
pension products include ongoing charges related to the contract’s underlying assets. 

April 2018          63 

 
 
  
 
 
 
 
 
 
 
 
 
                                           
 
 
Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

3 

3 

3 

1 

3 

0 

1.68% 

3.00% 

2.75% 

0.11% 

0.88% 

2.50% 
0.30% 

4.50% 
1.50% 

3.00% 
0.50% 

0.11% 
0.11% 

0.88% 
0.88% 

0.05% 

0.05% 
0.05% 

1.00% 

Not applicable 

1.20% 

1.50% 

1.50% 
0.65% 

0.48% 

Not applicable 

0.54% 

Not applicable 

1.63% 

3.50% 
0.82% 

1.20% 
1.20% 

0.48% 
0.48% 

0.54% 
0.54% 

2.00% 
1.25% 

Not available 

Not available 

Not available 

30 

Not applicable 

Not applicable 

1.10% 

2 

0 

- 

Not applicable 

4.00% 

4.00% 
4.00% 

1.18% 

Not available 

Not available 

Not available 

3.40% 

2.62% 

0.87% 

1.50% 
0.07% 

1.25% 
1.11% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

The  collected  information  on  the  webpages  of  distributors  usually  does  not  allow  for 
assessing whether  cost and charges  related to underlying assets are included or not. 
The costs presented below are the ones displayed in the products’ information sheet, 
where the costs on underlying assets are not specified and only one value is given for 
the different types of fees incurred.  

The sample size for pension products with guaranteed capital was low across  Member 
States in comparison to other types of investment products. In two Member States not 
a  single  actor  included  in  our  sample  actively  disclosed  fees  for  capital-guaranteed 
pension products, Romania and the UK. In Germany, Poland and Czech Republic, only 
one product could be identified for which fees were disclosed. In Denmark 2 products 
could be identified and in Italy only 3.  

Considering these limitations, no conclusions can be drawn based on the above table. 

4.1.5.2  Pension products without capital guarantee 

The following table summarizes the different fees presented by distributors (banks 
and  insurance  companies)  from  15  Member  States  for  pension  products  without 
guaranteed  capital.  Please  note  that  “Not  applicable”  written  in  a  cell  means  that  no 
values were found for the particular fee for all the products analysed. In addition, note 
that “Not available” written in a cell means that no pension products without guaranteed 
capital were found on distributors’ webpages on a best-effort basis.  

April 2018          64 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension products without guaranteed capital 

Member State 

Number of 
data points 

Entry fees61 

Exit fees62 

Ongoing charges63 

Belgium 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Spain 

Sweden 

UK 

Average 

12 

40 

12 

3 

15 

0 

21 

12 

0 

26 

14 

17 

104 

10 

6 

- 

Median  Max 
Min 

Median  Max 
Min 

Median  Max 
Min 

3.00% 

3.00% 
6.00% 

0.50% 

0.50% 
0.50% 

1.25% 

Not applicable 

Not applicable 

1.00% 

1.85% 

1.00% 

4.38% 

2.00% 
1.70% 

1.00% 
1.00% 

0.96% 
0.80% 

Not applicable 

0.71% 

1.00% 

1.00% 
1.00% 

1.50% 

Not applicable 

0.96% 

1.35% 
0.89% 

1.00% 
0.40% 

1.07% 
0.06% 

1.50% 
1.00% 

5.00% 
3.50% 

Not available 

Not available 

Not available 

2.08% 

4.00% 

2.68% 
0.26% 

4.50% 
1.50% 

Not applicable 

1.46% 

Not applicable 

1.20% 

2.00% 
0.19% 

1.20% 
1.20% 

Not available 

Not available 

Not available 

1.75% 

2.00% 

0.19% 

3.15% 
0.18% 

2.50% 
1.50% 

0.50% 
0.17% 

Not applicable 

2.00% 

1.38% 

1.50% 
1.25% 

1.13% 

Not applicable 

2.96% 

Not applicable 

Not applicable 

1.50% 

2.49% 

0.70% 

2.98% 
1.00% 

0.70% 
0.70% 

Not applicable 

1.08% 

Not applicable 

1.62% 

2.99% 
0.42% 

2.00% 
0.50% 

4.01% 
1.95% 

1.60% 
0.19% 

1.92% 
0.06% 

4.51% 
1.27% 

2.19% 

0.97% 

1.45% 

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States.  

The  available  information  does  not  allow  to  assess  whether  the  costs  related  to 
underlying assets are included in the products’ information sheet. Underlying assets are 
not specified and only one value is given for the different types of fees incurred on such 
products. 

61 Entry fees: Fees paid by the investor upon each contribution into a contract. 
62 Exit fees: Fees charged when the investor buys back his contract (if he does not hold it until maturity). 
63 Ongoing charges: Fees charged by the insurer on a regular (annual) basis, including management fees of the product, 
expressed as a percentage of the value of the policy. Note that in some Member States, the ongoing charges disclosed for 
pension products include ongoing charges related to the contract’s underlying assets. 

April 2018          65 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
Danish distributors of pension products without capital-guarantee disclosed the lowest 
ongoing charges at 0.71%. Retail investors face the highest charges in Romania and in 
Poland, with ongoing charges at 2.06% and 2.00% respectively.  

Please also note that in Germany and the Netherlands, no financial institution disclosed 
fees for pension products without capital-guarantee. 

4.1.5.3  Pension mutual funds 

The following table summarizes the different fees presented by distributors (banks 
and insurance companies) from 15 Member States for pension mutual funds. Please 
note  that  “Not  applicable”  written  in  a  cell  means  that  no  values  were  found  for  the 
particular fee for all the products analysed. In addition, note that “Not available” written 
in a cell means that no pension mutual funds were found on distributors’ webpages on 
a best-effort basis.  

The value highlighted in bold is the median value, and the two values on the right are 
the  maximum  and  minimum  figures  recorded  during  data  collection.  The  values 
displayed in the last row are average fee values across the Member States. 

Pension mutual funds 

Member State 

Number of 
data points 

Entry fees64 

Exit fees65 

Ongoing charges66 

Median  Max 
Min 

Median  Max 
Min 

Median  Max 
Min 

Belgium 

17 

3.00% 

3.00% 
3.00% 

5.00% 

6.00% 
5.00% 

1.05% 

3.00% 
0.30% 

Czech Republic 

Denmark 

Estonia 

France 

Germany 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

0 

3 

8 

0 

0 

9 

7 

22 

57 

21 

Not available 

Not available 

Not available 

1.70% 

1.00% 

1.70% 
1.70% 

1.00% 
1.00% 

Not applicable 

0.40% 

1.00% 

1.12% 
1.00% 

1.15% 

1.45% 
0.15% 

1.50% 
0.30% 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

Not applicable 

0.52% 

2.50% 

0.75% 

3.83% 

2.50% 

2.50% 
2.50% 

0.75% 
0.75% 

3.83% 
3.83% 

3.50% 
1.00% 

0.52% 
0.20% 

1.00% 
1.00% 

0.75% 
0.75% 

1.00% 

1.14% 

0.19% 

1.00% 

0.75% 

Not applicable 

2.00% 

2.25% 

2.50% 
2.00% 

1.44% 

2.10% 
0.96% 

1.42% 
0.78% 

1.51% 
0.15% 

3.10% 
0.20% 

2.00% 
0.10% 

64 Entry fees: Fees paid by the investor upon each contribution into a contract. 
65 Exit fees: Fees charged when the investor buys back his contract (if he does not hold it until maturity). 
66 Ongoing charges: Fees charged by the insurer on a regular (annual) basis, including management fees of the product, 
expressed as a percentage of the value of the policy. Note that in some Member States, the ongoing charges disclosed for 
pension products include ongoing charges related to the contract’s underlying assets. 

April 2018          66 

 
 
  
 
 
 
 
 
 
 
 
 
                                           
 
 
Romania 

Spain 

Sweden 

UK 

Average 

0 

0 

45 

0 

- 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

1.00% 

1.00% 
1.00% 

1.00% 

1.00% 
1.00% 

0.53% 

1.51% 
0.01% 

Not available 

Not available 

Not available 

2.30% 

1.65% 

1.15% 

4.1.6   Competition on costs & charges of investment products  

Although  retail  investors  have  in  principle  access  to  a  large  variety  of  investment 
products and distributors, the current low level of transparency in terms of fees prevents 
the customer to fully understand how much he will end up paying for his investment. In 
addition,  this  retail  investor  will  find  it  difficult  to  compare  fees  across  different 
distributor in his home country. While the level of fees is not the only criterion to take 
into  account  when  choosing  a  product  and  a  distributor,  it  is  certainly  an  important 
element in the decision making. 

Therefore  we  assess  the  level  of  competition  on  cost  and  charges  between  local 
distributors, by computing the difference between the cheapest and the most expensive 
distributor (in our sample) per product type in a given Member State thus providing a 
view on whether a retail investor will encounter large (or small) differences in terms of 
fees of distributors. Fee values have been collected from the webpages of distributors. 
The difference is computed separately for recurring fees and one-off fees. 

Table  6  displays  the  difference  between  the  cheapest  and  the  most  expensive 
distributor for each product by Member State. The colour coding indicates the level of 
spread per product type, e.g. the darker the value for a Member State, the higher the 
spread for this product in that Member State. Taking the example of bonds, the largest 
spread between distributors in terms of the recurring fee is found in Germany, with a 
spread of 1.36 percentage points. Conversely, the lowest spread between distributors 
for the same product and the same type of fee is found in Belgium with a spread of only 
0.05 percentage point. 

For cells marked grey, no value could be calculated as either no products of this type 
could be found on the webpages of distributors (displaying the particular fee type) or 
only a single product could be found that displayed fees. 

The order of Member States reflects whether the spreads across products are generally 
small (top) or large (bottom). 

One can notice that the Luxembourgish and Dutch distributors present a spread on their 
recurring fees across the different product types which is on average substantially lower 
than for Member States such as Romania or Poland. The Luxembourgish or Dutch market 
can therefore be interpreted as more homogeneous and competitive markets where the 
actors tend to be more aligned with their prices.  

Estonia is also among the Member States with highest spreads across its distributors in 
terms of recurring fees for several products. This is the case for several types of funds 

April 2018          67 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
such as bond funds, equity funds and money market funds. German distributors show 
the largest spread for bonds, equities and ETFs. Spanish distributors do so for the mixed 
funds, and Italian’s for the products with capital guarantee (life insurances and pension 
products).  The  largest  spread  for  life  insurance  without  capital  guarantee  is  found  in 
Romania  with  a  spread  of  3.62  percentage  points,  and  for  non-guaranteed  capital 
pension products and pension mutual funds, it is found is Poland with spreads of 2.57 
and 3.47 percentage points respectively. 

April 2018          68 

 
 
  
 
 
Table 6: Overview of the spread between the highest and the lowest recurring fee values disclosed by distributors, per product 
type and across Member States, in percentage points 

Bonds  Equities  ETFs 

Bond 
Funds 

Equity 
Funds 

Global or 
Mixed 
funds 

Money 
Market 
Funds 

Real estate 
funds 

Life 
Insurance 
guaranteed 

Belgium 

Czech 
Republic 

0,05% 

0,14% 

0,64% 

0,78% 

0,37% 

0,87% 

0,61% 

1,41% 

0,45% 

0,66% 

1,15% 

0,47% 

0,68% 

0,75% 

1,44% 

0,33% 

Denmark 

0,21% 

0,22% 

0,23% 

0,94% 

0,76% 

0,43% 

Estonia 

0,84% 

0,82% 

0,59% 

1,60% 

2,87% 

2,39% 

1,80% 

1,75% 

Life 
Insurance 
non-
guaranteed 

1,75% 

1,48% 

1,13% 

0,38% 

France 

0,14% 

0,14% 

0,30% 

0,85% 

0,91% 

0,93% 

0,50% 

1,65% 

0,36% 

0,30% 

0,85% 

Germany 

1,36% 

1,36% 

1,66% 

1,53% 

1,59% 

1,52% 

1,50% 

0,30% 

Italy 

0,45% 

0,78% 

0,45% 

1,07% 

0,89% 

0,84% 

1,05% 

3,68% 

Luxembourg 

0,10% 

0,10% 

0,22% 

0,58% 

0,66% 

0,86% 

0,61% 

0,23% 

0,00% 

Netherlands 

0,13% 

0,61% 

1,17% 

0,82% 

0,25% 

0,10% 

Poland 

0,71% 

1,31% 

1,05% 

1,89% 

1,88% 

0,09% 

Portugal 

0,17% 

0,17% 

0,27% 

1,09% 

1,66% 

1,16% 

0,68% 

0,46% 

0,70% 

Romania 

0,88% 

1,56% 

1,20% 

0,76% 

0,77% 

Spain 

0,87% 

0,87% 

0,80% 

0,79% 

1,29% 

2,45% 

0,41% 

Sweden 

United 
Kingdom 

0,79% 

0,64% 

0,16% 

0,48% 

0,39% 

0,87% 

0,30% 

0,48% 

0,60% 

0,48% 

0,30% 

0,34% 

0,39% 

Source: Intermediaries’ websites (2017), Deloitte analysis (2017

3,43% 

0,50% 

0,07% 

3,38% 

1,99% 

3,62% 

1,10% 

2,68% 

0,00% 

0,81% 

0,81% 

1,74% 

Pension 
Products 
guaranteed 

Pension 
Products non-
guaranteed 

Pension 
Products 
mutual funds 

0,72% 

0,60% 

1,03% 

0,50% 

0,16% 

1,79% 

0,00% 

2,57% 

0,25% 

2,14% 

0,39% 

2,11% 

1,87% 

0,23% 

1,13% 

1,15% 

1,48% 

0,64% 

0,41% 

3,47% 

1,87% 

0,68% 

April 2018          69 

 
 
  
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Differences  for  one-off  fees  are  displayed  in  Table  7.  These  spreads  are  especially 
important for investment funds, where the largest spreads can go up to more than 9.00 
percentage points in Spain for the global or mixed funds, whereas the lowest spread is 
equal to only 1.16 percentage points in Belgium. 

Conversely, for products that are publicly traded such as bonds, equities or passively-
managed funds, those spreads remain lower across most Member States, rarely going 
beyond 1.50 percentage point. 

Luxembourgish  distributors  display  the  largest  spreads  in  terms  of  one-off  fees  for 
equities and ETFs. Spanish distributors disclose the largest ones for bonds, bond funds, 
and mixed funds, whereas British distributors present the largest ones for equity funds, 
Romanian distributors for money market funds, and Czech distributors for real estate 
funds.  

Interestingly, Belgian distributors disclose much larger differences in terms of one-off 
fees than in terms of recurring fees for life insurances and pension products, and display 
the  highest  spreads  for  these  products  except  for  life  insurance  without  capital 
guarantee. For this product type, the highest spread is displayed by Italian insurers with 
a gap of 6.64 percentage points.  

April 2018          70 

 
 
  
 
 
 
 
 
 
 
 
 
Table 7: Overview of the spread between the highest and the lowest one-off fee values disclosed by distributors, per 
product type and across Member States, in percentage points 

Bonds  Equities 

ETFs 

Bond 
Funds 

Equity 
Funds 

Global or 
Mixed 
funds 

Money 
Market 
Funds 

Real 
estate 
funds 

Life 
Insurance 
guaranteed 

Life 
Insurance 
non-
guaranteed 

Pension 
Products 
guaranteed 

Pension 
Products 
non-
guaranteed 

Pension 
Products 
mutual 
funds 

0,41% 

0,65% 

2,32% 

1,82% 

1,16% 

2,85% 

3,00% 

3,51% 

4,00% 

7,50% 

3,00% 

3,00% 

0,49% 

0,69% 

5,46% 

5,50% 

5,75% 

4,90% 

8,50% 

0,50% 

2,23% 

Belgium 

Czech 
Republic 

Denmark 

0,26% 

0,50% 

0,46% 

0,61% 

1,87% 

1,28% 

1,00% 

0,30% 

Estonia 

0,14% 

0,15% 

0,15% 

6,09% 

6,55% 

4,25% 

1,00% 

France 

0,91% 

0,91% 

1,40% 

3,00% 

2,61% 

2,08% 

0,77% 

2,63% 

3,00% 

3,00% 

1,50% 

1,50% 

Germany 

0,75% 

0,80% 

1,19% 

1,79% 

1,44% 

5,23% 

1,59% 

Italy 

0,60% 

0,90% 

0,70% 

3,23% 

1,93% 

3,08% 

3,09% 

3,45% 

6,64% 

2,25% 

Luxembourg 

0,59% 

1,40% 

1,49% 

3,25% 

2,50% 

2,50% 

3,40% 

2,00% 

1,00% 

3,00% 

Netherlands 

0,09% 

0,09% 

0,03% 

4,52% 

5,81% 

5,97% 

3,00% 

3,75% 

Poland 

0,64% 

0,55% 

7,75% 

5,46% 

6,20% 

4,83% 

1,00% 

Portugal 

0,45% 

0,45% 

0,32% 

4,43% 

5,86% 

4,29% 

3,50% 

2,00% 

4,00% 

Romania 

0,90% 

5,00% 

5,33% 

6,00% 

5,25% 

4,20% 

Spain 

1,65% 

0,10% 

0,35% 

7,80% 

3,64% 

9,27% 

0,04% 

Sweden 

United 
Kingdom 

0,40% 

0,45% 

0,05% 

4,00% 

4,06% 

4,00% 

0,00% 

1,08% 

0,29% 

0,12% 

6,21% 

6,61% 

6,39% 

Source: Intermediaries’ websites (2017), Deloitte analysis (2017) 

2,92% 

3,00% 

2,97% 

0,33% 

1,98% 

1,12% 

0,32% 

0,00% 

2,50% 

April 2018          71 

 
 
  
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
4.2  Costs and charges when investing online 

Customers in all Member States, especially the generation of Millennials, are increasingly 
taking  advantage  of  online  platforms  dealing  with  their  financial  matters.  With  the 
advent of online banking portals, fund supermarkets and online brokers, a growing share 
of  retail  investors  are  investing  without  relying  on  advisors,  be  it  IFAs  or  non-
independent advisors at banks or insurance companies. We therefore assess the costs 
and charges an investor encounters when investing online. A detailed description of the 
data collection method is given in Annex 1. 

The  assessment  of  the  different  costs  and  charges  disclosed  by  online  distributors  is 
based  on  two  main  types  of  actors  proposing  investment  services  through  online 
channels to retail investors:  

  Banks and their online platforms; 
  Fund supermarkets (including D2C platforms and online broker). For a more 
detailed description of these online platforms please refer to section 8.1. 

Generally,  our  research  found  that  the  fee  structure  of  fund  supermarkets  is  quite 
complex. A retail investor will find it difficult to understand the fees associated with a 
particular  investment  and  correctly  calculate  on  his  own  the  total  amount  of  fees 
charged over the investment horizon.  

Today, many users of online services rely on comparator websites in order to compare 
offers  of  different  providers.  This  is  also  true  for  investment  products.  A  variety  of 
comparator  sites  compare  online  services  of  banks,  fund  supermarkets  and  online 
brokers.  Nevertheless,  the  information  provided  by  comparators  needs  to  be  taken 
cautiously as comparators might be linked to a given service provider and, as a result, 
the offer of this service provider might be favoured. Some of the comparators provide 
a static overview of investment products and their associated fees per available product 
category.  Other  comparators  provide  a  dynamic  view  where  the  interested  investor 
indicates  the  amount  to  invest,  the  type  of  investment  products,  the  number  of 
transactions, etc. before receiving a ranking of the best  offers.  When  comparing fees 
for a given investment product, a user of such a comparator needs to carefully assess 
the assumptions made by the algorithm in order to calculate the total amount of fees 
and  check  whether  these  assumptions  actually  correspond  to  the  information  of  the 
individual fund supermarket.  

4.2.1  Investment funds 

Below,  we  distinguish  between  one-off  fees  (entry  and  exit  fees)  and  recurring  fees, 
which are charged on a recurrent (usually yearly) basis. 

Across the 15 Member States in the scope of this Study, slightly more than half of them 
host  fund  supermarkets  according  to  our  research  (France,  UK,  Germany,  Belgium, 
Italy,  Spain,  the  Netherlands,  Sweden  and  Poland).  The  level  of  development  of  this 
type  of  channel varies  significantly across  Member States. Only a few of the  Member 
States  have  a  large  number  of  funds  supermarkets  such  as  the  United  Kingdom, 
Germany  and  France  whereas  investing  into  funds  through  online  platforms  remains 
more difficult in the remaining Member States of our sample.  

April 2018          72 

 
 
  
 
 
 
 
 
 
 
 
 
 
But  in  all  the  Member  States  in  which  they  are  present,  the  majority  of  the  online 
distributors enable retail investors to gain access to funds at lower costs compared to 
offline (telephone or agency) purchase.  

Entry and exit fees for investment funds 

According to our research, banks, in the vast majority of cases, charge the same entry 
or exit independent of whether the investor decides to purchase funds through a branch 
(or by phone) or through the online platform of the bank.67  

For  many  fund  supermarkets,  entry  and/or  exit  fees  of  the  particular  fund  are  either 
reduced or not charged at all. This is the case for example for all the investment funds 
proposed by some fund supermarkets in Italy, Poland or Spain. In France, the situation 
is also similar, with most fund supermarkets entering into partnerships with a selection 
of funds, enabling the  client to have lower  entry and  exit fees.  In Germany,  reduced 
entry fees are quite frequent and can reach 50% for a 10,000 EUR initial investment. 
In  some  other  cases,  the  fund  supermarkets  also  choose  to  only  select  particular 
investment funds which do not charge any entry and exit fees.  

Recurring fees for investment funds 

Again,  as  for  the  entry  and  exit  fees,  banks  charge  the  same  recurring  fee  (i.e.  the 
management fee of the asset manager) independent of whether the investor decides to 
purchase funds through a branch (or by phone) or through the online platform of the 
bank.67  

In general, this is also the case for fund supermarkets. Nevertheless, a small number 
of platforms offer discounts on the annual management fees of the funds ranging from 
0.035 percentage points to 0.50 percentage points.  

In some instances, a retail investor investing will also have to pay a service charge to 
the fund supermarket. Table 8 gives an overview of Member States where service fees 
have been encountered regularly. 

Table 8: Service fees disclosed by fund supermarkets  

Country 
France 
Netherlands 
Poland 
UK 

Service fee 
0.79% 
0.20% 
0.15% 
0.30% 

Source: Deloitte analysis (2017) 

4.2.2  ETFs, bonds and listed equities 

In  this  section,  we  investigate  the  execution  fees  for  the  online  distribution  of  ETFs, 
bonds  and  listed  equities.  Fees  have  been  extracted  from  the  same  institutions,  and 
following the same procedure, as for the analysis of the  costs and charges in section 
4.1.  The  tariff  sheets  of  most  banks  indicate  different  fees  according  to  whether  the 
investor  decides  to  proceed  the  transaction  online  or  through  the  regular  channels 
available (an agency or over the phone).  

67 Promotional campaigns, which are limited in time, have been excluded from the results. 

 April 2018          73 

 
 
  
 
 
 
 
 
 
 
 
 
 
                                           
 
 
ETFs 

It is also the case for ETFs that retail investors face lower execution fees when trading 
ETFs  through  online  platforms  of  banks.  Differences  are  quite  significant,  except  for 
Estonia. As a matter  of fact,  execution fees decrease only by 0.07 percentage points 
when  using  online  channels  in  Estonia.  For  Denmark  or  Spain,  the  execution  fees 
decrease  more  substantially  and  go  from  0.75%  and  0.60%  to  0.13%  and  0.08% 
respectively.  Nevertheless,  note  that  only  one  online  distributor  of  ETFs  disclosed 
execution fees in Denmark and Spain. Moreover, three Member States included in our 
sample  do  not  host  any  ETFs  distributors  which  actively  disclose  their  fees  and  have 
therefore been removed from Graph 20 (Poland, Czech Republic and Romania). 

Funds supermarkets generally display even lower costs than online channels of banks. 
The differences are especially significant in France and Belgium.  

Graph 20: Execution fee values per defined distribution channel for ETFs

Belgium

0,10%

0,50%

Denmark

0,13%

1,00%

0,75%

Estonia

France

Germany

Italy

Luxembourg

Netherlands

0,18%

0,25%

0,12%

0,25%

0,38%

0,17%

0,24%

0,12%

0,20%
0,20%

0,62%

1,20%

0,70%

0,50%

1,00%

1,00%

Portugal

0,09%

Spain

0,08%

Sweden

0,09%

0,45%

0,45%

0,60%

United
Kingdom

0,12%
0,13%

0,35%

Funds supermarket

Online distribution

Distribution through phone or agency

Source: Deloitte analysis (2017)

 April 2018          74 

 
 
  
 
 
 
 
 
Listed bonds  

Graph 21 provides an overview of the execution fees recorded at fund supermarkets, 
online channels of banks and “offline” channels of banks, i.e. purchasing through phone 
or at an agency. The execution fees presented by online platforms are for every Member 
State (except for the Czech Republic) less expensive than the ones faced when investing 
through phone or directly at an agency. 

On the one hand, Member States such as Portugal or Poland present execution fees for 
their online channels that are more than three and four times lower than for the offline 
channels. Execution fees charged by distribution channels in Poland go from 0.67% to 
0.19%  and  from  0.43%  in  Portugal  to  0.08%.  On  the  other  hand,  for  some  Member 
States which already display quite low execution fees for the offline channels such as 
Denmark or Estonia, the differences remain fairly low with a slight decrease of only 0.05 
and 0.10 percentage points on the execution fees. 

Only distributors in Czech Republic display fees for online distribution that are higher 
than for distribution through offline channels. However, it should be noticed that this is 
mainly  due  to  the  fact  that  some  distributors  charge  a  nominal  fee  for  the  offline 
distribution,  and  a  fee  expressed  in  percentage  for  the  online  distribution.  Therefore, 
when the nominal fee is  translated into a percentage with regards to  a 10,000 euros 
investments, this results in a very low percentage which biases the comparison.  

The fees displayed by fund supermarkets remained relatively close to the ones displayed 
by bank’s online platforms: However, Belgian’s fund supermarkets display a fee equal 
to 0.20% compare to the one of 0.30% of the online platforms of banks. The difference 
is even more significant in France, with online brokers displaying an execution fee almost 
five times lower than the one shown by the online platforms of banks. 

 April 2018          75 

 
 
  
 
 
 
 
 
 
Graph 21: Execution fee values per defined distribution channel for
listed bonds

0,65%

0,50%

1,38%

1,00%

Belgium

0,20%

0,30%

0,40%

Czech Republic

0,25%

0,15%

Denmark

Estonia

France

Germany

Italy

Luxembourg

Netherlands

Poland

0,10%

0,15%

0,10%

0,20%

0,13%

0,25%
0,25%

0,25%
0,24%

0,30%

0,39%

0,10%

0,17%
0,17%

0,19%
0,19%

Portugal

0,08%

0,43%

Romania

Spain

Sweden

0,12%

0,20%

United Kingdom

0,15%

0,13%

0,30%

0,48%

0,41%

0,67%

0,60%

Funds supermarket Online distribution Distribution through phone or agency

Source: Deloitte analysis (2017)

Listed Equities 

When  trading  equities,  retail  investors  face  lower  execution  fees  by  trading  through 
online  distribution  channels  than  when  they  trade  offline.  The  spread  in  terms  of 
execution fee is rather quite large for certain Member States according to the channel 
chosen. Indeed, in Spain or Denmark where distributors charge only 0.90% and 0.15% 
when  clients  use  banks’  online  platforms,  the  distributors  charge  0.60%  and  0.75% 
when clients use the phone or go to the agency. However, these differences are smaller 
for other Member States. For instance, in Czech Republic or in Estonia, the  execution 
fees  drop  from  0.40%  and  0.20%  to  0.28%  and  0.18%  respectively  when  investors 
choose to go online.  

Regarding fund supermarkets, the differences of fees with banks’ online platforms vary 
also strongly across Member States. In Belgium, Germany and France, the differences 
are particularly significant. Differences remain relatively low for retail investors choosing 
fund supermarket over banks’ online platforms in Italy, Poland or the UK. 

 April 2018          76 

 
 
  
 
 
  
 
 
 
 
Graph 22: Execution fee values per defined distribution channel for Listed
Equities

1,00%

1,00%

1,00%

1,38%

Belgium

0,09%

0,50%

Czech Republic

0,28%

0,40%

Denmark

0,15%

Estonia

France

Germany

Italy

Luxembourg

Netherlands

Poland

Portugal

0,08%

Romania

Spain

Sweden

United Kingdom

0,09%

0,09%

0,13%
0,12%

0,75%

0,65%

0,18%

0,20%

0,12%

0,25%

0,50%

0,17%

0,24%

0,35%

0,12%

0,17%
0,17%

0,43%

0,39%
0,39%

0,45%

0,40%

0,45%

0,35%

0,68%

0,60%

Funds supermarket

Online distribution

Distribution through phone or agency

Source: Deloitte analysis (2017)

4.2.3  Life insurance and pension products 

In general, direct selling of life insurances and pension products through online channels 
remains marginal in most of the Member States.  

There are two notable exceptions. In France, some of the distributors enable investors 
to have access to life insurances online due to the popularity of these products on the 
French market. The fees disclosed by the online platforms proposing life insurances are 
once  again  slightly  lower  (0.75%  as  ongoing  charges)  than  the  ones  displayed  when 
purchasing offline (0.85%).  

In  the  UK  and  Sweden,  pension  products  are  easily  accessible  online.  Indeed,  every 
fund  supermarket  in  the  UK  enables  retail  investors  to  have  access  to  Self-Invested 
Personal Pension (SIIP), which offers tax reductions to investors saving for retirement. 
The fees shown in those cases by online platforms of banks and by fund supermarkets 
are also lower than the ones displayed  when purchasing offline, amounting to 1.08% 
against 1.62%.   

 April 2018          77 

 
 
  
 
 
  
 
 
 
 
 
 
4.3  Findings  

Transparency of fees 

  The investment products in the scope of this Study are complex by nature and 
require a substantial level of financial literacy for a customer to understand the 
product  specificities,  its  associated  risks  and  the  fees  displayed  over  the 
investment period.  

  On top of this inherent complexity, the way information on fees is displayed on 
distributor’s webpages requires a customer to gather information from different 
documents and, in some instances, be able to combine them correctly e.g. when 
investing  in  3rd  party  funds  customers  would  need  to  cover  additional  custody 
charges.  

  The  way  information  on  fees  is  displayed  (or  not)  on  distributor’s  webpages 
strongly depends on the type of product and the Member State. Information on 
fees for investment funds (money market, bond, equity and mixed funds) was 
usually  easy  to  gather  on  the  distributors  webpages.  In  roughly  10%  of  the 
cases, our researchers had to manually search for the relevant KIID in order to 
find  the  information  on  costs.  For  ETFs  and  real  estate  funds,  depending  on 
Member  States,  information  on  fees  was  slightly  more  difficult  to  access,  with 
some distributors only displaying partial or no information.  Fees associated with 
listed bonds and equities were always disclosed by distributors. Finally, we found 
that the amount of information on fees for life insurance and pension products 
varied very much from one Member State to another. In some Member States, 
information on fees for life insurance and pension products could not be found 
on the website of  any  distributors. Furthermore, if  costs  for life insurance and 
pensions  products  were  displayed,  it  is  difficult  for  a  retail  investor  to  discern 
whether the indicated fees include the costs for any underlying asset. 

  Again, in relation to life insurance and pensions products, it is difficult for a retail 
investor  to  discern  whether  the  indicated  fees  include  the  costs  for  any 
underlying asset. This can be highlighted for insurance products without capital 
guarantee.  While  the  documentation  provided  explicitly  mentions  that  fees  for 
the  underlying  asset  are  included in  Italy,  Poland  and  Romania,  it is  not  clear 
based on the provided information, whether the fees for the underlying assets 
are included in other Member States. The comparatively low total fees in these 
Member States, due to low ongoing charges tend to indicate that the fees for the 
underlying asset are not included.  

  While there is no obligation for distributors to display fees to non-clients through 
webpages, a retail investor will very likely not be able to collect comprehensive 
information  on  fees  and  correctly  interpret  the  information  provided.  As  a 
consequence, he will not be able to compare fees across different products and 
distributors.  He  would  need  to  talk  directly  with  a  bank  advisor  to  receive  the 
necessary information  and the  associated explanations. This in turn raises  the 
efforts a retail investor  needs to spend in order to  compare different  products 
and different distributors. As a  result, he might refrain from investing at all in 
any investment product or he will simply choose among the products provided 
by the bank or insurance company that he is already a client of, thus preventing 
him from shopping around. 

  The  feedback  by  Consumer  Protection  Agencies  (CPA)  and  Alternative  Dispute 
Resolution  agencies  (ADR)  collected  through  an  online  questionnaire,  clearly 
indicates that an opaque fee structure is the subject of regular complaints. Retail 
investors often feel misinformed by their advisors or the information on product 

 April 2018          78 

 
 
  
 
 
 
 
sheets on the fees that are related to a given investment product. According to 
the respondents, investors complain about either the costs being too high or that 
costs were hidden (e.g. costs of the underlying investment fund in life insurance 
products).  

  Upcoming regulations will certainly increase the transparency on fees and help 

investors take informed decisions.  

Fees by product type across Member States 

  For each type of investment funds, large differences in terms of displayed costs 
can be found across Member States. As stated in Section 2, the vast majority of 
funds  offered  to  retail  clients  are  in-house  products,  thus  differences  in  fees 
across Member States might be explained through differing pricing strategies of 
the distributors as well as potentially other local specificities. 

  On  average,  distributors  in  the  Netherlands  and  the  UK  seem  to  display  the 
lowest ongoing fees for all types of funds (except for money market funds). This 
is potentially related to the ban on inducements which the consumer being better 
informed about what he pays for, has led intermediaries to abandon advice and 
offer  more  low-cost  options  to  consumers  through  their  execution-only  online 
channel.  

  On  the  other  side  of  the  spectrum,  distributors  in  Poland,  Italy,  Romania  and 
Spain seem to display the highest average ongoing fees across the various fund 
types. 

  ETFs seem to be most expensive in Spain, Denmark, Belgium and the UK while 

ETFs in Portugal are the cheapest. 

  ETFs  are  on  average  almost  60%  cheaper  than  actively  managed  investment 

funds across our sample of 15 EU Member States.  

  For bonds and listed equities, substantial discrepancies are found across Member 
States. Investing in bonds and listed equities is potentially the most expensive 
in  Spain  and  Italy  and  while  the  lowest  fees  are  displayed  in  the  UK,  the 
Netherlands, Romania and Luxembourg. 

  Results  for  life  insurance and pension products  need to  be  interpreted 
with caution.  Firstly, only a small set of the distributors in scope displayed the 
costs for these products thus reducing the sample size. On top, the information 
provided per product on the distributor’s webpage is in many cases unclear as to 
whether all fees are included, especially those related to the underlying assets. 

  Our data shows that a retail investor is potentially exposed to large differences 
in  terms  of  fees  between  the  various  local  distributors.  Differences  vary 
substantially across Member States and product types. 

Purchasing investment products online 

  Not taking into account promotional campaigns which are limited in time, banks 
usually do not offer discounts when purchasing investment funds through their 
online platform. Thus, the investor has to pay  the same  one-off and  recurring 
fees as when purchasing through telephone or at an agency.  

  When  purchasing  investment  funds  at  a  fund  supermarket,  investors  may 
regularly benefit from reduced entry and exit fees. In some cases, investors may 
even  benefit  from  discounts  on  recurring  fees,  i.e.  reduced  fund  management 

 April 2018          79 

 
 
  
 
 
 
 
 
 
fees. On the  other hand, fund supermarkets in some  Member States charge  a 
service fee on top of the recurring fee for the fund.   

  For  ETFs,  bonds  and  listed  equities,  fees  are  usually  substantially  lower  when 
purchasing online compared to purchasing at a bank agency or through phone. 
Fund  supermarkets  and  online  brokers  are  on  average  the  cheapest  way  to 
invest. 

 

In  general,  selling  of  life  insurances  and  pension  products  through  online 
channels remains marginal in most of the Member States. But if possible, e.g. 
life insurance in France and pension products in the UK, investors are better of 
online compared to purchasing over phone or at an agency. 

  Concerning  the  transparency  and  comprehensibility  of  fees,  there  is  little 
difference  between  online  websites  of  banks  and  insurers,  fund  supermarkets 
and online brokers. A retail investor will probably find it difficult to identify and 
understand all the fees associated with an investment.  

 April 2018          80 

 
 
  
 
 
 
 
 
 
5  Outcomes of different types of advice 

Advice  is  an  important  tool  to  guide  retail  investors  in  their  investment  decisions.  In 
principle,  it  should  enable  customers  to  consider  a  wider  set  of  investment  products, 
better  understand  their  features  and  buy  products  that  better  match  their  individual 
profile. Different types of investment advice exist today in Europe:  

  Non-independent  advice  is  whereby  the  advisor  is  allowed  to  receive 
inducements  from  the  manufacturers  of  the  product  that  is  recommended. 
This type of advice is still the most common across Europe, with the exception 
of the Netherlands and the UK.  
Independent  advice  is  from  an  Independent  Financial  Advisor  in  Member 
States  with  a  ban  on  inducements  (the  Netherlands  and  UK).  IFAs  in  the 
Netherlands  almost  exclusively  offered  discretionary  mandates  to  our 
mystery  shoppers,  thus  they  did  not  provide  advice  as  such.  We  included 
them in the analysis below for the sake of completeness. 

 

  Robo-advice  platforms  provide  investment  recommendations  through  an 

algorithm that analyses the users’ responses to a questionnaire.  

In this Section, we investigate how different types of advice take into account the profile 
and investment needs  of a retail investor and matches them  with the features  of the 
investment products recommended.  

Through this exercise we particularly aim to compare the quality of: 

 

Independent advice in the Member States with a ‘ban on inducements’ (e.g. the 
UK  and  the  Netherlands)  versus  non-independent  advice.  Data  on  non-
independent  advice  has  been  gathered  from  Member  States  with  a  ‘ban  on 
inducements’ and the remaining eight Member States. 

  Face  to  face  advice  versus  robo-advice  (in  the  Member  States  where  robo-

advisors are available). 

Limitations and challenges 

The mystery shopping exercise that will be detailed below, was executed in such a way 
that  it  mimics  the  behaviour  of  a  retail  investor  who  is  not  familiar  with  investment 
products and is seeking first guidance on this topic. While this exercise has been planned 
to  analyse  in  the  best  way  the  advisory  process  and  the  product  suitability,  mystery 
shopping  in  the  financial  services  industry  is  an  inherently  complex  process  with  a 
number of operational challenges which are detailed in Annex 1. 

Considerations on robo-advice  

The risks and benefits of robo-advice are detailed in Section 8.2. Nevertheless, we would 
like to highlight here some important differences between face-to-face advice and robo-
advice: 

  As described above, face-to-face advice through banks and insurance companies 
is usually provided during one or several physical meetings where the investor 
has the possibility to ask for additional explanations on relevant topics, e.g. risks 
associated with a given investment product. Additionally, the advisor is able to 
provide  specific  information  he  deems  relevant  and  he  is  in  principle  able  to 
assess the level of experience of the customer in relation to investment products. 

 April 2018          81 

 
 
  
 
 
 
 
 
 
 
 
 
 
 

In contrast, a robo-advisor provides a pre-defined set of quite simple questions 
that the customer can complete in a few minutes. Although for some questions, 
the platform might provide additional information through pop up explanations 
or illustrative examples. It is obvious that the information gathered through an 
average  of  10  close-ended  questions  cannot  be  as  complete  as  a  full-fledged 
conversation with an advisor. 

  For  each  of  the  criteria  analysed  in  this  section,  we  provide  examples  of  how 
robo-advisors gather information on this topic in order to provide insight on how 
questions on suitability are posed to the customer. 

Please  note  that  in  the  following  pages,  the  term  “Robo-advisors  EU”  shown  in  the 
different graphs refers to an average of all robo-advisors analysed in our sample (32 for 
each investor profile), in the 10 Member States where we conducted mystery shops. 

Structure of the analysis 

In  line  with  our  approach  to  mimic  the  behaviour  of  a  financially  less  sophisticated 
investor, we decided to investigate the different types of advice through a mystery shop 
exercise rolled out across 10 Member states.  

More  precisely,  we  investigated  how  the  general  suitability  of  products  has  been 
established  by  distributors  during  the  mystery  shops.  Due  to  the  lack  of  a  coherent 
definition  of  suitability  checks  across  all  investment  products  under  scope,  our 
methodology is based on general considerations (through expert advice and a literature 
review)  on  how  to  check  the  suitability  of  the  investment  products  in  scope,  MiFID 
requirements  and  alignment  with  the  methodology  of  other  mystery  shops  that  have 
been performed at national or European level. We divided the information to be collected 
and provided as part of the advice process into 4 categories. These categories are shown 
in the table below and will be used to structure the analysis of the mystery shops later 
on.  

The  table  served  as  a  basis  to  develop  so-called  “contact  reports”  documenting  the 
points raised and the product data obtained as part of the interaction with the advisor. 
Mystery  shoppers  had  to  complete  a  contact  report  for  each  meeting  with  human 
advisors  (either  a  non-independent  advisor  or  an  IFA)  or  when  going  through  the 
process at a robo-advice platform. Mystery shoppers could provide additional comments 
when deemed necessary. For additional details regarding contact reports, please refer 
to Annex 1. 

To  better  reflect  the  diversity  of  individuals  within  the  population  of  European  retail 
investors, two distinct profiles have been set up for shoppers to adopt. Each profile was 
given  a  specific  background,  which  varies  in  terms  of  age,  profession,  financial 
resources and commitments, investment objectives, investment amounts, investment 
horizon, risk appetite, and level of experience with financial products: 

  Profile  A:  a  young,  risk-averse  teacher  with  10.000  EUR  to  invest  and  no 

investment experience; 

  Profile B: a 50 year old freelancer with 100.000 EUR to invest, medium risk-

appetite and limited investment experience. 

Unless  mentioned  otherwise,  numbers  shown  on  the  graphs  in  this  section  are 
aggregates of the data collected by both investor profiles in each Member State. Note 
that unless mentioned otherwise, in each Member State profiles A and B were used in 
an equal number of mystery shops. For additional details about the investment profiles 

 April 2018          82 

 
 
  
 
 
 
 
 
 
 
 
used, please refer to Annex 1. In the next sections, we show the results for all of the 
above mentioned categories individually. 

Type of questions asked by the advisor in view of assessing suitability 

1.  Information to assess the client’s investment objectives, which should 

include the client’s: 

- 

- 

- 

Desired duration of the investment 

Risk profile and preferences regarding risk taking 

Investment purpose 

2.  Information to assess if the client has the necessary experience and 
knowledge to understand the complexity and risks involved in the 
transaction: 

- 

Experience with investments: types of services, transactions and financial 

instruments with which the client is familiar 

- 

- 

Client’s level of education 

Client’s profession 

3.  Information to assess if the client is able financially to bear the investments 

consistent with his objectives: 

- 

- 

- 

- 

Source and extent of client’s regular income 

Client’s current financial situation in terms of assets: liquid assets, investment 

and property 

Client’s current financial situation in terms of regular financial commitments 

Ability to bear losses 

Note that gathering information on the client’s ability to bear losses is a 

requirement of the MiFID II regulation, reinforcing the existing MiFID I 

requirements on the assessment of suitability. As this regulation was not yet in 

force when conducting the mystery shops, this criterion was merely tested in 

anticipation of the new regulation. 

Information on product(s) provided by advisor 

4.  Level of product information provided by advisor: 

- 

- 

The number of products offered by advisors in each Member State 

The quality of the explanation advisors provided regarding the risks of the 

products they offered 

- 

The information provided on product’s costs and charges 

 April 2018          83 

 
 
  
 
 
 
 
 
 
 
 
 
5.1  Assessment of the client’s investment objectives 

5.1.1.1  Desired duration of investment 

The investment duration is a question almost all non-independent advisors asked in the 
Member  States  in  scope.  There  are  no  major  differences  between  Member  States  for 
non-independent advisors here (except Germany and Poland, where slightly lower than 
90%  of  bankers  &  insurers  asked  this  question).  However,  this  question  is  less 
frequently  asked  by  IFAs  in  both  the  Netherlands  and  the  UK,  but  the  difference  is 
marginal. There are no clear differences across investment profiles either: both profiles 
are asked about their investment horizon almost  systematically. Note that in the few 
Member  States  where  this  question  is  less  systematic,  investor  B  is  generally  asked 
more often about his investment horizon than profile A, e.g. Poland (A: 75%, B: 100%) 
and UK IFAs (A: 67%, B: 100%). 

The intended duration of the investment is requested by more than 90% of robo-advice 
platforms. 

Graph 23: Did the advisor ask you about your desired duration of
investments? (% of "Yes" answers)

100%

92%

87%

96%

100%

88%

98%

95%

100%

93%

89%

76%

Source: Deloitte analysis (2017)

5.1.1.2  Risk profile 

There are major differences when it comes to the creation of a risk profile by an advisor. 
As  illustrated  by  Graph  24,  slightly  more  than  30%  of  Spanish  and  British  non-
independent  advisors  created  a  risk  profile  for  their  potential  future  customers. 
Conversely, almost all Luxembourgish and Polish advisors created risk profiles. IFAs in 
the Netherlands all created a risk profile for their investors mainly because they almost 
exclusively  offer  discretionary  mandates,  and  allocate  their  pre-made  portfolio  to 
several  risk  levels,  therefore  performing  a  risk  profile  every  time  with  their  potential 
client. On another hand, only 29% of British IFAs made a risk profile with their investors, 
this  result  being  almost  the  same  as  for  the  non-independent  advisors.  In  terms  of 
investment profiles, a risk profile assessment was generally conducted more often for 
investor  B  than  for  investor  A.  This  difference  is  particularly  important  in  France  (A: 
67%, B: 100%) and Spain (A: 0%, B: 65%). The only clear exception to this trend is 
UK IFAs (A: 67%, B: 18%), where the situation is reversed. 

 April 2018          84 

 
 
  
 
 
 
 
 
 
The vast majority of robo-advice platforms request information about the risk profile of 
the customer: 

  How would you react if your investments go down? [4 options]; 

  How much are you ready to temporarily lose in a year? [Percentage value]. 

Graph 24: Did the advisor perform a risk profile? (% of "Yes" answers)

83%

78%

85%

94%

88%

80%

84%

100%

46%

33%

33%

29%

Source: Deloitte analysis (2017)

5.1.1.3  Investment purpose 

Across Member States, advisors did not necessarily look at long-term savings objectives, 
e.g.  only  32%  of  Belgian  advisors  and  half  the  Spanish  advisors  asked  about  the 
investors’  investment  purpose.  This  is  potentially  due  to  the  way  that  the  shopper 
presented his profile during the discussion potentially revealing his investment purpose 
unintentionally. As a consequence, the advisor did not have to ask specifically. On the 
contrary, almost all Italian advisors asked about the investment purpose when meeting 
with  the investors.  89%  of  Dutch  mystery  shoppers  were  asked  about  their  goals  by 
Dutch IFAS, while only 57% of British investors were asked about their goals.  

Robo-advisors  requested  information  about  the  investment  purpose  in  70%  of  the 
cases: 

  Objectives [12 options]; 

  What  goal  do  you  pursue  with  your  investment?  [4  options  with  explanatory 

text]; 

  What is your primary reason for investing? [4 options]. 

 April 2018          85 

 
 
  
 
 
  
 
 
 
Graph 25: Did the advisor ask you about investment purpose? (% of "Yes"
answers)

98%

88%

85%

73%

77%

65%

67%

70%

50%

89%

57%

32%

Source: Deloitte analysis (2017)

5.2  Assessment of the client’s experience and knowledge 

5.2.1.1  Experience with investments 

The assessment of the client’s knowledge and experience is important for the advisor in 
order to evaluate the general ability of the client to understand the product types and 
the  risks  related  to  the  recommended  transactions  or  in  the  management  of  the 
portfolio. Almost all the non-independent advisors (> 85%) asked about the experience 
with investments in most of the Member States in scope. Only in Germany and the UK 
was this percentage slightly less than 80%. All the British IFAs asked the investors about 
their experience with investments; more than 80% of Dutch IFAs did also. Investor B 
was generally asked more often about his investment experience than investor A. This 
difference is particularly important in France (A: 70%, B: 100%) and for  UK IFAs (A: 
67%, B: 100%). 

Conversely, 66% of all robo-advisors analysed in our Study asked about the customer’s 
experience with investments: 

  Did you purchase a life-insurance, a securities account or a savings plan based 

on shares? [Y/N]; 

 

In the past, have you come to regret important financial decisions? [5 options]; 

  How would you rate your understanding of investment matters? [5 options]. 

 April 2018          86 

 
 
  
 
 
 
 
 
Graph 26: Did the advisor ask you about your experience with
investments? (% of "Yes" answers)

98%

85%

77%

89%

88%

90%

98%

100%

100%

84%

78%

66%

Source: Deloitte analysis (2017)

5.2.1.2  Client’s level of education 

Graph 27 shows whether the advisors asked the investor about their level of education 
which is deemed relevant in order to assess the client’s general ability to understand. 
There  are  significant  discrepancies  between  Member  States.  Indeed,  75%  of  Italian 
advisors asked retail investors about their level of education in our Study, whereas none 
of the French and Luxembourgish advisors did. Overall, non-independent advisors asked 
this question more frequently than Dutch and UK IFAs (respectively 32% and 29% of 
them asked retail investors about it) and robo-advisors analysed in our sample (18%). 
Looking  at  the  split  between  profiles,  profile  A  investors  were  more  frequently  asked 
this question (89%) than profile B investors (60%) in Italy.  

Graph 27: Did the advisor ask you about your level of education? (% of
"Yes" answers)

75%

65%

42%

28%

45%

33%

23%

32%

29%

18%

0%

0%

Source: Deloitte analysis (2017)

 April 2018          87 

 
 
  
 
 
 
 
 
 
 
5.2.1.3  Client’s profession 

Advisors are, according to MiFID, required to ask a question about the profession or the 
relevant former profession of retail investors. Some Member States are similar in terms 
of frequency, i.e. German, Italian, Spanish, Swedish and UK non-independent advisors 
asked about the profession of their prospective client. IFAs in the  UK follow the same 
pattern, as 76% of them asked this question to retail investors (While slightly more than 
half the Dutch IFAs did ask this question). On another hand, only 39% of robo-advisors 
analysed  in  our  sample  asked  their  future  client  about  their  profession,  similar  to 
Luxembourgish and Polish advisors (respectively 38% and 40% of the cases). Spanish 
advisors asked about the profession to 100% of profile A investors and 60% of profile 
B investors.  

Graph 28: Did the advisor ask you about your profession or relevant former
profession? (% of "Yes" answers)

85%

78%

85%

80%

78%

76%

62%

56%

38%

40%

53%

39%

Source: Deloitte analysis (2017)

5.3  Assessment of the client’s ability to bear the investment 

5.3.1.1  Source and extent of client’s regular income 

Another question the advisors should ask concerns the source and extent of the regular 
income of retail investors. Again, there are many differences across Member States. For 
example, only 20% and 30% of French and Polish advisors asked investors about their 
income. Conversely, almost all retail investors in the UK were asked about their source 
of income by non-independent advisors.  Dutch  IFAs tend to ask more frequently this 
question  (nearly  75%of  them)  than  UK  IFAs  (62%  of  them).  German  and  Swedish 
advisors  also  ask  frequently  about  the  source  and  extent  of  retail  investors’  income 
(more than 70% of them). 

 April 2018          88 

 
 
  
 
 
 
 
 
 
 
 
 
Graph 29: Did the advisor ask you about the source and extent of your
regular income? (% of "Yes" answers)

64%

72%

60%

63%

70%

65%

74%

66%

62%

89%

20%

30%

Source: Deloitte analysis (2017)

5.3.1.2  Client’s current financial situation in terms of assets 

Graph 30 shows whether the advisor asked the investors about their financial situation 
in terms of assets (e.g. bank savings, investments, liquid assets, real estate). The graph 
shows that in more than 75% of the cases, the French, German, Belgian, Polish, Swedish 
and British advisors from banks and insurers asked the investors about their financial 
situation. The same holds true for IFAs from the Netherlands and the UK.   

On the other hand, we found out that only 50% and 57% of the advisors in Luxembourg 
and  Italy  respectively  asked  about  the  current  financial  situation  in  terms  of  assets 
during our mystery shopping exercise.  

In terms of differences between investment profiles, investor B was generally asked less 
often about his financial situation in terms of assets than investor A. This difference is 
particularly important in Spain (A: 100%, B: 30%) and Italy (A: 86%, B: 24%). The 
only clear exception to this trend is Germany (A: 60%, B: 90%), where the situation is 
reversed. 

More than 90% of robo-advisors asked about the current financial situation in terms of 
assets, with typical questions as below: 

  What is the value of your total assets, excluding primary residence? [5 options]; 

  Financial  assets  [total  figure,  with  the  option  to  provide  more  detailed 

information according to several asset categories]; 

  Are you the owner of your residence? Y/N: 

  What  is  the  total  amount  of  your  real  estate?  [total  figure  after  deducting 

remaining loans]. 

 April 2018          89 

 
 
  
 
 
 
 
 
Graph 30: Did the advisor ask you about your current financial situation
in terms of assets? (% of "Yes" answers)

100%

90%

85%

75%

80%

65%

57%

50%

90%

91%

90%

79%

Source: Deloitte analysis (2017)

5.3.1.3  Client’s current financial situation in terms of regular commitments 

The advisors asked about the current financial situation in terms of regular commitments 
of  investors  (e.g.  mortgage  payments,  household  costs,  child  support  and  financial 
security). Only British and Swedish non-independent advisors asked more than 8 times 
out of 10 about a client’s current financial situation. The other advisors did not ask this 
question  in  many  occasions,  i.e.  12%  and  13%  of  French  and  Polish  advisors 
respectively  asked  the  investors  about  their  financial  situation  in  terms  of  regular 
commitments.  Less  than  half  of  IFAs  in  the  UK  and  the  Netherlands  investigated  the 
customer’s  current  regular  commitments.  Investor  B  was  generally  asked  less  often 
about  his  financial  situation  in  terms  of  regular  commitments  than  profile  A.  This 
difference is particularly important in Spain (A: 95%, B: 30%) and for UK IFAs (A: 67%, 
B: 36%). 

Slightly  more  than  40%  of  robo-advisors  gathered  information  about  regular 
commitments, e.g.: 

  What is the rent of your main residence? [monthly amount]; 

  How many dependent children do you have? [None, 1, 2, 3 or more]; 

  Monthly expenses [average monthly expenses, with the option to provide more 

detailed information according to several asset categories]; 

  What amount is free for you every month as soon as all invoices are settled? [4 

options]. 

 April 2018          90 

 
 
  
 
 
 
 
Graph 31: Did the advisor ask you about the current financial situation in
terms of regular commitments? (% of "Yes" answers)

60%

47%

12%

25%

19%

13%

89%

80%

63%

47%

41%

38%

Source: Deloitte analysis (2017)

5.3.1.4  Client’s ability to bear losses 

Graph 32 shows to what extent the advisors asked the shoppers about their ability to 
bear  losses.  As  mentioned  previously,  gathering  information  on  this  criterion  is  a 
requirement of the MiFID II regulation only, which was not in force when this study was 
carried out. The question was merely tested in anticipation of the new regulation. 

Usually  the  advisor  explained  the  different  levels  of  loss/return  that  may  occur 
depending on the level of risk taken or to other relevant situations. Although it has been 
found that sometimes people have difficulties in understanding percentages (especially 
small  ones),  the  advisors  usually  used  percentages  to  investigate  the  ability  to  bear 
losses of the shopper. Shoppers reported that both robo-advisors and human advisors 
seldom used graphical visualizations of different possible market scenarios in which the 
development of the assets was shown over time in order to assess the client’s ability to 
bear losses.  

The  ability  to  bear  losses  was  raised  by  almost  all  the  advisors  in  Poland  (90%)  and 
Luxembourg (88%). A majority of IFAs (74%) in the Netherlands  asked the investors 
about it and slightly more than half of British IFAs. In contrast, only 20% of the French 
advisors  questioned  the  investors  about  their  ability  to  bear  losses.  In  terms  of 
investment profiles, investor B was generally asked more often about his ability to bear 
losses than investor A. This difference is particularly important in Germany (A: 53%, B: 
80%), Belgium (A: 40%, B: 68%) and for UK IFAs (A: 33%, B: 64%). The only clear 
exception to this trend is Italy (A: 89%, B: 48%), where the situation is reversed. 

The result for robo-advisors is quite poor on this criteria (45%). Typical questions cover: 

  Capital  markets  are  vulnerable  to  fluctuations.  What  loss  of  value  makes  you 

nervous? [percentage of loss with additional illustrative example]; 

 

If you invest 10,000 EUR over 5 years, what potential gain / potential loss are 
you ready to take? [4 options]. 

 April 2018          91 

 
 
  
 
 
 
 
Graph 32: Did the advisor ask about your ability to bear losses? (% of "Yes"
answers)

88%

90%

67%

70%

68%

74%

57%

50%

44%

45%

54%

20%

Source: Deloitte analysis (2017)

5.4  Level of information availability 

5.4.1.1  Number of products offered 

Graph 33 provides an overview per Member State of the number of products proposed 
to shoppers in each one of their interactions with the advisors. As mentioned previously, 
the overwhelming majority of products offered through non-independent advisors were 
the  distributor’s  in-house  products  (investment  funds,  insurance  policies  and  pension 
products are the most commonly-proposed product categories).  

Please note that as Dutch IFAs only offered discretionary mandates, no product details 
are shown in this section. 

The  large  majority  of  Belgian  (73%)  and  French  (62%)  non-independent  advisors 
offered only one product. Shoppers were offered two products in the majority of cases 
in Italy (54%) and Spain (59%).  In the UK, 37% of the IFAs proposed three products 
when giving advice. Sweden is the only Member State where more than three products 
were presented to retail investors in almost half of the cases (47%).  

In contrast to human advice, 8 out of 10 robo-advisors proposed only one product to 
their potential clients. 

 April 2018          92 

 
 
  
 
 
 
 
 
 
Graph 33: How many different products were proposed to you?

7%
2%

17%

5%
10%

23%

73%

62%

4%
11%

45%

40%

7%

22%

54%

13%

13%

25%

50%

2%

24%

28%

10%

59%

45%

47%

12%

12%

5%

17%

13%

13%

37%

50%

26%

78%

17%

18%

15%

29%

25%

37%

Source: Deloitte analysis (2017)

1

2

3

>3

5.4.1.2  Risks inherent to products offered 

Graph 34 shows whether the risks associated with the specific investment product were 
mentioned by the financial advisors. In most of the Member States in scope, risks were 
explained very frequently. In the UK, it is interesting to note that almost all IFAs (86% 
of them) explained the associated risks for the proposed investment products whereas 
only slightly more than 50% of non-independent UK advisors did.  

Robo-advisors explained the risks of their products less often than the non-independent 
advisors (except for the UK), with slightly more than 7 robo-advisors out of 10 providing 
information on the products’ risks. 

 April 2018          93 

 
 
  
 
 
 
 
 
 
Graph 34: Did the advisor explain to you the associated risks for the proposed
investment products? (% of "Yes" answers)

86%

90%

88%

94%

88%

100%

98%

85%

86%

71%

56%

Source: Deloitte analysis (2017)

5.4.1.3  Costs and charges information 

Graph 35 displays the frequqeny with which costs and charges were explained during 
the  interaction  with  the  advisor.  While  Spanish,  Luxembourgish  and  Polish  non-
independent financial advisors explained the different costs & charges in almost all the 
cases (respectively 90% and 88% of the cases), only slightly more than half the British 
non-independent  advisors  explained  the  corresponding  costs  of  their  products.  More 
than 7 British IFAs out of 10 and more than 85% of robo-advisors mentioned products’ 
fees.  

Graph 35: Did the advisor provide you with the conditions, in particular
costs & charges? (% of "Yes" answers)

82%

85%

81%

73%

88%

88%

90%

80%

86%

76%

56%

Source: Deloitte analysis (2017)

 April 2018          94 

 
 
  
 
 
 
 
 
 
 
 
 
5.5  Findings 

  There  are  substantial  differences  between  how  the  general  suitability  was 
established by the different types of advisors across the Member States under 
study against the set of criteria that was specifically developed for this study.  

  Concerning the client’s investment objectives, the intended investment duration 
is covered to a high degree across the board independent of the type of advice. 
In contrast, substantial discrepancies appear across Member States and types of 
advice for the criteria of investment objectives as well as to the risk profile of the 
investor. 

 

In  relation  to  the  client’s  experience  and  knowledge,  the  customer’s  prior 
experience  with  investments  is  covered  to  a  very  large  extent  by  all  types  of 
advisors  and  across  all  Member  States.  In  contrast,  the  degree  to  which  the 
client’s  profession  is  asked  varies  strongly  across  Member  States.  Across  the 
board, the level of education of the investor was very rarely touched upon.  

  With  regards  to  the  client’s  ability  to  bear  the  investment,  i.e.  be  financially 
capable of handling an investment, advisors very frequently inquired about the 
customer’s current financial situation in terms of assets. On the other hand, they 
seem  to  care  significantly  less  about  the  client’s  income  and  regular 
commitments.  

  The ability to bear losses is not a requirement under the current regulation. While 
the  rates  vary  widely  for  this  criterion,  advisors  in  some  Member  States 
frequently inquire about it. 

  While the results between independent and non-independent advisors seem to 
be globally comparable across and within Member States, independent advisors 
seem to ask more frequently questions on the ability to bear losses than  non-
independent advisors.  

 

In terms of differences between profiles, there is evidence that advisors tend to 
ask  less  questions  on  financial  situations  (e.g.  resources,  source  of  income, 
assets, and expenses) to clients wishing to invest larger amounts (such as profile 
B:  100,000  EUR  to  invest  and  willingness  to  take  risks).  As  such  clients  seem 
more valuable customers in the eyes of a financial institution than clients with 
less  capital,  it  may  be  that  distributors  typically  choose  to  adopt  a  more 
commercial approach with them, less centred on potentially intrusive questions 
and more focused on product marketing and investment objectives. This is also 
reflected  in  the  fact  that  clients  with  more  capital  are  overall  asked  more 
questions on investment experience, horizon, objectives and risk-appetite than 
the ones with less capital. It should be noted, however, that although they are 
asked less resource-related questions, clients looking to invest larger amounts 
are also asked much more often about their ability to bear potential losses than 
clients looking to invest less capital. 

  The number of products proposed as a result of the advisory process is between 
2 and 3 for most of the Member States and types of advice. The most notable 
exception  is  robo-advice,  where  only  1  product  was  proposed  in  8  out  of  10 
mystery shops.  

 

It  is  important  to  note  that  most  shoppers  had  the  impression  that,  in  both 
independent and non-independent advice settings, the impact of the discussion 
(more specifically the “suitability” questions) on the actual product(s) proposed 
was  quite  limited.  In  some  occasions,  advisors  explained  that  the  institution’s 
team  of  investment  experts  constructed  ex-ante  a  small  portfolio  of  in-house 
products that, to a large extent, are suitable to cover the different needs of retail 

 April 2018          95 

 
 
  
 
 
 
investors, in terms of knowledge and experience, financial situation, investment 
horizon, objectives and risk tolerance. The job of the advisor merely consisted of 
picking product(s) out of this limited portfolio which he deemed the most suitable 
for the specific shopper. While this approach, on one hand, potentially reduces 
the risk of the customer to be exposed to unsuitable products, it highlights on 
the  other  hand  the  often  reported  bias  of  non-independent  advice  due  to  the 
incentive schemes in place. 

  Concerning  risks  disclosure,  there  are  no  substantial  differences  between 
independent and non-independent advice at EU-level. Focusing on Member State 
level,  British  IFAs  tend  to  explain  more  risks  to  retail  investors  than  non-
independent advisors. 

  No significant discrepancies are to be noted for the explanations of fees or the 
details of the recommended investment products (i.e. underlying asset classes, 
maturity  and  required  holding  period)  between  the  three  different  advice 
categories.  Shoppers  reported  that  their  advisor  usually  showed  the  past 
performance of the product. A projection of a potential future performance was 
shown much less often. 

For robo-advice: 

 

It  is  difficult  to  compare  the  performance  of  the  robo-advisors  with  human 
advisors due to the inherent limitations of the pre-defined set of multiple choice 
questions.  While  the  results  in  terms  of  percentage  values  might  seem 
comparable for any of the above criteria, one needs to keep in mind that each 
criteria was covered by only 1 to 3 basic questions by a given platform.  

  While  most  robo-advisors  presented  additional  clarifications  on  many  criteria 
(through pop up explanations or illustrative examples), all automated platforms 
in  our  sample  provide  the  possibility  to  rely  on  assistance  through  human 
although the level of intervention is not immediately clear.  Most robo-advisor 
platforms  provide  explicitly  the  possibility  to  be  put  in  contact  with  a  human 
advisor  through  a  hotline  (generating  costs)  or  a  chat  to  receive  further 
information and guidance. This option is clearly visible during each step of the 
advice process. In contrast, other platforms only provide the possibility to contact 
a  “technical”  helpdesk  which  does  not  complement  the  advice  process.  In  this 
case, like for many other websites, a “Contact” link is provided.  

 

In general, shoppers had the (subjective) impression that questions were worded 
objectively.  

  When  the  shopper  indicated  to  be  completely  novice  to  investment  products, 
about half of the robo-advisors did not allow shoppers to finish the advice process 
and suggested either that a human advisor could further assist in the process or 
that  robo-advice  is  not  suitable.  A  customer  in  such  a  situation  could  either 
choose  any  of  the  two  options  proposed  or  go  back  in  the  advice  process  (or 
launch  a  new  process)  and  adapt  his  responses  to  be  able  to  complete  the 
process nonetheless.  

  A major concern for robo-advice relies in the self-assessment of the customer in 
terms of current financial situation, experience with investment products and risk 
appetite.  Overconfidence  of  the  investor  or  unreliable  information  provided  by 
the investor might lead to the proposition of an unsuitable product at the end. 

 April 2018          96 

 
 
  
 
 
 
6  Challenges for consumers with regard to investment 

products 

The Consumer Markets Scoreboard,68 which monitors how markets are functioning from 
the perspective of consumers, clearly indicates that financial services are consistently 
ranked  among  the  poorest  performing  service  markets  in  Europe.  Combined  with  a 
general  low  level  of  financial  literacy,  the  average  retail  investor  in  Europe  has  little 
confidence  in  his  own  financial  decision  making  as  well  as  in  financial  institutions  in 
general. Nevertheless, the latest trend suggests that the efforts of public and private 
stakeholders  are  starting  to  pay  off,  consumers  now  have  more  trust  in  their  banks, 
private pensions and investment funds.69 

We investigate more specifically 2 issues in this section: 

-  Based  on a  review of existing scientific literature and  studies, we explore how 
consumers perceive the benefits and risks of different types of investment advice 
and how they value these in terms of willingness to pay.  

-  Based on the feedback of Consumer Protection Agencies and Alternative Dispute 
Resolution  agencies,  we  paint  a  picture  of  the  most  frequent  problems 
encountered by retail investors in relation to investment products. 

6.1  Perception  and  understanding  of  the  benefits  and  risks  of  the 

different types of investment advice 

In this section, we explore how consumers perceive the benefits and risks of the above 
different types of investment advice under study, e.g. advice through non-independent 
advisors  at  banks  and  insurance  companies,  advice  through  independent  financial 
advisors and advice through robo-advice platforms. Furthermore, to the extent possible, 
we investigate their willingness to pay for these various types of advice. 

Financial decision making 

Financial decision making is fundamental to financial and investor education as educated 
consumers  are  better  equipped  to  choose  financial  products  for  their  needs  and  are 
better protected against financial risks and fraud. Graph 3670 shows the key building 
blocks of financial decision-making: 

  Financial  information:  today  financial  information  on  the  types  of  available 
investment products, their associated risks, their access, etc. is largely available 
to  all  people  with  internet  access.  38%  of  Europeans  use  online  sources  to 
retrieve information to guide their investment decisions.71 In fact, the amount of 

68 http://ec.europa.eu/consumers/consumer_evidence/consumer_scoreboards/12_edition/index_en.htm 
The findings are based on a large scale survey on consumers’ experiences and perceptions regarding the functioning of key 
good  and  services  markets  in  the  28  Member  States  of  the  European  Union,  as  well  as  Iceland  and  Norway.  The  2016 
Scoreboard  screens  42  markets,  of  which  29  services  markets  and  13  goods  markets,  accounting  together  for  45  %  of 
consumer expenditure. Market Performance is measured by the Market Performance Indicator (MPI), a composite index made 
of  5  components:  comparability  of  offers,  trust  in  businesses  to  respect  consumer  protection  rules,  the  extent  to  which 
markets live up to what consumers expect, choice of retailers/suppliers and the degree to which problems experienced in the 
market cause detriment. 
69 http://ec.europa.eu/consumers/consumer_evidence/consumer_scoreboards/12_edition/docs/ 
factsheet_consumer_markets_scoreboard_2016_en.pdf 
70 Building Blocks for Industry Driven Investor Education Initiatives, EFAMA 2014 
71 Blackrock 2017 Investor Pulse survey (2017) 

 April 2018          97 

 
 
  
 
 
 
 
 
 
                                           
 
 
available information is rather overwhelming to a standard retail customer who 
is less financially sophisticated. Particularly, such customers find the information 
on costs and charges for various investment products difficult to understand.  

  Financial  advice:  A  standard  retail  investor  is  likely  to  look  for  advice  in  their 
investment decisions. Advice should enable customers to consider a wider set of 
investment  products,  better  understand  their  features  and  buy  products  that 
better match their individual profile. Different types of investment advice exist 
today  in  the  European  markets  based  on  both  the  European  and  national 
legislations  in  force.  For  instance,  there  is  a  clear  distinction  between 
independent  advice  (with  a  ban  on  inducements)  and  non-independent  advice 
(where the advisor is allowed to receive inducements from the providers of the 
product  that  is  recommended).  Lately,  automated  advice  through  robo-advice 
platforms  have  seen  increasing  interest,  albeit  remaining  quite  rare  across 
Member States. 

  Financial  guidance:  a  process  of  determining  an  individual's  financial  goals, 
purposes  in  life  and  life's  priorities,  and  after  considering  his  resources,  risk 
profile and current lifestyle, to detail a balanced and realistic plan to meet those 
goals. Financial guidance provides a detailed strategy tailored to a client's specific 
situation,  for  meeting  a  client's  specific  goals  covering  various  aspects  of 
personal  finance  which  includes  cash  flow  management,  education  planning, 
retirement  planning,  investment  planning  risk  management  and  insurance 
planning, tax planning, estate planning and succession planning but excludes the 
recommendation to purchase a particular financial product.72 

  Financial Literacy: this focuses on the ability to manage personal finance matters 
in  an  efficient  manner  and  includes  the  knowledge  of  making  appropriate 
decisions  about  personal  finance  such  as  investing,  insurance,  real  estate, 
budgeting, retirement and tax planning.73 A lack of financial literacy may lead to 
making  poor  financial  choices  that  can  have  negative  consequences  on  the 
financial well-being of an individual.  

Financial literacy is mainly achieved through financial education, defined as the 
process by which financial consumers/investors improve their understanding of 
financial  products,  concepts  and  risks  and,  through  information,  instruction 
and/or objective advice, develop the skills and confidence to become more aware 
of  financial  risks  and  opportunities.  Financial  literacy  allows  them  to  make 
informed choices, to know where to go for help and to take other effective actions 
to improve their financial well-being.74 

More  specifically  of  interest  for  this  Study,  investor  education  refers  to  the 
learning and improvement of skills and knowledge that people need to know for 
making  sound  investment  decisions,  selecting  among  different  saving  and 
investment products, and planning for education and retirement.75  

72 https://ec.europa.eu/info/file/55556/download_en?token=3K0_lWIU: Financial guidance – Financial Services User Group 
73 http://www.investopedia.com/terms/f/financial-literacy.asp#ixzz4uYJ7akGa 
74 Recommendations on principles and Good Practices for Financial Education and Awareness, OECD 2005 
75 Building Blocks for Industry Driven Investor Education Initiatives, EFAMA 2014 

 April 2018          98 

 
 
  
 
 
 
 
 
                                           
 
 
Graph 36: Building Blocks for Industry Driven Investor Education Initiatives 

Financial and Investor Education: 
Key building blocks of financial decision-making 

Financial Advice 

Financial Literacy 
& Investor 
Education 

Financial Decision 

Financial 
Information 

Financial Guidance 

Source: EFAMA (2014) 

Financial literacy is a skill that is necessary to make sound financial decisions across a 
lifetime even in a world of abundant financial information and with the help of advice. A 
review of studies and surveys on financial literacy across many Member States shows 
that  the  level  of  financial  literacy  among  the  population  is  low76  and  that  it  does  not 
improve over time.77 Research suggests that many factors influence financial literacy:  

  Age:  financial  literacy  is  lowest  for  younger  and  older  consumers  with  the 
difference that older consumers tend to give themselves very high self-assessed 
knowledge  scores.78 
financially  more 
knowledgeable than women across all age groups. This holds true even for well 
educated women, suggesting that women acquire financial literacy differently.80 

79Gender:  Generally,  men  are 

  Education: Unsurprisingly, financial literacy depends on the level of education. 
Nevertheless,  financial  literacy  remains  low  even  at  the  highest  level  of 
schooling. 

  Family background: the young who are financially literate are disproportionately 

more likely to have parents who have college degrees.81 

While most of the studies refer to basic knowledge of financial matters, the same lack 
of  knowledge  appears  in  studies  that  investigate  more  advanced  concepts  related  to 
investment  decisions.  Only  one  quarter  of  a  representative  sample  of  the  Dutch 
population  understood  the  basic  relationship  between  bond  prices  and  interest  rates 
thus  underlining  that  most  consumers  have  a  limited  understanding  of  risk 

76 Consumer Decision-Making in Retail Investment Services: A Behavioural Economics Perspective and the recent consumer 
vulnerability study 
77 The Economic Importance of Financial Literacy: Theory and Evidence, Annamaria Lusardi and Olivia Mitchell, 2014 
78 Debt Literacy, Financial Experiences, and Overindebtness. Lusardo and Tufano, 2009 
79 Financial Literacy around the World: An Overview. Lusardi and Mitchell, 2011 
80 Building Blocks for Industry Driven Investor Education Initiatives, EFAMA 2014 
81 Financial Literacy Among the Young. Lusardi, Mitchell and Curto. 2010 

 April 2018          99 

 
 
  
 
 
 
 
 
                                           
 
 
diversification82 and do not know the function of the stock market or what mutual funds 
do. In contrast, more financially literate individuals are more judicious about choosing 
mutual funds, including those with lower fees.83 84 85 

While the general financial literacy of the average retail investor is low, this does not 
entail  that  they  will  not  need  to  take  investment  decisions  at  some  stage  of  his  life. 
Table  9  shows  the  sources  of  information  a  retail investor  in  Europe  consults  before 
taking  an  investment  decision.86    41%  and  23%  respectively  rely  on  their  bank  or  a 
financial advisor to guide their decision-making. Almost 40% rely on the internet as a 
source of information while 28% consult their family and friends. The written press as 
well  as  TV  and  radio  follow  closely.  It  must  be  noted  however  that  the  age  of  the 
respondents  strongly skews this distribution. Younger people are more  susceptible to 
consult their family and friends and rely more frequently on information sourced through 
the internet. In contrast, older respondents show a stronger tendency to rely on their 
bank or a financial advisor to guide their decisions.  

Table 9: Sources of information consulted by European retail investors before 
making investment decisions (% of survey respondents) 

Banks 

Internet 

Family, 
friends 

Financial 
advisors 

Press 

Radio, 
television 

Insurance 
companies 

Asset 
managers 

Employers  Other 

41% 

38% 

28% 

23% 

20% 

10% 

8% 

8% 

4% 

6% 

Source: Blackrock 2017 Investor Pulse survey (2017) 

A    FAMR  report87  found  that  people  often  do  not  seek  help  with  important  financial 
decisions because of a range of factors, such as limited confidence and engagement in 
their financial affairs, combined with a lack of trust stemming from historic mis-selling 
or a sense that financial advice is ‘not for them’. Furthermore, 28% of those people who 
had  not  received  regulated  financial  advice  in  the  last  12  months  but  whose 
circumstances suggest there might be a need for financial advice, felt able to make their 
own  decisions.  Indeed,  20%  of  UK  adults  indicated  to  have  purchased  investment 
products without advice.88 

There  is  a  rich  body  of  literature  showing  that  (overconfident)  self-directed  investors 
trade actively, speculatively and to their detriment: 

They  trade  frequently  and  have  perverse  stock  selection  ability,  incurring 
unnecessary investment costs and return losses. They tend to sell their winners 
and  hold  their  losers,  generating  unnecessary  tax  liabilities.  Many  hold  poorly 
diversified portfolios, resulting in unnecessarily high levels of diversifiable risk, 
and  many  are  unduly  influenced  by  media  and  past  experience.  Individual 

82 Financial Illiteracy and Stock Market Participation, Van Rooij, Lusardi and Alessie, 2011 
83  Financial  Literacy,  Information,  and  Demand  Elasticity:  Survey  and  Experimental  Evidence  from  Mexico.  Hastings  and 
Tejeda-Ashton, 2008 
84 How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors. Hastings and Mitchell, 2011 
85 Fees, Framing, and Financial Literacy in the Choice of Pension Managers. Hastings, Mitchell, and Chyn, 2011 
86 Blackrock 2017 Investor Pulse survey (2017) 
87 Financial Advice Market Review, Baseline report, 2017 
88 YouGov 23-24 January 2017, Deloitte analysis. Sample: 2,046 

 April 2018          100 

 
 
  
 
 
 
 
                                           
 
 
investors  who  ignore  the  prescriptive  advice  to  buy  and  hold  low-fee,  well-
diversified portfolios, generally do so to their detriment.89   

In many Member States, financial education programs have been set up but the actual 
impact of these programs seems generally limited as the overall financial literacy of the 
European population remains low. As a complement to financial literacy, the concept of 
financial  guidance  is  gaining  traction.  According  to  FSUG90,  financial  guidance  is 
completely  disconnected,  either  directly  or  indirectly,  at  any  time,  from  any  sale  of 
financial products. In contrast, financial advice providing potentially similar elements of 
information  will  eventually  lead  to  the  recommendation  of  one  or  more  financial 
products.  Therefore,  financial  guidance  could  enable  consumers  to  make  informed 
financial decisions as they could rely on qualified persons who do not have a direct self-
interest in selling financial products to them. As financial guidance providers will likely 
not  recommend  too  complex  investment  products,  the  dissemination  of  simpler  and 
better  suited  products  will  be  facilitated.  As  a  result,  retail investors  benefitting  from 
financial  guidance  will  eventually  be  able  to  either  make  self-directed  investment 
decisions  or  challenge  the  recommendations  of  an  independent  or  non-independent 
advisor for their own benefit. But today, financial guidance is not common yet. Although 
some  financial  institutions  provide  some  elements  of  financial  guidance  to  their 
customers,  only  two  bodies  fully  meet  the  definition  given  by  FSUG:  The  German 
consumer  association  (VZBV)  and  a  service  implemented  by  British  public  authorities 
(Money Advice Service). Other Member States put tools on their websites  to provide 
consumers some knowledge on financial guidance but according to FSUG, it is yet not 
sufficient in most cases to help them in their decision-making process. 

Risks and benefits of Financial Advice 

Nevertheless,  advice  remains  an  important  and  frequently  used  tool  to  guide  retail 
investors in their investment decisions but only few people take advantage of advice. 
Financial advice is often considered by consumers as free of charge and no alternatives 
exist yet. While only 15% of the population in the UK consult an advisor in general, 6% 
of them (or 3.2 million people) received financial advice on investments in the last 12 
months.91 Numbers are consistently low across Member States with 22% for France and 
18%  for  the  Netherlands  and  for  Germany.  However,  there  seems  to  be  a  positive 
correlation  between  wealth  and  advice-seeking,  as  this  share  increases  to  30%  for 
wealthier investors in Germany. This result is not surprising, since those with greater 
resources have the most to gain from advice. 

Whether financial experts’ intervention benefits investors remains up for debate92 93 94 
since  the  incentive  scheme  of  the  advisor  has  a  strong  influence  on  the  investor’s 
benefit.  Using  a  dataset  from  a  large  retail  bank,  it  could  be  shown  that  advisors 
recommend the bank’s own mutual funds which are most proﬁtable for the bank.95 This 
is  a  finding  which  is  corroborated  by  our  own  mystery  shop  exercise,  whereby  non-
independent advisors tend to propose in-house products in a vast majority of cases. The 

89 The behavior of individual investors. Barber and Odean, 2011 
90 https://ec.europa.eu/info/file/55556/download_en?token=3K0_lWIU: Financial guidance – Financial Services User Group 
91 Blackrock 2017 Investor Pulse survey (2017) 
92 Bergstresser, D., J.M.R. Chalmers, and P. Tufano, 2009, “Assessing the Costs and Benefits of Brokers in the Mutual Fund 
Industry”, Review of Financial Studies 22, 4,129-4,156 
93  Hackethal,  A.,  M.  Haliassos,  and  T.  Jappelli,  2012,  “Financial  Advisors:  A  Case  of  Babysitters?”  Journal  of  Banking  and 
Finance 36, 509-524 
94 Kramer, M.M., 2012, “Financial Advice and Individual Investor Portfolio Performance”, Financial Management 41, 395-428. 
95 Financial Advice and Bank Proﬁts. Hoechle, Ruenzi, Schaub, Schmid, 2017 

 April 2018          101 

 
 
  
 
 
                                           
 
 
same  study  further  finds  that  advised  clients  achieve  a  signiﬁcantly  worse  net 
performance  than  independent  clients,  concluding  that  advisors  put  their  employer’s 
rather  than  their  clients’  interest  ﬁrst.  Indeed,  non-independent  advisors  seem  to 
support strategies that result in more transactions and higher fees.96 97  

Additionally, there is uncertainty and confusion in retail investors’ knowledge of the way 
the main financial professional involved in the purchase process is incentivised. While a 
significant proportion of purchasers recognise that independent financial advisors and 
brokers earn a commission on sales (and that the commission is usually not contingent 
on the future performance of the investment), more than four in ten purchasers either 
do not know about the financial incentives of their advisor, or believe that the advisor 
has no financial incentive to encourage purchase. This share is much higher when the 
main contact is with an employee of a bank, insurance company or other investment 
provider, resulting in the wrong assumption of many retail clients that this type of advice 
is for free. The same study points out that around  half of retail investors believe that 
the incentive scheme of the financial professional did not influence their confidence in 
the information or advice received in contrast to the above-mentioned literature. 

Nevertheless,  risk-adverse  individuals  who  should  value  the  advice  that  reduces 
potential wealth losses  are less likely to consult any type  of financial professional for 
advice across all types of financial services.98 

The relationship between advice-seeking propensity and financial literacy is ambiguous. 
In a choice experiment, less sophisticated people were more likely to take advice (Hung 
and  Yoong’s  (2010))  while  investors  who  rely  more  on  financial  advice  perceive 
themselves as less knowledgeable. Georgarakos and Inderst (2011) suggest that advice 
matters most for households with low financial capability and trust in advice. Hackethal 
et  al.  (2012)  Inderst  and  Ottaviani,  2009)  confirm  that  investors  who  rely  more  on 
financial advice perceive fewer conflicts of interests. In contrast, Van Rooij et al. (2011a) 
find that people who are less financially literate rely more on informal sources of financial 
advice, such as friends and family.  

On  the  other  side  of  the  spectrum,  respondents  who  considered  themselves  more 
financially literate preferred more autonomy in their pension decisions (Van Rooij et al., 
2007). Guiso and Japelli (2006) also find that investors who spend more time acquiring 
financial information delegate their financial decisions less. On the other hand, Bucher-
Koenen and Koenen (2011) state that more literate investors make more use of advisors 
because they can induce advisors to provide better advice. In addition, investors that 
are more financially literate might have higher advice-seeking propensities because of 
their higher opportunity costs of time.  

In summary, the exact relationship among financial literacy and the propensity to seek 
professional financial advice is still unclear. Part of the explanation for the ambiguous 
results is related to overconfidence.  The model from Guiso and Japelli (2006) predicts 
that overconfident investors are less willing to rely on information provided by financial 
advisors, banks or brokers and more likely to collect information directly because they 
believe that self-collected information is of better quality than it actually is. As a result, 

96 Mullainathan, S., M. Nöth, and A. Schoar, 2012, “The Market for Financial Advice: An Audit study,” The National Bureau of 
Economic Research Working Paper. Available at SSRN: http://ssrn.com/abstract= 2028263. 
97 Financial Advice and Bank Proﬁts. Hoechle, Ruenzi, Schaub, Schmid, 2015 
98 The demand for financial professionals’ advice: The role of financial knowledge, satisfaction and confidence. Robb, Babiarz 
and Woodward, 2012 

 April 2018          102 

 
 
  
 
 
 
                                           
 
 
overconfident  investors  tend  to  perform  less  well.    In  the  study  by  Von  Gaudekker 
(2014),  most  losses  from  insufficient  diversification  are  obtained  by  overconfident 
investors,  which  are  neither  financially  literate  nor  go  to  financial  advisors.  Several 
studies  also  highlight  possible  resistance  to  financial  counselling  or  planning  services 
among men. This may not be surprising if men are more likely to be overconfident of 
their  ability  to  direct  their  own  financial  decisions.99  The  impact  of  overconfidence  is 
underlined by an experiment where unbiased and theoretically sound advice was offered 
to customers of a brokerage company. Only about 5% of the customers accepted the 
offer  for  advice.    Within  this  study,  researchers  also  investigated  whether  the  advice 
was  followed  by  the  investors.  Surprisingly,  among  those  who  accept  the  offer,  the 
advice  is  rarely  followed  as  these  clients  over  perceive  their  own  investment  skills 
pointing again at some degree of overconfidence. 

In addition, the finding that education is positively associated with paying for financial 
advice is counterintuitive but may also suggest that some level of knowledge is needed 
to  increase  recognition  of  the  benefits  from  hiring  an  expert  to  provide  financial 
assistance  as  well  as  to  differentiate  between  different  types  of  advice.  It  is  possible 
that  many  who  have  less  formal  education  and  less  exposure  to  finance-related 
coursework are underserved due to an inability to assess whether the potential benefits 
of advice outweigh the cost and to choose the suitable type of advice. Results indicate 
that  the  wealthy  are  the  most  likely  to  receive  professional  assistance  when  making 
financial decisions, a trend that not only increases with the level of education but also 
with  the  level  of  wealth.  While  this  result  is  not  surprising,  since  those  with  greater 
resources  have  the  most  to  gain  from  this  advice  as  well  as  being  for  financially 
rewarding clients to advisors, it highlights the need for professional advice among lower-
wealth  households  who  may  be  among  the  most  vulnerable  to  making  poor  financial 
decisions. 

When purchasing directly from a financial professional, uninformed investors are more 
likely to purchase from a non-independent advisor, while in contrast, more self-directed 
purchasers  are  more  likely  to  purchase  from  an  independent  advisor.  This  type  of 
purchaser  is  twice  as  likely  to  purchase  remotely  from  an  independent  website  or 
telephone service.100 The same study suggests that retail investors failed to identify a 
conflict of interest of the advisor due to his incentive scheme resulting in biased advice.  

Willingness to pay 

Little  public  knowledge  is  available  about  the  consumer’s  willingness  to  pay  for  the 
different types of advice available. As described above, most people do not make use of 
advice and if so, they do not necessarily rely on paid-for advice. Graph 46 shows the 
usage of different types of advice among UK adults with paid-for advice being marked 
in blue demonstrating their low willingness to pay for advice. 

99 Financial Advice: Who Pays: Michael S. Finke, Sandra J. Huston, and Danielle D. Winchester, 2011 
100 Consumer Decision-Making in Retail Investment Services: A Behavioural Economics Perspective and the recent consumer 
vulnerability study 

 April 2018          103 

 
 
  
 
 
 
                                           
 
 
Graph 37: Usage of advice on product purchases among UK adults, 2014-16 

20%

36%

12%

11%

11%

10%

Not purchased product

Purchased without advice

Family and/or friends

An independent financial advisor

A bank - free advice

A website or online platform

A bank - advice for a fee

My emplyer/previous employer

Mortgage broker

Don't know

An accountant or solicitor

Other professional advice

1%

Non-professional advice

0%

7%

6%

5%

4%

3%

Source: Blackrock 2017 Investor Pulse survey (2017) 

0%

5%

10%

15%

20%

25%

30%

35%

40%

The Financial Lives survey explored the extent to which consumers in the UK said that 
they are willing to pay for advice (including automated advice). The results show that 
just under half (46%) of UK adults would be willing to pay for regulated financial advice 
if the costs were ‘reasonable’. The willingness  strongly depends on the past usage  of 
advice thus on the overall understanding of the benefits and disadvantages of advice. A 
large majority (81%) of those who had received advice in the previous 12 months were 
willing to pay for advice whereas this figure is substantially lower for those who did not 
benefit from advice. Of those who did not recently make use of advice, less than a fifth 
would be willing to pay more than 500 GBP. Whereas, out of those who did benefit from 
advice, the majority (72%) thought the fee they had paid for advice was about right, 
whilst 21% thought it was too expensive.  Less than half (47%) of respondents in the 
UK are satisfied with the fees they pay for advice.101 

In Sweden, 35% of adults state that they may consider paying an annual fee for financial 
advice amounting to an average of 1.1 percent of the value of the investment.102 The 
willingness to pay depends on: 

  Gender: 44% of men state that they may consider paying a fee, compared with 

22 percent of women.  

  Age: 59% of those aged 24-34 can think of paying an annual fee. 

Experiments suggest that when investors became aware of a conflict of interest of their 
advisor (non-independent advice), they were substantially less willing to pay for advice 
or  to  follow  a  recommendation  to  invest.103  More  particularly,  a  quarter  of  investors 
upfront payments were considered as an immediate loss as the payment has to be made 
regardless of whether a purchase was made subsequently. 

Robo-advice platforms offer lower-cost and more accessible advice options that may be 
attractive to those who do not currently seek financial advice through bans and insurers. 
The Financial Lives Survey indicates that only about 20% of respondents would pay for 

101 Blackrock 2017 Investor Pulse survey 
102 Blackrock 2017 Investor Pulse survey 
103 Consumer Decision-Making in Retail Investment Services: A Behavioural Economics Perspective and the recent consumer 
vulnerability study 

 April 2018          104 

 
 
  
 
 
 
 
                                           
 
 
automated online investment advice, strongly depending on the age of the respondent 
with the younger generations more inclined to pay for automated online advice. 

6.2  Overview of consumer complaints on retail investment products 

As part of the Study, we collected feedback by Consumer Protection Agencies (CPA) and 
Alternative Dispute Resolution agencies (ADR) through an online questionnaire. 8 CPAs 
and  15  ADRs  participated  in  the  survey  and  provided  substantial  insights  into  their 
experience in dealing with consumer complaints in relation to retail investment products. 

Depending on the size of the Member State and the uptake of investment products in 
the  retail  sector,  CPAs  and  ADRs  receive  between  a  dozen  and  a  few  thousand  of 
complaints  a  year  in  relation  to  investment  products.  Among  these,  the  respondents 
raised  the  following  issues  as  to  being  the  most  detrimental  to  retail  investors  and 
consumers within the distribution of investment products: 

  Mis-selling 

In 2013, the Financial Services Authority (of which country) defined mis-selling as “a 
failure  to  deliver  fair  outcomes  for  consumers”,  including  providing  customers  with 
misleading information or recommending that they purchase unsuitable products. In the 
UK,  FCA  issued  fines  for  298  million  GBP  for  mis-selling  activities,  including  bank 
accounts,  consumer  loans,  investing  and  insurance.  More  specifically,  in  relation  to 
investment products, mis-selling covers: 

o  Insufficient or unclear information about the risks associated 

with the investment product. 
Understanding of risk and risk diversification is essential and affects 
financial decision making, but research shows that only a minority of 
individuals has a good grasp of risk diversification.104 This finding is 
remarkably similar across Member States. 

o  Insufficient or unclear information about the product in which the 

customer invested in.  
Respondents repeatedly mentioned that investors do not understand the 
information provided during the purchase of an investment products. This 
is  partly  due  to  the  low  financial  literacy  of  retail  investors.  Indeed, 
investors do simply not read the terms and conditions before signing or 
relevant information is packed into a very large set of documents provided 
to them. One respondent mentioned: 

Also, the sheer amount of coexisting information which has to be 
provided to consumers in this field might already overstrain 
consumers to acknowledge or even comprehend them 
(informational overload) and makes it difficult for consumers to 
properly assess its relevance for an educated investment 
decision. 

104 Heinberg, Hung, Kapteyn, Lusardi, and Yoong (2010); and Heinberg, Hung, Kapteyn, Lewis, Lusardi and Samak (2012) 
for examples of visual tools that can be used to improve the knowledge of risk diversification. 

 April 2018          105 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
o  Investment products being advised and sold that are unsuitable 
for the needs of the investor or do not comply with his risk profile.  
Conflicts  of  interest  may  not  appropriately  be  divulged  or  the  advisor 
might be acting on his own interest,  offering products that are not the 
most adequate for the needs and characteristics of the client but those 
that are more profitable for him or his employer. 

  High and/or hidden fees 

An often opaque fee structure frequently leads to retail investors not understanding the 
fees  that  are  related  to  a  given  investment  product.  According  to  the  respondents, 
investors  complain  that  either  the  costs  are  too  high  or  that  costs  have  not  been 
disclosed before the purchase (e.g. for life insurance products, the (hidden) costs related 
to the underlying investment fund). 

  Financial literacy and guidance 

Respondents regularly mention the low financial literacy of the common retail investor 
as a major source of detriment. A review of studies and surveys covering 12 Member 
States, among which the Netherlands, Germany, Italy, Sweden and France, which are 
covered by this Study, show that the level of financial literacy among the population is 
very  low,  thus  impacting  their  ability  to  make  sound  financial  decisions.  Moreover, 
financial literacy does not seem to be improving over time. As financial illiteracy is both 
widespread  and  particularly  severe  among  specific  demographic  groups,  it  has 
consequences  for  both  individuals  and  society  as  a  whole.105  As  some  respondents 
foresee  that  the  upcoming  regulations  will  lead  to  an  exclusion  of  less  wealthy 
consumers  from  (any  type  of)  advice,  financial  guidance  could  become  of  increasing 
importance to support financially less sophisticated consumers in their decision-making 
by  providing  comprehensible  information  and  adequate  guidance  on  available 
investment products. 

Related to this is the ability of retail investors to understand the potential benefits 
and risks of the different types of investment advice, i.e. independent and non-
independent  advice.  Respondents  stressed  that  an  investor’s  ability  to  make  this 
distinction and understand its implications strongly depends on the financial literacy of 
the individual in question. Considering that financial literacy in Europe is quite low, CPA 
and ADR feedback indicates that most retail investors do not understand the difference 
between independent and non-independent advice. 
Related to the above, participants to our survey were asked to rate the frequency of a 
pre-defined set of issues within complaints they receive from retail investors: 

o  More than half report frequent or occasional complaints about:  

 

 
 
 

“Products not suitable to investor needs/inappropriate advice” 
(frequent: 53% / occasional: 33%) 
“Advice not clear” (27%/27%) 
“Costs and charges too high” (14%/36%) 
“Financial return too low” (13%/40%) 

o  Mentioned to a lesser extent where the following: 
“Biased Sales and/or conflicts of interests” 

 

105 Building Blocks for Industry Driven Investor Education Initiatives, EFAMA, 2014 

 April 2018          106 

 
 
  
 
 
 
 
 
 
                                           
 
 
 
 

“Costs and Charges not transparent” 
“Terms & Conditions not transparent” 

In terms of type of investment products that retail investors complain about the most, 
survey responses seem to reflect the market share of the different products within the 
retail sector: 

o  Frequent complaints about “Mixed funds” and “Life Insurance” 
o  Occasional complaints about “Bonds” and “Equities” 
o 
“ETFs” seem to appear rather seldom in complaints 

In Germany, “Riester pensions”, which are based on investment funds are regularly the 
subject  of  complaints  mainly  due  to  the  information  on  charges  for  private  pension 
products being rather hard to obtain and often non-transparent for individuals.106 

Generally, respondents believe that the average retail investor is only modestly aware 
of his rights with regards to investment products. As a consequence, they recommend 
strengthening efforts to increase the financial literacy of the wider public, which would 
allow the average retail investor to take better informed decisions but also to be aware 
of his rights. Furthermore, they suggest to continue to improve the system of legal help 
in the mediation/arbitration process. 

None  of  the  respondents  believed  that  there  is  a  need  to  further  regulate  market 
practices  to  protect  the  consumer  when  purchasing  retail  investment  products. 
However, regulations such as MiFID II, the PRIIPs Regulation and the IDD, have not yet 
taken  effect.  Once  they  come  into  force,  they  will  have  a  significant  impact  on  the 
transparency  of  costs  and  charges,  which  seems  to  be  one  of  the  central  topics  of 
consumers’  complaints.  Respondents  believe  that  before  considering  additional  policy 
measures concerning the protection of the consumer when purchasing retail investment 
products,  the  legislator  should  await  the  consequences  deriving  from  the  new 
regulations and analyse its effects intensively. One respondent mentions: 

Furthermore, in the field of consumer protection there is already a huge number 
–  both  national  and  European  –  regulations  in  place.  This  has  already  had 
negative consequences on the market such as a significant reduction of market 
participants  offering  kinds  of  retail  investment  products.  Therefore,  this  – 
regulatory  driven  –  development  already  has  negative  implications  on  the 
customer  by  reducing  the  market  spectrum.  One  example  is  the  ban  of 
inducement-based investment advice e.g. in the UK. Customers get advice only 
if  they  invest  at  least  50,000  GBP,  in  some  cases  even  more.  Therefore,  the 
result was not better advice, but the exclusion of customers with low-income.  

6.3  Findings 

  Today,  an  average  consumer  is  overwhelmed  by  the  sheer  complexity  of,  and 
uncertainty associated with, investment products even more so as the general 
familiarity  with  basic  financial  concepts  and  terminology  is  low  across  Europe. 
Consequently, most households do not invest  at all or do so  very infrequently 
across their lifetime. 

106http://betterfinance.eu/fileadmin/user_upload/documents/Research_Reports/en/Pension_report_2016_For_Web_-
_Final.pdf 

 April 2018          107 

 
 
  
 
 
 
 
 
 
 
 
 
 
                                           
 
 
 

If they do invest, retail investors  frequently complain about the mis-selling of 
products  due  to  the  provision  of  insufficient  or  unclear  information  about  the 
product,  its  associated  risks  or  the  product  being  not  adapted  to  their  risk 
appetite. Retail investors also frequently complain about the fees associated with 
the investment products they purchase, claiming that fees actually charged are 
higher than those explained during the advice process.  

  When facing an investment decision, retail investors  rely on advice in a face-to-
face setting either through a non-independent financial advisor of a distributor 
or through independent advisors. Due to the technological and societal changes 
of  the  digital  age,  the  share  of  self-directed  investors  among  the  younger 
generation is increasing.  

  Generally, the average retail investor does not understand the incentive scheme 
of their non-independent advisor and frequently perceives that this type of advice  
is  free.  As  a  result,  he  is  unlikely  to  understand  the  benefits  and  risks  of 
independent vs non-independent advice. 

  Research suggests that financially less literate and less wealthy investors rely, 
to a large extent, on advice to guide them in their financial decision making. In 
addition,  they  seem  to  be  less  knowledgeable  about  the  benefits  and  risks  of 
from  challenging  unsuitable 
different 
recommendations from advisors. 
In addition, advisors tend to target their services at clients with significant levels 
of wealth, making it harder for ‘mass market’ consumers to find advice. 

types  of  advice  keeping 

them 

 

  On  the  other  side  of  the  spectrum,  more  wealthy  and  informed  investors  also 
make  use  of  advice  in  order  to  complement  their  own  knowledge  and  further 
support  their  own  decision-making.  Overconfidence  in  their  own  decision 
capability  in  financial  matters  leads  (mainly  young  and  male)  self-directed 
investors  to  ignore  advice  and  make  poor  investment  choices  to  their  own 
detriment. 
Investors’  willingness  to  pay  for  different  types  of  advice  is  generally  low  and 
depends strongly on gender and age. This low willingness to pay highlights again 
the  low  level  of  awareness  of  incentive  mechanisms  in  traditional  distribution 
models where the distributors receive a commission for selling the product to an 
investor. 

 

  Although  rapidly  gaining  in  popularity  among  the  younger  generation,  only  a 
minority of retail investors today are willing to pay for automated advice through 
robo-advice platforms. 

Considering that retail investors frequently believe advice to be free of charge, objective 
and show a low willingness to pay for advice, other options have been proposed: 

  Financial  education  remains  an  important  element  in  people  developing  the 
ability to improve their financial decision-making, lowering their overconfidence 
and valuing the risks and benefits of different types of advice. It is nevertheless 
questionable  whether  financial  education  programs  will  effectively  change 
customers’ behavior at a larger scale.  

  Financial  guidance,  providing  consumers  with  objective  and  easily 
comprehensible information in order to support sound financial decision making, 
is not widespread yet but  should be considered as an important complement to 
financial education, advice and information. 

 April 2018          108 

 
 
  
 
 
 
  Other options, such as simpler products, e.g. a Pan-European Pension Product107, 
and carefully designed default options, have been proposed in order to simplify 
the choice of investment products for financially less sophisticated investors. 

107 https://ec.europa.eu/epsc/publications/strategic-notes/pan-european-pension-product_en#h-4 

 April 2018          109 

 
 
  
 
 
 
 
 
 
                                           
 
 
7  Initiatives to guide the distribution process of retail 

investment products  

In this section, we highlight initiatives at national and European level that could guide 
and improve the distribution process of investment products to retail investors. We focus 
on initiatives by National Competent Authorities (NCAs) and consumer associations. 

NCAs are considered as key actors in the financial marketplace ensuring that the various 
financial actors are licensed to conduct business in the territory of the relevant country; 
that these financial entities are regularly supervised as well as focusing on ensuring that 
the financial products they distribute are suitable for not only the marketplace and the 
different investor types but are also distributed in accordance with relevant European 
and local legislation. 

Another  major  aspect  of  the  duties  and  responsibilities  of  these  NCAs  is  securing  an 
appropriate  degree  of  protection  for  all  retail  investors.  Hence,  as  part  of  the  Study, 
various  telephone  interviews  were  conducted  with  the  majority  of  the  National 
Competent Authorities of those countries in scope. The interviews lasted approximately 
one hour; a list of possible questions was drawn up to lead the discussions and it was 
left to the interviewer to assess which questions were most relevant depending on the 
responses provided by the interviewees during the call. Out of the 15 countries in scope 
of the Study, three NCAs did not participate and two NCAs submitted written responses 
by email rather than agreeing to conduct a telephone interview. 

For  the  12  National  Competent  Authorities  that  were  interviewed  or  that  provided 
written  responses,  key  regulations  such  as  UCITS,  AIFMD,  MiFID  and  PRIIPS  have 
generally been transposed into national legislation without any major implementation 
of  gold-plating  requirements.  Many  mentioned  that  it  was  not  their  aim  to  introduce 
additional  requirements  without  valid  reasons.  In  terms  of  distribution,  some  NCAs 
confirmed they had introduced gold-plating requirements for UCITS investment funds 
but, that in all cases, these requirements were considered not to be major barriers to 
entry into their territory but are nevertheless required to ensure that a strong level of 
investor protection was maintained by all actors present in that segment. Examples of 
such  gold-plating  include  the  requirement  by  the  Austrian  Finanzmarktaufsicht,  the 
French  Autorité  des  marchés  financiers  (AMF)  and  the  German  Bundesanstalt  für 
Finanzdienstleistungsaufsicht (BaFin), to pay their regulatory fees up-front prior to the 
submission of the passporting notification to the home member state authority of the 
UCITS and to provide proofs of the payments as part of the notification package. Another 
often-cited  example  is  the  mandatory  requirement  to  use  the  DEPROF  system  of  the 
Italian Commissione Nazionale per le Società e la Borsa on share class level to handle 
passporting  notification  filings  to  allow  the  distribution  of  UCITS  investment  funds  to 
retail investors, which adds considerable  complexity and effort to  what is a relatively 
straightforward process.  

In terms of incidents of misconduct and/or misspelling, the majority of NCAs indicated 
a similar trend in the three types of incidents, namely that the retail investor was under 
the impression that: 

a) The product they had been sold was not suitable as they had lost money;  
b)  That  they  had  not  been  made  aware  of  the  detailed  costs  and  charges 
associated with investing in that particular product; and  
c) That they perceived that the professional who had sold the product was not 
necessarily acting in the best interests of the investor.  

 April 2018          110 

 
 
  
 
 
 
 
 
 
 
However,  it  is  worth  restating  that  the  above  mentioned  types  of  incidents  can  be 
perceived as being very subjective from the point of view of the retail investor. In all 
cases,  the  NCAs  mentioned  that  if  they  had  received  any  complaints,  then  they  are 
generally passed onto their local financial ombudsman for resolution but  the NCAs are 
advised  of  the  outcomes.  During  the  discussions  with  the  NCAs,  it  also  became  clear 
that there was no single particular sector of the financial industry that received more 
complaints from retail investors than another. 

Following  the  discussions  with  the  NCAs  together  with  the  results  obtained  for  the 
mystery shopping exercise, it has become apparent that seeking advice from banks and 
insurers  appears  to  be  the  most  common  distribution  route  taken  by  retail  investors 
except in the UK and the Netherlands, where advice is difficult to obtain from banks and 
insurers since the introduction of bans on inducements. Advice from banks and insurers 
results in relatively similar investment recommendations across Member States in terms 
of  products  (with  the  exception  of  the  UK  and  the  Netherlands).  Our  research  also 
showed the overwhelming majority of non-independent advisors only proposed in-house 
products. 

For the UK, the landscape is very different to that of other Member States, largely due 
to  the  introduction  of  the  Retail  Distribution  Review  (RDR)  in  2012.  The  five  key 
objectives of this review were that a) independent advice is in actual fact independent 
and reflects the retail investors’ needs; b) that the potential investor can clearly identify 
and  understand  the  service  that  is  being  offered  to  them;  c)  that  any  potential 
commission bias is removed and any recommendations / investment advice provided to 
the  retail  investor  is  not  influenced  by  any  product  manufacturers;  d)  investors  are 
informed  up-front  of  the  cost  of  the  advice  and  how  this  will  be  charged  and  e) 
qualifications for all investment advisors were upgraded.  

Following  the  introduction  of  RDR,  the  UK’s  Financial  Conduct  Authority  (FCA) 
commissioned  a  post-implementation  review,  which  was  published  in  2014.108  The 
review concluded that overall RDR was on track to deliver its objectives, for example, 
in reducing product bias from advisor recommendations, creating a more level playing 
field in terms of products on offer, evidence of product prices falling and more advisors 
reaching the minimum standard qualifications. The  UK’s FCA was due  to undertake a 
further review of the impact of RDR in 2017 but this has now been delayed until 2019. 
The  reason  for  the  delay  is  to  combine  the  RDR  review  with  the  impact  of  the  2015 
Financial Advice Market Review (FAMR) reforms and to effectively allow the market time 
to  react  to  the  various  regulatory  changes  resulting  from  FAMR  and  MiFID  II.  The 
combined  impact  report  on  RDR  and  FAMR  is  anticipated  early  2020.  Our  sample 
mystery shops indicated that investors with less than EUR 100,000 were systematically 
turned  down  by  banks  and  insurance  companies  that  led  such  investors  to  seek  the 
services of Independent Financial Advisors (IFA), who are able to provide advice. Our 
results  also  showed  that  the  initial  consultation/advice  is  generally  free,  while 
subsequent investments made through the IFA are typically subject to a fee, expressed 
as a percentage of the invested amount. In the Netherlands, the Woekerpolissen scandal 
of  2006  within  the  Dutch  insurance  market  is  widely  credited  as  having  provided  the 
political impetus for the Dutch Autoriteit Financiële Markten (AFM) to act against mis-
selling. Various initiatives were tried by the AFM including requiring more transparency 
on  commissions  or  caps  on  the  amounts  of  commission  to  be  paid  before  the  final 
decision  was  taken  to  ban  inducements.  The  ban  came  into  effect  in  2014  and  only 
applies  to  services  provided  to  non-professional  investors  i.e.  retail  investors.  This 

108 https://www.fca.org.UK/publication/research/post-implementation-review-rdr-phase-1.pdf 

 April 2018          111 

 
 
  
 
 
 
 
 
                                           
 
 
effectively  means  that  retail  investors  do  not  receive  advice  anymore  from  either 
traditional  distributors  or  IFAs.  From  a  positive  perspective,  this  has  led  to  more 
consumer awareness in relation to costs charged for advice and taking more informed 
choices  for  themselves.  In  addition,  advisors/intermediaries  are  also  becoming  more 
responsive to the needs of the retail clients with more tailored business models arising. 
Conversely, this situation has also led some retail clients to refrain from investing, to 
potentially using the services of discretionary portfolio managers, or, for the least risk-
averse, to invest (online) by their own means (execution only). The most recent country 
to  consider  banning  inducements  is  Ireland.  The  Central  Bank  of  Ireland  (CBI)  has 
recently launched a consultation paper containing proposals to “enhance the protection 
for consumers when seeking advice from financial intermediaries.”109 The consultation 
paper does not propose to issue a blanket ban but a partial ban to eliminate any potential 
bias  that  could  arise  as  a  result  of  inducement  arrangements.  The  closing  date  for 
responses to this consultation paper is 22 March 2018. 

As regards to the subject of the technological advances relating to Fintech, at the time 
of writing this Study, only the UK’s FCA has formally launched a “regulatory sandbox” 
in June 2016. The intention of this regulatory sandbox is to encourage innovative ideas 
to  reach  the  market  and  eventually  the  retail  client.  The  sandbox  is  designed  for 
businesses  to  test  their  products  and  services  with  a  limited  number  of  real  “end” 
consumers/investors whilst being supervised by the FCA. The UK’s FCA, received 146 
applications,  of  which  55  were  accepted  into  two  cohorts  of  testing,  each  lasting  six 
months.  The  accepted  firms  were  then  permitted  to  test  their  innovative  products, 
services and business models in live market environments, with appropriate safeguards 
in  place.  Examples  of  firms  permitted  to  test  within  the  sandbox  include  Bud 110  (an 
online  platform  allowing  users  to  manage  their  financial  products,  with  personalised 
insights, on a  single dashboard) and  AssetVault (enabling consumers to catalogue all 
their  assets  in  a  secure  online  register  and  better  understand  their  total  value. 
AssetVault then works with insurance providers to protect the consumer and their assets 
with appropriate insurance products). Although the current entities participating in the 
sandbox are more financial services oriented rather than financial product oriented, both 
services and products can participate. 

The first year of operation showed that the  UK FCA’s sandbox had been successful in 
meeting  its  overall  objective:  around  90%  of  the  firms  accepted  into  the  first  cohort 
have progressed towards a wider market launch. A significant benefit of the sandbox is 
that it permits firms to test consumer uptake and commercial viability, and to adapt if 
necessary. Consequently, around a third of firms in the first cohort significantly pivoted 
their business model ahead of launch in the wider market. Furthermore, the sandbox 
helped  innovators  secure  funding,  with  at  least  40%  of  the  first  cohort  receiving 
investment during or after their sandbox testing due to the higher level of confidence 
investors had in firms taking part in the testing. However, the majority of the NCAs that 
were  interviewed  confirmed  that  they  had  set  up  internal  working  groups/divisions 
relating to the advent of Fintech and that some were considering implementing a similar 
sandbox structure. In all cases, the NCAs were keen to stress that they were very open 
to having discussions with new financial actors prior to the licensing application and the 
launch of new financial products in their respective territories.  

109 https://www.centralbank.ie/publication/consultation-papers/consultation-paper-detail/cp116---intermediary-
inducements---enhanced-consumer-protection-measures 
110 https://www.fca.org.UK/firms/regulatory-sandbox/cohort-1 

 April 2018          112 

 
 
  
 
 
 
 
 
                                           
 
 
Another view shared by all NCAs was that any new entrants into the financial sector, be 
they  traditional  type  of  companies  or  Fintech,  are  all  subject  to  the  same  existing 
licensing requirements and that no new licensing category has been created for Fintech 
companies. One of the reasons expressed by the NCAs for having taken this decision is 
that innovation in terms of financial products is not limited to the new Fintech actors 
but that also the more traditional players are entering this new sector hence the wish 
to maintain a level playing field across all players. For the moment, as this segment is 
in its infancy, the NCAs did not comment on any specific perceived risks from these new 
entrants  but  all  confirmed  their  openness  in  having  dialogue  with  the  new  financial 
actors  including  robo-advisors  to  help  understand  and  alleviate  any  potential  future 
risks.  

To  strengthen  their  roles  in  securing  investor  protection,  all  NCAs  mentioned  that  in 
collaboration with their EU counterparts, they regularly issue alerts to the general public 
when  they  discover  products  and  services  that  infringe  statutory  and/or  regulatory 
requirements.  Generally, such alerts are published on the websites of  the NCAs. Two 
most recent general alerts include “Beware of boiler rooms!”111 published by the Belgian 
FSMA on 27 November 2017 warning consumers against fraudulent investments and a 
warning from the UK FCA published on 29 November 2017 in relation to the cloning of 
authorised firms.112 Databases are made available for the general public to encourage 
investors to systematically check not only that their intended product for investment is 
authorised for sale in the country of residence but also that the intermediary in question 
is duly licensed. Although many NCAs provide databases of regulated entities, the UK’s 
FCA recently introduced ScamSmart113, an electronic database helping investors detect 
potential  scams  not  just  in  the  financial  sector  but  more  widely  ranging  from 
investments  in  bamboo,  through  to  parking  and  even  wine.  The  investor  can  either 
answer three simple questions using the drop down fields (proposed investment sector, 
source of proposed investment and whether pension money may be involved) or directly 
search the UK FCA’s warning list to see if the proposed investment opportunity may be 
considered a scam.  

Some  NCAs  have  also  begun  to  take  actions  to  discourage  non-suitable  investment 
products  from  being  sold  in  their  territories.  Belgium,  France,  the  UK  and  the 
Netherlands,  to  name  but  a  few,  are  introducing  laws  to  limit  the  products  that  they 
have classified as toxic. In addition, various NCAs have issued regulations and guidance 
to be followed when distributing complex products. 

In April 2011, the Danish National Bank issued an Executive Order on Risk-Labelling of 
Investment  Products  (EO  345).114  This  Executive  Order  requires  all  financial 
intermediaries  that  distribute  or  provide  advice  on  investment  products  to  retail 
investors to effectively “label” the products using a traffic light system i.e. red, yellow 
or  green.  Red  products  are  those  where  retail  investors  could  lose  more  than  their 
original investment  amount  or  those  which  may  be  difficult  to  understand;  examples 
according  to  the  Executive  Order  include,  amongst  others,  non-UCITS,  structured 
bonds,  contracts  for  difference,  credit  default  swops  and  Exchange  Traded  Funds. 
Products classified as yellow are those where there is a risk of wholly or partly losing 
the amount invested and that it is not difficult to understand; these include amongst 
others, UCITS and shares/corporate bonds admitted to trading on a regulated market. 

111 https://www.fsma.be/en/warnings/beware-boiler-rooms-0 
112 https://www.fca.org.UK/news/warnings/michael-ullrich-hartmann-clone-eea-authorised-firm 
113 https://www.fca.org.UK/scamsmart  
114 http://www.danskebank.dk/PDF/PRISER-VILKAAR-FAKTAARK/Homepage-
UK/Privat/Investment/ExecutiveOrderRiskLabelling-InvestmentProducts.pdf 

 April 2018          113 

 
 
  
 
 
 
 
 
                                           
 
 
With regards to green products, these include Danish government bonds, treasury bills 
and government bonds  issued by euro countries in Euro or Danish Krona. During the 
interview, the Danish Finanstilsynet mentioned they are currently considering revising 
this Executive Order in light of the UCITS KIID / PRIIPS KID but for the time being the 
status quo remains. 

Another  similar  traffic  light  initiative115  was  established  in  January  2013  by  the 
Portuguese Comissao do Mercado de Valores Mobiliarios (CMVM), whereby a specific key 
information  document116  must  be  drawn  up  for  complex  financial  products  with  a 
minimum investment amount of EUR 100,000. In addition, this document and related 
advertising materials are also required to include both a coloured warning symbol and 
notice  for  investors.  The  definition  of  complex  financial  products  includes  derivative 
financial instruments and derivative securities, structured bonds, unit-linked insurance 
plans  and  other  debt  securities.  Green  may  only  be  assigned  to  products  with 
guaranteed income when issued by an EU based supervised entity; yellow is used for 
products  with  guaranteed  income  which  are  not  issued  by  an  EU  based  supervised 
entity.  Orange  is  used  where  there  is  a  possibility  of  recording  a  capital  loss  greater 
than 10% but less than 100% of the invested amount and finally red is assigned when 
there is a possibility of recording a capital loss greater or equal to 100% of the invested 
amount. 

In both France and the Netherlands, toxic products are considered to be binary options 
and Contracts for difference without a guaranteed stop loss. As far back as August 2011, 
the Belgian Autorité des Services et Marchés Financiers (FSMA) introduced a moratorium 
on the distribution of complex structured products to retail investors in Belgium117 unless 
specific criteria are met including the requirement to submit marketing materials for the 
relevant products for FSMA approval prior to commencing any marketing materials. For 
the purposes of this moratorium, structured products have been deemed to be products 
that have a derivative component regardless of the form of the product in which they 
are  sold.  Affected  products  include  undertakings  for  collective  investment,  insurance 
contracts, notes or deposits. The FSMA has determined four criteria to assist with the 
categorisation on whether the product is considered complex: 1) whether the underlying 
value  is  sufficiently  accessible  and  transparent  for  the  investor;  2)  if  the  investment 
strategy is not overly complex; 3) complexity of yield calculations and 4) whether there 
is sufficient transparency in relation to costs, credit risk and market value. To date, it is 
understood  that  the  majority  of  distributors  have  signed  up  to  this  voluntary 
moratorium. Following the introduction of the Sapin 2 law in France earlier this year, 
the  number  of  illegal  advertising  has  decreased  by  around  a  quarter.  With  the 
introduction  of  MiFID  II  in  January  2018,  NCAs  will  have  the  possibility  of  imposing 
stricter requirements on products they consider as high-risk for retail investors. In June 
2016, ESMA issued a press release 118 effectively warning about the dangers of investing 
in contracts for difference, binary options and other speculative products. The release 
was  issued  due  to  a  marked  increase  in  the  number  of  investor  complaints  in  such 
products having been brought to the attention of NCAs. 

115 http://www.cmvm.pt/en/Legislacao/National_legislation/Regulamentos/Pages/reg2012_02.aspx?v= 
116  Please  note  this  key  information  document  is  separate  to  and  should  not  be  confused  with  the  UCITS  Key  Investor 
Information Document 
117 https://www.fsma.be/en/news/moratorium-distribution-particularly-complex-structured-products 
118 https://www.esma.europa.eu/sites/default/files/library/2016-
1166_warning_on_cfds_binary_options_and_other_speculative_products_0.pdf 

 April 2018          114 

 
 
  
 
 
 
 
                                           
 
 
Concerned by the lack of financial education, many of the NCAs provide retail investors 
with a range of tools on their websites as well access to various educational publications 
including  factsheets,  guidebooks,  frequently  asked  questions.  Some  additionally  offer 
access  to  helplines    available  for  assistance  and  recourse  in  case  of  mis-selling.  DG 
FISMA recently commissioned a separate study119 on access to comprehensive financial 
guidance  for  consumers  across  seven120  countries.  In  this  context,  financial  guidance 
was taken to mean the process to determine a person’s financial goals in relation to the 
personal circumstance and provide a strategy to meet these goals. This separate study 
found that in general, the provision of financial guidance was more widespread and/or 
extensive  in  Australia,  the  Netherlands  and  the  UK,  where  financial  advice  that  has 
effectively been financed by the sale of products (commissions) is no longer permitted. 
The analysis showed that in contrast, in Belgium, France and  Denmark, non-industry 
provision  is  at  quite  a  low  level  with  Germany  being  an  exception  due  to  the  large 
network  of  local  consumer  associations  playing  a  key  role.  In  terms  of  the  actors 
providing  such  financial  guidance,  this  varied  between  countries.  In  two  countries, 
namely Australia and the UK, the local financial services regulator and local government 
play a key role. For the UK, there are three additional national providers – the Money 
Advice Service, the Pensions Advisory Service and PensionWise. For the other countries 
in scope, the role of the local financial services regulator and local government is more 
limited. In Belgium, the FSMA has created a website to provide such financial guidance. 
For Denmark, the government has created the Penge-og Pensionspanelet (The Money 
and  Pensions  Panel)  website  whereas  in  France,  it  is  L’union  Retraite  that  provides 
guidance  on  pensions  and  retirement  planning.  In  the  Netherlands,  it  is  the  Dutch 
Treasury that has created an independent body Wijzer in Geldzaken (Money Wise). From 
this  separate  study,  it  appears  that  only  in  Germany,  there  is  no  direct  involvement 
from the government although the BaFin has information available on its website. 

In addition to transposing the various EU Directives, the NCAs issue additional guidance 
in  the  form  of  regulations,  doctrines,  guidelines,  circulars  or  similar.  These  generally 
take the form of enhancing the local legislation and to act as best market practice in 
multiple  areas  of  the  financial  sector.  A  good  example  of  such  additional  legislation 
comes  from  Germany.  Since  2010,  the  German  BaFin  issued  the  obligation  that  all 
companies  providing  investment  services  are  required  to  keep  written  minutes  of  all 
investment  advice  given  to  retail  investors  (Beratungsprotokoll).  The  underlying  key 
reason for the introduction of this measure in 2010 was to strengthen investor protection 
and therefore clients’ rights; previously no formal records necessarily existed for such 
meetings  making  it  very  difficult  to  prove  any  potential  mis-selling/mis-information. 
Another reason for the Beratungsprotokoll is to make it easier for the German BaFin to 
supervise investment advice during their regular on-site checks. Appointed auditors are 
also required to check during regular audits whether the investment services companies 
have implemented organisational measures to properly take investment advice minutes 
and to make these available. In the case of material irregularities, the  German BaFin 
can take appropriate measures and, if necessary, issues administrative fines.  

Effectively,  these  investment  advice  minutes  provide  a  standardized  record  of  the 
discussion between the financial intermediary and the retail investors. Details noted in 
these minutes include, amongst others, the reason for the investment advice, how long 
the  session  lasted,  details  of  the  potential  investors’  personal  situation  together  with 
information on the advice that was provided and the reasons therefore. Once the session 

119  HYPERLINK "https://ec.europa.eu/info/file/55554/download_en?token=z733mogF" 
https://ec.europa.eu/info/file/55554/download_en?token=z733mogF 
120 Six of the seven countries are in scope of this separate study (Belgium, Denmark, France, Germany, Netherlands and 
UK); the seventh country was Australia. 

 April 2018          115 

 
 
  
 
 
 
 
                                           
 
 
has finished, the financial intermediary is required to sign the form and pass them to 
the  retail investor.  In  2012,  following  this  initiative,  the  German  BaFin  introduced  its 
Employees and Compliants Register, a list of all individuals entitled to give investment 
advice. In addition to being registered, such individual must also meet strict minimum 
standard requirements to perform such tasks.  

Fees is the single word that touches the heart of the investment management industry 
from asset managers, to service providers, right through to the end investor. It is our 
understanding that no European regulator has tried to prohibit entry fees, nor are they 
likely  to  consider  such  a  drastic  move  in  the  future.  However,  such  a  measure  was 
successfully  introduced  outside  Europe  by  the  Indian  Securities  and  Exchange  Board 
who introduced a ban on entry fees in 2009.121 The closest that any European regulator 
has come to such a similar decision is the Spanish  Comisión Nacional del Mercado de 
Valores (CNMV). According to Royal Decree 1082/2012122, management, entry and exit 
fees charged by financial investment funds are capped. The prospectus must disclose 
the calculation method for the management fees as well as maximum limits, details of 
the fees that will actually be applied and the entity receiving the payment. In terms of 
entry and exit fees, neither the subscription and redemption fees nor the sum of both 
may exceed 5% of the net asset value of the units. With the introduction of PRIIPS on 
1  January  2018  however,  more  transparency  in  terms  of  costs  and  especially  their 
impact on the investment performance should prove beneficial to retail investors in the 
long term.  

As  part  of  their  supervisory  duties,  many  of  the  NCAs  regularly  conduct  their  own 
investigations and inspections on financial actors whilst working closely with other local 
and foreign authorities. Various reports are also issued on a regular basis by the NCAs 
on the workings of their internal markets. During the discussions with the various NCAs, 
it became clear that for many NCAs, mystery shopping exercises do not form part of 
potential  initiatives  to  measure  not  only  the  quality  of  the  services  provided  by  the 
financial sector but also compliance with regulations. Only the French AMF, the Irish CBI 
and the UK FCA have publically acknowledged that they conduct/commission mystery 
shopping exercises. The reasoning behind conducting such mystery shops as part of the 
supervisory  approach  is  effectively  to  evidence  a  small  snapshot  of  the  day-to-day 
reality  that investors  face  when  taking  financial  decisions  on  their  investments.  Such 
activities  help  in  identifying  potential  risks  to  customers  as  well  as  aid  in  assessing 
quality of service, compliance with regulation and being a means of gathering specific 
information. Adding these types of exercises to the list of initiatives undertaken by the 
NCAs  will  likely  enhance  not  only  the  quality  of  information  made  available  to  retail 
investors  but  also  assist  with  the  general  positive  development  of  the  financial 
marketplace. 

Without exception, all the NCAs stressed that with the introduction of MiFID II and the 
advent of PRIIPS as per 1 January 2018, the financial marketplace for the protection of 
retail  investors  will  be  strengthened  even  if  these  new  regulations  are  considered 
burdensome and administrative for the actors concerned. 

The views of several leading consumer associations were collected through a series of 
interviews.  BEUC  and  Better  Finance  stressed  several  measures  which  could  spark 
competition in a proper single market, bringing prices and charges down for individual 

121 https://www.ft.com/content/ff5269e6-219a-11e6-9d4d-c11776a5124d  
122 http://www.boe.es/buscar/act.php?id=BOE-A-2012-9716 

 April 2018          116 

 
 
  
 
 
 
 
 
 
                                           
 
 
investors  and  facilitate  access  to  the  best  products  and  services  thus  restoring  retail 
investor trust again:  

  Having simple, transparent and comparable products to choose from 

This holds true for all types on retail investment products but in particular  for 
pension  products.  The  growing  reliance  by  Europeans  on  individual  pension 
products  is  not  matched  by  an  adequate  supply  of  value  for  money  pension 
savings vehicles. Multiple fees and charges have a very detrimental impact on 
the (real) return of pension products.123 124 Moreover, weak disclosure practices 
add to the  opacity of often very complex personal pension products. Also, the 
lack  of  proper  financial  advice  and  the  absence  of  an  aggregated  overview  of 
different pension pillars are making it difficult for European consumers to make 
good and informed choices.   

While improving disclosure practices is a first  essential step, more supply-side 
regulation, along with improved governance and aligned incentives for providers 
will be crucial in fundamentally improving consumer outcomes. One way forward 
in  this  perspective  is  the  promotion  of  default  products  and  auto-enrolment 
options in pension provision, which has a big potential towards achieving a better 
market  outcome  for  those  disengaged  consumers  unable  to  make  active 
choices.125 

The “Simple Products Initiative” in the UK126 could improve the access to basic 
good-value financial products for those consumers who do not manage to deal 
with the complexity of the market. 

  The provision of unbiased advice and transparent information 

The  widespread  use  of  commissions  and  fees  conflicts  with  a  need  for  neutral 
advice  to  consumers  across  Europe.127  Accordingly,  consumer  associations 
demand a ban on inducements in order to tackle the conflicts of interest, which 
will erode investor trust only further in the future. First assessments in countries 
which have adopted such a ban (UK128 and NL129) are providing evidence for its 
necessity.  In  those  countries,  prices  of  products  have  decreased  considerably 
due to the increasing competition and putting client’s interest first. 
Existing and future regulation should be assessed with regards to improving the 
provision  of  information  on  performance  and  costs  with  the  goal  to  provide 
relevant  and  comprehensible  information  to  retail  investors  in  an  easily 
comprehensible way. 

the 

real 

“Pension 

Savings: 

123 “Towards an EU single market for personal pensions An EIOPA Preliminary Report to COM “, Eiopa, 2013, p 81. 
124 
http://www.betterfinance.eu/fileadmin/user_upload/documents/Research_Reports/en/Pensions_Repo 
_EN_FOR_WEB.pdf 
125  “Better  pensions”,  Which?,  2015  http://www.staticwhich.co.uk/documents/pdf/better-pensions-report--march-2015-
397468.pdf 
126 https://www.gov.uk/government/news/simple-financial-products-a-step-closer 
127 http://www.beuc.eu/publications/beuc-x-2015-046_gve_green_paper_building_a_capital_markets_union.pdf 
128  “Post-implementation  review  of  the  Retail  Distribution  Review  –  Phase  1”,  Financial  Conduct  Authority,  2014 
http://www.fca.org.uk/your-fca/documents/post-implementation-review-of-theretail-distribution-review-phase-1 
129 http://www.gfk.com/nl/news-and-events/press-room/press-releases/paginas/consument-bespaart15-door-
provisieverbod.aspx  / http://www.afm.nl/nl-nl/professionals/nieuws/2014/nov/speech-tkrovisieverbod 

rt_2014_FINAL_-

Finance, 

return” 

,Better 

2013  

 April 2018          117 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
  Further combat mis-selling of financial products 

Consumer associations regularly criticize the mis-selling of savings, investment 
and mortgage products and request improvements in the enforcement of conduct 
of financial business rules. In a recent briefing paper130, Better Finance suggests, 
among other recommendations, the development of a Pan-European collective 
redress mechanism, modelled on the best practices in Europe as individuals are 
not equipped to assess their  own detriment, and even less equipped to obtain 
redress in court on their own: it is very often too technical, too costly for them 
and takes too much time. In addition, contrary to consumer goods such as drugs 
and  cars,  most  financial  products  are  not  pre-tested  by  Public  Authorities. 
Therefore, abuses should be even more effectively identified and sanctioned, and 
the victims properly indemnified.  

  Develop the potential of new technologies 

In  terms  of  robo-advisors131,  Better  Finance  believes  that  they  can  lead  to 
significant  benefits  for  EU  citizens  as  savers  and  individual  investors,  through 
significantly  lower  and  more  transparent  fees,  a  better  alignment  with  their 
clients’  interests  (since  they  are  mostly  fee-based  rather  than  commission-
based) and better value for money by combining low overall pricing with the use 
of index ETFs which, on average, have over-performed a majority of active funds 
over the mid- and long-term. 

Findings 

  The majority of NCAs and consumer associations indicated that complaints from 
retail investors usually cover three areas: mis-selling of unsuitable products, the 
level of fees exceeding the expectations of the investor and biased advice. 

  Across the Member States we identified a number of national initiatives that aim 
at  protecting  the  retail  investor  beyond  the  key  regulations  such  as  UCITS, 
AIFMD, MiFID and PRIIPS: 

o  The  regulators  in  the  UK  and  the  Netherlands  introduced  specific 
regulations,  which  among  others,  introduced  a  ban  on  inducements. 
These  regulations  have  had  a  substantial  impact  on  the  national 
investment  landscape  and  led  to  a  shift  in  investor  behaviour  from 
obtaining  advice  through  banks  and  insurers  to  retail  investors  either 
taking  investment  decisions  on  their  own  through  online  investment 
platforms or getting advice through IFAs. Generally, local investors have 
become  more  cost-sensitive  and  better  informed  about  investment 
products. 

o  The  UK  FCA  has  formally  launched  a  “regulatory  sandbox”  with  the 
intention  to  encourage  innovative  ideas  to  reach  the  market  and  thus 
eventually the retail client.  

o 

In collaboration with their EU counterparts, NCAs regularly issues alerts 
to  the  general  public  when  they  discover  products  and  services  that 
infringe statutory and/or regulatory requirements. NCAs discourage non-
suitable  investment  products  from  being  sold  in  their  territories  either 
through legislation or voluntary moratoria. 

130 http://betterfinance.eu/fileadmin/user_upload/documents/Research_Reports/en/Misselling_of_Financial_Products_in_the_EU_-
_Briefing_Paper_2017.pdf 
131 http://betterfinance.eu/fileadmin/user_upload/documents/Research_Reports/en/Robo_Investing_Report_070617.pdf 

 April 2018          118 

 
 
  
 
 
 
 
                                           
 
 
o  Quite  frequently,  NCAs  support  initiatives  aimed  at  strengthening  the 
financial education and knowledge of retail investors. On the other hand, 
initiatives by NCAs on financial guidance are still quite rare but have the 
potential to effectively support the retail investor in their decision making.  

o 

In  view  of  improving  its  supervision  of  investment  advice,  the  German 
BaFin introduced the obligation that all companies providing investment 
services  are  required  to  keep  written  minutes  of  all  investment  advice 
given to retail investors.  

o  Upper limits on entry and exit fees have been introduced by the Spanish 

CNMV. 

o  NCAs also conduct their own investigations and inspections on financial 
actors as well as current practices. In particular, mystery shops are used 
by some NCAs, notably France, Ireland and the UK to assess compliance 
of market practices with regulation. 

  Consumer associations advocate:  

o  The  development  of  simple,  transparent  and  comparable  investment 

products.  

o  The  need  to  further  support  the  provision  of  unbiased  advice  and 
transparent information, in order to guide the retail investor without being 
exposed to conflict of interest or misleading or incomplete information. 

o  To strengthen the combat against mis-selling of financial products. 

o  To further develop the potential of new technologies, in order to provide 

retail investors with suitable low-cost products. 

 April 2018          119 

 
 
  
 
 
 
 
8  Impact of online platforms and new Fintech 
solutions on retail investment distribution 

In this section, the objective is to analyse and describe business and distribution models 
proposed  by  online  investment  platforms  in  Europe  and  beyond.  Specifically,  the  in-
depth analysis includes the most successful fund supermarkets, robo-advisors and social 
trading  platforms  across  Europe.  The  information  providing  the  basis  for  the  analysis 
originates from desk research, data collected during previous tasks as well as interviews 
with market players. Upon gathering the information, comparisons are drawn between 
regions and Member States in which the fund supermarkets, robo-advisors and social 
trading  platforms  are  operating.  For  each  type  of  online  platform,  we  investigate  the 
business  model  in  terms  of  target  client  segments,  products  and  services  and  the 
distribution  strategy.  Subsequently,  the  level  of  development  of  online  distribution  is 
assessed in terms of market penetration and accessibility for average  retail investors 
covering  an  overview  of  costs  and  account  minima.  When  analysing  the  level  of 
development, particular attention has been attributed to online distribution platforms in 
EU  Member  States  where  they  are  developing  the  fastest.  In  the  next  section,  we 
identify the risks and benefits of online platforms for average retail investors. In the last 
section, we list suggestions of market players to improve policies and creating the right 
regulatory  environment  to  fully  profit  from  new  possibilities  while  managing  any  new 
risks that might be created for consumers.  

8.1   Fund supermarkets, online brokers and banks’ online platforms 

There  are  several  types  of  online  investment  platforms,  which  offer  execution-only 
services  that  are  available  for  retail  investors  in  Europe.  The  most  common  types  of 
these  platforms  are  fund  supermarkets,  online  brokers  and  banks  offering  their  own 
online  platform.  A  fund  supermarket  is  an  online  platform  that  allows  an  investor  to 
invest  in  a  wide  range  of  funds  from  many  different  fund  providers  using  just  one 
account. An online broker, on the other hand, is another type of order execution broker 
that  generally  targets  highly  sophisticated  and  self-directed  investors  and  in  many 
cases, primarily focuses on complex products while providing little research or guidance 
service. Retail investors also have another option to access online investment platforms 
thanks to a number of banks offering their own online platforms for investment. In the 
following  section,  ‘online  investment  platform’  will  refer  to  all  three  platforms  (fund 
supermarkets, online brokers and banks’ online platforms), otherwise the platforms will 
be referred to specifically. 

8.1.1   Target client segments 

In Europe, the main fund supermarkets, online brokers and the banks’ online platforms 
employ  the  B2C  business  model,  targeting  self-directed  individuals  that  are 
knowledgeable enough to trade by themselves. Fund supermarkets and banks’ online 
platforms have a broader client range and target both younger investors around the age 
of  30  as  well  as  more  mature  investors  in  their  fifties  and  beyond.  In  addition,  our 
research  suggests  these  customers  often  invest  for  the  longer  term.  In  the  UK,  their 
investment  size  varies  widely  but  are  influenced  by  the  diffusion  of  ISAs.  ISAs  are 
“Individual Savings Accounts”,  which are a tax efficient way to invest  money up to a 
certain amount. When assessing a 50-year old investor with no previous investments, 
the average size of the portfolio is equal to around 4,600 GBP, contains an average of 
2.7 funds through, essentially, ISAs. In other Member States with a significant presence 

 April 2018          120 

 
 
  
 
 
 
 
 
 
of  fund  supermarkets  and  banks’  online  platforms,  such  as  Germany  and  France,  a 
predominant investment size could not be identified.  

With regard to online brokers, based on our research and the interviews conducted with 
the companies’ executives, the average client profile of such platforms involves tech-
savvy, self-directed investors that are around 40 years old, mostly male,132 invest an 
average of 3,000 EUR to 5,000 EUR annually and typically trade as a hobby without a 
profit-making goal. 

A  few  fund  supermarkets  and  online  brokers  also  focus  on  the  B2B  market  and  offer 
liquidity as well as their technology to institutional customers. Especially in the UK, 93% 
of Independent Financial Advisors (IFA), utilize online investment platforms to trade and 
invest  on.133  In  terms  of  the  technology,  B2B  online  investment  platforms  offer  both 
front end and back office technology either by white-labelling it or by licensing software.   

8.1.2   Products and services 

Online  investment  platforms  consist  of  web-based  broker  platforms  that  offer  self-
directed investors a wide range of investment products to be bought and sold online. 
Fund supermarkets and banks’  online platforms generally focus  on investment funds, 
shares and depending on the Member State, life insurance and pension products as well 
as  country-specific  products  for  the  average  retail  investor.  Moreover,  fund 
supermarkets and banks’  online platforms often offer additional services like investor 
education,  research  and  other  informative  content.  Some  leading  fund  supermarkets 
and online platforms offered by banks additionally offer guidance from the moment the 
client  starts  out  to  the  moment  funds  are  chosen,  followed  by  overall  advice  on 
managing money as well as staying informed. This translates into specific services such 
as an account selector tool, charts to compare funds, calculators to help reach goals, 
educational  videos  as  well  as  a  variety  of  publications.  On  top  of  that,  some  fund 
supermarkets even complement their offer with investment advice that can be received 
by contacting Independent Financial Advisors. Banks’ online platforms have the ability 
to leverage the banks other services to bundle additional services to customers. 

Online brokers mainly offer CFDs (contract for difference) which mirror the movements 
of  certain  underlying  assets  of  asset  classes  like  shares,  bonds  and  commodities,  to 
name  a  few.  This  is  due  to  their  inherently  high  flexibility  in  terms  of  contract  sizes, 
market depth and liquidity for the purpose of short-term trading. Due to the inherent 
risk of CFDs, a variety of online brokers offer additional features such as loss protection 
systems that consist in a stop-loss tool, allowing the investor to set a limit for incurred 
deficits.  Once  this  limit  is  reached,  the  platform  liquidates  the  investments  to  avoid 
greater losses. 

Despite these broad patterns, the offering varies from Member State to Member State. 
Generally, Germany and the UK offer the broadest range of online investment platforms. 
Nevertheless, there are number of niche online investment platform offerings in different 
Member States across Europe. In Spain and the Czech Republic, for example, users can 
trade cryptocurrencies, while in Portugal, users can buy stocks sold through Initial Public 
Offerings (IPO). In other Member States, such as Germany, France and the UK, one can 

132 The State of Online Brokerage Platforms, Celent (2015) 
133 DeVere Group (2011) 

 April 2018          121 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
buy almost any product since the user only needs to provide the International Securities 
Identification Number (ISIN).  

8.1.3  Distribution strategy 

The distribution model of the  online investment platforms is naturally focused on the 
online channel, including applications for smartphones and tablets as well as webpages, 
and  customer  service  is  made  mostly  via  online  chat,  email  or  phone  call.  Some 
platforms  also  have  an  offline  presence  represented  by  a  network  of  representative 
offices. The online investment platforms tend to focus their marketing efforts mostly on 
online  channels  by  placing  advertisements  on  digital  financial  newspapers,  on  search 
engines  and  on  social  media.  Most  of  the  advertisements  are  specifically  targeted  at 
users who have showed past online activity related to an interest in online investment. 
Offline media is also used but to a lesser degree, with some online investment platforms 
marketing their offerings through, for example, advertisements in the financial press. 

8.1.4   Level of development 

In terms of geographical coverage, online brokers can be found in almost all European 
Member States, as many of them use the European passport provided with their license 
to  offer  their  services  across  borders.  In  addition,  the  online  brokers  often  have  an 
international presence in Asia. On the contrary, the majority of US brokers tend to focus 
on the local market. The reason behind the limited availability of (international) online 
brokers  in  the  USA  is  mainly  regulation.  Indeed,  CFD  trading  is  not  permitted  to  US 
residents  due  to  restrictions  by  the  Securities  Exchange  Commission  (SEC)  on  OTC 
financial instruments.  

Fund  supermarkets  in  Europe  are  less  present  than  online  brokers.  While  the  UK, 
Germany and France have the greatest number of fund supermarkets, with around 15, 
6 and 8 respectively, the other European Member States do not appear to have more 
than a couple of fund supermarkets. 

Publicly  available  consolidated  data  on  the  trading  volumes  across  Europe  and  the 
specific Member States are not available. As such, it is not possible to discern the level 
of development of fund supermarkets and online brokers based on the investment flows. 

Generally, one can say that Germany and the UK are the most developed Member States 
in  terms  of  online  investment  platforms  in  Europe.  An  estimated  total  of  50  million 
securities transactions are executed by German retail investors each year and 136,000 
transactions  are  concluded  each  day.  Moreover,  61%  of  German  retail  investors  use 
online  investment  platforms  to  trade  with  securities  and  2.2  million  individuals  are 
trading stocks and securities on the internet. While fund supermarkets are not new in 
the UK, their significance has grown rapidly in recent years.  Assets under administration 
(AUA) in UK fund supermarkets increased from 108 billion GBP in 2008 to 592 billion 
GBP  in  2016,  and  now  account  for  over  50%  of  annual  sales  of  funds  to  retail 
investors.134 

134 Best buys and own brands: investment platforms’ recommendations of funds, FCA (2017) 

 April 2018          122 

 
 
  
 
 
 
 
 
 
 
 
 
 
                                           
 
 
8.1.5   Costs and account minima 

The aim of online brokers, in terms of pricing, is to position themselves amongst the 
cheapest  options  in  the  market  in  the  hope  of  attracting  as  many  users  as  possible. 
While  the  commission  (spread)  is  usually  specific  to  every  kind  of  CFD  making,  it  is 
difficult  to  compute  average  spreads.  There  is  a  widespread  agreement  that  online 
brokers are facing downward price pressures in order to remain competitive.135 136  

Fund  supermarkets  tend  to  offer  a  greater  numbers  of  service  offerings  than  online 
brokers,  ranging  from  tailored  advice  to  execution-only  services,  each  with  different 
pricing models. However, fund supermarkets also face pricing pressures. Particularly at 
the bottom end of the price spectrum. This pricing pressure can be especially strong in 
mature markets with many online investment platforms such as the UK, Germany and 
France. 

The fees that these online investment platforms charge are principally broken down into 
brokerage fees and management or custody fees, with most platforms using either one 
or the other, and some using a combination of both. The brokerage fees are often under 
5 EUR, sometimes as low as 1 EUR, especially for investments of under 2,000 EUR, with 
prices  going  up  only  by  a  few  euros  for  higher  investments,  and  for  those  orders  of 
significant sums (generally over 50,000 EUR) a small percentage charge of around 0.05-
0.25%  is  the  norm.  In  relation  to  management  fees  and  fees  for  using  an  online 
investment platform, these fees are also generally scaled as a percentage of the amount 
invested. Despite the fact that the percentage decreases as the amount invested goes 
up,  even  small-scale  investors  with  a  few  thousand  euros  face  fees  of  around  0.20-
0.40%, or sometimes flat fees for little more than 10 EUR a month.  

It is worth noting that many of these platforms have additional fees which are less clear. 
There  are  often  various  administrative  fees  for  investment  orders  which  are  not  the 
most basic or not done over the internet; some charge fees 6 or 7 times higher when 
placing an order over the phone rather than online. Additionally, some platforms actively 
offer their low order fees yet have minimum monthly fees, as well as occasionally fees 
for  inactivity  and  withdrawal  of  funds.In  most  cases,  the  minimum  amount  of  capital 
needed to begin investing through online investment platforms is low; platforms attempt 
to attract investors with very low account minima, generally ranging from 0 EUR up to 
500 EUR.  

In  general,  fund  supermarkets,  online  brokers  and  banks’  own  platforms  are  widely 
accessible in Europe. One can differentiate the platforms geographically by defining one 
group as the international platforms and another as the local ones. Most international 
companies operate throughout the EU as well as in some Asian countries with more than 
100 offices all around the world. As such, all Member States have at least one online 
broker that provides its services to the Member State’s citizens. Besides online brokers, 
certain Member States also have local fund supermarkets and online brokers. While local 
online  brokers  are  present  throughout  almost  all  European  Member  States,  fund 
supermarkets  often  solely  exist  in  the  UK,  France,  Germany,  and  the  Netherlands  as 
well as to a lesser degree in Italy and Spain. 

135 Fidelity, Charles Schwab Slash Online Trading Commissions, Wall Street Journal (2017) 
136 Cheapest-ever broker lets you trade shares for less than 2 GBP, Telegraph (2017) 

 April 2018          123 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
Graph  38:  Average  account  minima  of  online  brokers  (in  EUR,  per  Member 
State) 

670

320

310

380

360

100

60

50

150

130

290

270

220

110

100

Source: Deloitte analysis (2017) 

8.1.6   Suitability and appropriateness checks 

The  majority  of  online  investment  platforms  are  subject  to  MiFID,  which  requires 
distributors to conduct suitability and appropriateness tests depending  on the type of 
advice.  These  assessments  are  performed  to  ensure  that  investors  do  not  face  mis-
buying or mis-selling risks. This holds especially true for the average retail investors, 
who    generally  do  not  have  the  necessary  financial  knowledge  to  make  investment 
decisions  by  themselves.  The  appropriateness  checks  performed  by  execution-only 
online  investment  platforms  were  assessed  by  investigating  whether  questions  were 
asked  about  the  client’s  knowledge  and  experience  with  investment  products.  If  the 
investment platform only provides access to non-complex products, it is exempted from 
the requirement to execute an appropriateness check. 

After  assessing  a  variety  of  fund  supermarkets,  online  brokers  and  banks’  online 
platforms across the Member States under scrutiny, the analysis yielded that only a very 
small  portion  of  these  entities  perform  appropriateness  checks  before  requiring  the 
client to make an initial payment and have access to the platform services. As for those 
entities that perform appropriateness checks prior to opening an account or investing, 
they  are  mostly  online  brokers,  which  focus  on  highly  volatile  and  risky  financial 
products such as CFDs. The average amount of questions asked by these entities equals 
17  and  mostly  refer  to  the  current  financial  situation in  terms  of  financial  assets  and 
past investing experience. One online broker stuck out due to the level of detail of the 
questions. For example, one of the questions was: 

The  GBPUSD  forex  pair  is  trading  with  a  sell  price  at  1.2850  and  a  buy  price  at 
1.2855. You decide to  buy 0.1 lot with margin requirement of 0.50%. After some 
negative  UK  GDP  data,  the  latest  sell  price  is  1.2750  and  buy  price  is  1.2755. 
Excluding  any  overnight  financing  costs  and  other  applicable  commissions,  what 
would your profit or loss be? 

 April 2018          124 

 
 
  
 
 
 
 
 
 
 
-  A loss of 105 GBP 
-  A loss of 105 USD 
-  A profit of 100 USD 

These  findings  suggest  that  online  brokers  generally  perform  online  appropriateness 
checks, although with varying degrees of thoroughness. In contrast, fund supermarkets 
focusing on non-complex products do not execute online appropriateness tests as they 
are not required to. 

8.1.7  Benefits and risks 

8.1.7.1   Benefits 

The  major  benefit  of  these  online investment  platforms  for  retail investors  is  the  low 
cost  of  investing(see  section  4.2).  For  ETFs,  bonds  and  listed  equities,  fund 
supermarkets  and  online  brokers  are  on  average  the  cheapest  way  to  invest.  When 
purchasing  investment  funds  at  a  fund  supermarket,  investors  may  regularly  benefit 
from  reduced  entry  and  exit  fees.  In  some  cases,  investors  may  even  benefit  from 
discounts  on  recurring  fees,  i.e.  reduced  fund  management  fees.  On  the  other  hand, 
fund supermarkets in some Member States charge a service fee on top of the recurring 
fee for the fund.   

Another significant advantage of online investment platforms is the ease of access to a 
wide range of products and information. Some fund supermarkets are offering access 
to  thousands  of  products  (of  various  types)  combining  high  risk  and  low  risk  funds, 
largely  outnumbering  the  average  online  and  offline  offering  of  banks  and  other 
traditional distributors. In addition, fund supermarkets usually provide access to funds 
from a much larger variety of different fund manufacturers. Search tools based on the 
basic characteristics of the investment product help investors narrow down the choice 
of suitable products. 

The  additional  services  provided  by  the  most  developed  online 
investment 
supermarkets, allow a novice investor with an Internet connection to learn the basics of 
financial services and products, know the real time stock quotes, historical stock price 
trends, have a handle on market events, access vast amounts of economic and market 
analysis, perform research on firms, and interact with other investors via forums or chat 
rooms.  This,  in  combination  with  time,  can  transform  even  the  most  novice  investor 
with an active interest in investments into an increasingly knowledgeable investor.  

These online investment platforms provide a portfolio monitoring tool and a consolidated 
statement,  enabling  the  investor  to  view  all  purchases  online  and  monitor  his 
investments  over  time.  Usually  orders  can  be  placed  by  a  variety  of  methods,  e.g. 
online, over the telephone or via paper. 

When available, independent online comparison tools enable customers to compare the 
services,  product  ranges  and  fees  of  fund  supermarkets  and  online  brokers  allowing 
them to choose the online investment platform that is best suited to their needs.  

An additional benefit for the investor is the greater level of security afforded by these 
new online investment platforms. Historically, clients were often sceptical to deal online 
because of security reasons. Now, however, these fears can be put to rest thanks to the 
enhanced encryption technologies that these platforms use. All major online investment 

 April 2018          125 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
platforms are intrusion-tested and provide the highest levels of encryption across their 
service  offering.  Ultimately,  consumers  can  trade  online  with  significantly  more 
confidence thanks to these online investment platforms. 

Furthermore, fund supermarkets, online brokers and banks’ own platforms all decrease 
the  time  for  total  completion  of  a  trade  from  the  regular  T+3  days  to  a  matter  of 
minutes. 

8.1.7.2   Risks 

Due to the nature of online investment platforms providing execution-only services, a 
financially less sophisticated investor is at risk in multiple ways: 

  Choice of platform: 

Fees,  product  ranges  and  additional  services  vary  widely  from  one  actor  to 
another. A retail investor might thus find it difficult to choose the platform that 
best  suits his needs. A  further risk is associated with online comparison tools, 
which in  many  cases  are  not  independent  and  provide  biased  information  and 
rankings of platforms. A customer who does not carefully check the accuracy of 
the provided data might be misled in his choice of a platform. 

  Mis-buying: 

Our research shows that many platforms only employ very basic suitability and 
appropriateness tests, thus allowing potentially financially illiterate customers to 
invest  substantial  parts  of  their  savings  into  financial  products  with  basic 
characteristics they are not able to understand. 

Even though many fund supermarkets provide fund selectors as well as extensive 
information  and  guidance  on  investment  products,  retail  investors  may  not 
correctly  understand  the  information  or  may  simply  be  overwhelmed  by  the 
sheer amount of available information. If this is the case, the customer runs the 
risk of investing in a product that is not the best choice for his needs. 

Some  platforms  provide  guidance  services  to  help  retail  investors  take 
investment  decisions,  e.g.  an  overview  of  how  investors  with  similar 
characteristics and investment objectives invest. This guidance goes so far as to 
mention the explicit titles of investment products that are overrepresented in a 
group of investors with similar characteristics. Although clearly stated that both 
types  of  guidance  shall  not  be  considered  as  advice,  a  financially  less  literate 
investor  is  potentially  not  able  to  make  the  distinction  between  guidance  and 
advice  and  thus  trusts  the  provided  information,  potentially  leading  to  the 
purchase of an unsuitable product. 

  Transparency of fees: 

Especially for online platforms with a wide variety of investment products, a retail 
investor  might  find  it  difficult  to  collect  all  relevant  information  on  fees  and 
correctly  understand  the  fees  he  will  be  paying  after  his  purchase.  While  the 
service  fee  for  the  platform  is  usually  openly  displayed,  we  found  that,  in 
particular,  ongoing  charges  of  funds  and  ETFs  are  sometimes  not  explicitly 
disclosed.   

Moreover, despite the significant advances in security, the technological nature of online 
investment platforms exposes retail investors to risks. As with any online-based service, 
fund supermarkets and online brokers are subject to cybersecurity threats. 

 April 2018          126 

 
 
  
 
 
 
 
 
8.1.8   Findings 

  Although  fund  supermarkets  and  online  brokers  are  rapidly  increasing  their 
market  share,  the  level  of  development  of  fund  supermarkets  varies  strongly 
across  Europe  with  the  UK,  France,  Germany  and  the  Netherlands  leading 
followed to a lesser degree by Italy and Spain. Fund supermarkets exist in other 
Member  States,  but  are  less-developed.  The  ban  on  inducements  has  been  a 
strong  driver  for  fund  supermarkets  and  online  brokers  as  well  as  for  online 
investment platforms of incumbents. 

  Generally, fund supermarkets and online brokers display lower cost for investing. 
Nevertheless, due to the  complex structure of  costs  shown  on the websites of 
fund supermarkets and online brokers, a retail investor needs to carefully check 
whether he has identified all relevant costs and charges. 

  Users need to perform appropriateness checks before accessing online brokers 
although the level of thoroughness of these checks varies substantially. As fund 
supermarkets generally focus on non-complex products, they are not required to 
execute appropriateness checks when the investor decides to invest on his own 
without relying on advice. 

  Suitability  and  appropriateness  checks  seem  to  be  quite  basic  for  most  online 
investment  platforms  with  some  notable  exceptions  of  online  brokers  where 
future  customers  need  to  pass  a  complex  test,  requiring  a  very  high  level  of 
financial knowledge before being able to actually purchase products. 

  Although being execution-only platforms, the average retail investor might not 
be  able  to  understand  the  difference  between  the  guidance  provided  by  the 
platforms (where the responsibility stays with the investor) and actual advice by 
an advisor. Therefore, he is exposed to a certain risk of mis-buying. 

  Online  brokers  who  mainly  offer  CFD  and  Forex  are  less  suitable  for  average 

retail investors due to the complexity of products on offer.137  

  Fund supermarkets are at the crossroads, as they may cater to retail investors 
through their larger product range focusing on funds, ETFs and, depending on 
the Member State, life insurance and pension products. Although they provide 
guidance  and  educational  material  aimed  at  helping  a  retail  investor  with 
choosing a suitable product, they still require a certain level of financial literacy.  

137 https://www.esma.europa.eu/press-news/esma-news/esma-issues-warning-sale-speculative-products-retail-investors 

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8.2   Robo-advisors 

Robo-advisors  leverage  client  survey  data  into  complex  algorithms  that  produce 
customized financial plans and asset allocations. They digitalize and automate client on 
boarding,  investor  risk  profiling  and  investment  allocation  through  algorithm-based 
assessments,  and  providing  online  investors  on-demand  access  to  financial  advice. 
During the last few years, a large number of robo-advisors have developed in Europe 
as shown in Graph 39, demonstrating the increasing interest in retail and institutional 
clients in automated advice. 

Graph 39: Snapshot of robo-advisors across Europe 

8.2.1  Target client segments 

Essentially,  robo-advisors  target  retail  investors  through  2  models:  a  direct-to-
consumer (D2C) model and a business-to-business (B2B) model. While the direct-to-
consumer model involves targeting retail investors through an  online platform that is 
inherent to the robo-advisor, the business-to-business model entails the white-labelling 
of a robo-advisory platform to traditional financial institutions such as banks and asset 
management  companies.  Ultimately,  both  models  target  retail  investors,  although 
existing financial institutions may market the white-labelled solution to their wealthier 
clientele too. In general, one can state that robo-advisors target self-directed investors 

 April 2018          128 

 
 
  
 
 
 
 
 
 
 
 
 
with an investible amount that can reach 1,000,000 EUR, while the global average lies 
at 8,000 EUR.138  

When  engaging  with  retail investors  across  the  world,  the  demographics  and  cultural 
habits vary starkly from region to region. Yet, depending on the geographical location, 
certain patterns can be observed. In Europe, the target clients are quite homogeneous. 
Investors are usually male, have a monthly net household income of around 4,000 EUR, 
are  university  graduates  and  are  moderately  financially  literate.139  Millennials,  a 
generation  born  between  the  1980s  and  2000s,140  have  long  been  advertised  as  the 
early adopters, yet in Europe, the current clients are generally around 40 to 50 years 
old.141  Average account sizes vary depending on the robo-advisor. Some of the robo-
advisors manage an average portfolio of 100,000 EUR while others reach up to 1 million 
EUR. While we envision a broadening of the client segment, we believe that it will happen 
as  soon  as  well-known  financial  institutions  deliberately  actively  offer  robo-advisory 
offerings to their retail banking clients.  

While  customer  segments  across  the  world  may  differ,  the  clients  of  B2B  business 
models do not. Across the world, our research yielded that almost all robo-advisors offer 
a  white-labelled  product  to  incumbent  financial  institutions,  including  banks,  asset 
management companies and, increasingly, insurance companies. 

However, a third business model is currently gaining traction. Robo-advisors are now 
entering in partnerships with corporate companies, which encompasses the promotion 
of  robo-advisory  services  for  a  fraction  of  the  price.  Currently,  robo-advisory  firm 
MoneyFarm  and  Uber  have  entered  in  such  a  relationship  that  involves  offering 
discounted pension planning services to Uber drivers.142 

8.2.2   Products and services 

Robo-advisors offer two types of services: discretionary and advisory-based investment 
management.  

Discretionary investment management is a form of investment management in which 
the investment manager (in this case the robo-advice algorithm) decides what products 
to  buy  and  sell  on  behalf  of  the  customer,  based  on  a  mandate  agreed  with  the 
customer. In contrast, the advisory-based model is based on giving recommendations 
to a person on the merits of taking an action (e.g. buying, selling) in relation to a specific 
financial  product.  Ultimately,  the  customer  still  needs  to  take  affirmative  actions  to 
execute transactions (in this case through the robo-advice platform). 

Both  of  these  types  of  services  can  be  delivered  with  varying  degrees  of  human 
interaction, ranging from fully automated advice, through hybrid models to face-to-face 
advice  assisted  by  an  algorithm.  Fully  automated  advice  involves  customers  who 
normally solely interact with a website. They may still be able to speak to a human if 
they need to resolve any IT issues, make a complaint or clarify terms and conditions. 

138 Deloitte analysis 
139 Robo-advice – a true innovation in asset management, DB Research (2017) 
Report on financial investments of Italian households, Consob (2016) 
Deloitte analysis 
140 A new understanding of Millennials, Deloitte University (2015) 
141 Robo-advice – a true innovation in asset management, DB Research (2017) 
143 The expansion of Robo-Advisory in Wealth Management, Deloitte (2016) 

 April 2018          129 

 
 
  
 
 
 
 
 
 
 
 
 
                                           
 
 
In the case of hybrid models, customers interact with a website but may also interact 
with a human (e.g. via a web chat or by phone), for example if customers have questions 
or the firm needs to ask for additional information. In the case of face-to-face advice 
that is assisted by an algorithm, customers interact with a human, who uses a computer 
algorithm  to  generate  advice,  investment  decisions  or  information  (depending  on  the 
service provided) but can override the algorithm if needed.  

Emerging  Fintech  companies  essentially  focus  on  fully  automated  advice  or  hybrid 
models,  leveraging  online  questionnaires,  pre-defined  portfolios  according  to  risk 
profiles  and  algorithm-based  adjustments  and  rebalancing  proposals.  Through  our 
research, we have identified a four-step evolution of the features and services of robo-
advisors. 

Graph 40: The robo-advisory evolution 

  Robo-advice 1.0:  

o  Clients receive single-product proposals or portfolio allocations based on 
listed  investment  products  after  answering  a  questionnaire  to  filter 
suitable options. Most firms operate via web-service or smartphone app. 
There is no bank- or broker-API managing the execution. Clients have to 
buy  and  manage  a  real  product-based  portfolio  on  their  own  by  using 
their own accounts, and also manage future adjustments. Product variety 
includes stocks, bonds, ETFs and other investment vehicles. 

  Robo-advice 2.0: 

o 

Investment  portfolios  are  created  as  a  fund  of  funds,  and  setting  up 
investment  accounts  as  well  as  direct  order  execution  is  part  of  the 
service. The asset allocation is managed on a manual basis by dedicated 
investment managers. Questionnaires are not only used to filter suitable 
products but to allocate clients to a handful of pre-defined risk-allocated 
portfolios. Real investment managers take care of investing and adjusting 
client  portfolios.  The  realization  is  semi-automatic  as  investment 
managers oversee the investment algorithm and define rule sets. 

  Robo-advice 3.0: 

 April 2018          130 

 
 
  
 
 
 
 
 
 
 
 
 
 
o 

Investment  decisions  and  portfolio  rebalancing  proposals  are  based  on 
algorithms which monitor and satisfy pre-defined investment strategies. 
Final oversight is provided by professional fund managers. Some services 
enable  their  clients  to  follow  or  neglect  proposed  portfolio  adjustment 
decisions in order to individualize their portfolios. 

  Robo-advice 4.0: 

o  Sophisticated risk management and profiling questionnaires lead to direct 
investments  via  self-learning  artificial  intelligence  (AI)  investment 
algorithms. They shift between different asset classes based on changing 
market  conditions  and  individual  investment  needs  such  as  profit,  risk 
appetite, and liquidity aspects, monitor and adjust single client portfolios 
in real time to keep on track with their selected investment strategy. 

Today, about 80% of European, Asian and American robo-advisors have 3.0 capabilities 
with an increasing trend to automation and service offerings.143 We observed that robo-
advisor  3.0  capabilities  currently  include  a  wide  range  of  low  to  high  end  technology 
depending on the robo-advisor’s chosen strategy. Some offerings tend towards a fixed 
investment strategy built on a specific investment theory’s key performance indicators, 
others  choose  to  include  market  movements  and  trends  in  their  automated  portfolio 
rebalancing  proposals.  The  large  majority  of  the  robo-advisors  that  were  analysed, 
develop  and  maintain  their  algorithms  entirely  internally.  In  general,  the  platforms’ 
websites  are  clear  at  articulating  to  what  extent  their  algorithms  are  involved  in  the 
investment  processes,  although  there  is  still  room  for  greater  clarity  regarding  the 
specifics  of  the  process  –  especially  since  transparency  is  commonly  considered  a 
defining characteristic of Fintech. 

Independently of the precise capabilities, robo-advisors package their service offering 
in a practical and user-friendly way. Robo-advisors provide an end-to-end service that 
is  delivered  through  multiple  devices.  Starting  with  the  onboarding,  a  variety  of 
European  robo-advisors  feature  a  simple  process,  where  the  client’s  risk  profile  is 
assessed through a set of relatable closed-ended questions that yield the subsequent 
asset allocation. The online questionnaires vary with respect to length and the types of 
information requested. Section 6 contains a more thorough assessment of the suitability 
questions of the investigated robo-advisor platforms. The portfolio is then presented in 
a consolidated overview with dynamic charts as well as short and concise explanations 
that facilitate the comprehension of financial matters. After the portfolio allocation, most 
robo-advisors  formally  onboard  the  customer  through  Know-Your-Customer  (KYC) 
procedures. Here, the client’s identity is generally verified through an online video chat 
taking less than a few minutes. After the identity is verified, the concluded contract and 
account information is sent to the customer via e-mail. All in all, the whole onboarding 
process  usually  takes  around  15  minutes.  Customers  benefit  from  various  forms  of 
assistance ranging from explanatory visualizations, videos, hotlines to comprehensive 
FAQ sections.  

In terms of the investment products underlying the portfolios, robo-advisors are usually 
focused  on  Exchange-Traded  Funds  (ETFs).144  Due  to  the  ETFs  passive  investment 

143 The expansion of Robo-Advisory in Wealth Management, Deloitte (2016) 
144 Exchange traded funds attract record inflows in first quarter, Financial Times (2017) 

 April 2018          131 

 
 
  
 
 
 
 
 
                                           
 
 
approach, which contrasts with e.g. mutual funds, they are considerably less expensive 
to  run.  In  addition,  ETFs  are  diversified  and  mitigate  the  risk  of  single-security  price 
changes.  While,  roughly  6  in  10  robo-advisors  base  their  investment  approach 
exclusively  on  ETFs145,  others  offer  stocks,  commodities,  insurance,  cash  and  bonds. 
Certain particularities can be observed in France and the  UK, where the products are 
wrapped  in  a  tax-efficient  manner.  In  France,  the  portfolios  are  packaged  into  life 
insurance products (“assurance-vie”), a very common account form, harbouring 40% of 
all savings in France.146 In the UK, customers can invest through tax-efficient Stocks & 
Shares ISAs (Individual Savings Account).147 The widening of the product range in the 
most  developed  Member  States  is  partly  due  to  market  pressures  that  require  robo-
advisors to differentiate themselves from the competition, allowing a more personalized 
asset allocation. Investify, a robo-advisor operating in Luxembourg and Germany offers 
its  clients  to  invest  in  specific  “themes”  such  as  cybersecurity,  water,  or  disruptive 
technologies.  As  these  themes  cannot  be  executed  solely  with  ETFs,  Investify  adds 
different investment products to the portfolio. 

Regarding  the  levels  of  human  support  alongside  the  robo-advisors,  there  are  some 
common elements that can be identified. Firstly, all of the platforms offer free human 
support  to  some  degree  to  their  users  regardless  of  investment  size.  All  platforms 
offered complimentary technical support to assist with the set-up and maintenance of 
investing. Diverging results were identified in the degree of help in making investment 
decisions. Generally, in the UK and France, it is possible to speak to a member of the 
team  (via  chat,  e-mail  or  phone)  and  receive  support  in  choosing  your  investment 
product.  Customers  can  query  the  recommendations  given  by  the  robo-advisor  and 
receive  information  on  which investment  products  they  might  wish  to  select.  Indeed, 
further financial advice was occasionally included in the platform, such as advice on how 
much  to  contribute  regularly  and  rebalancing  over  time  to  meet  certain  investment 
goals. In some instances, in the UK for example, no financial advice would be given at 
all, and clients would need to speak to (and pay for) an independent financial advisor if 
they wished to learn more about the investment products available to them. This was 
principally due to regulatory restraints as to who can provide regulated financial advice.  

8.2.3   Distribution strategy 

European platforms offer their services in one or several Member States. Not only can 
users abroad open an account on these websites but they can also access the platform 
in their own language. German and Luxembourgish customers can invest and trade on 
Investify while MoneyFarm makes its website available in English as well as in Italian 
for UK and Italian customers. There is a notable exception with a particular robo-advisor 
available  in  32  countries.  Based  on  our  interviews  and  research,  regulations  and 
marketing costs are considerable hurdles for robo-advisors. All our interviewees have 
cited  the  differences  in  the  regulatory  status  of  robo-advisory  firms  as  well  as  the 
variance in applicable rules such as the Markets in Financial Instruments Directive as a 
key  concern.  In  addition,  European  Member  States  widely  differ  in  terms  of  cultural 
habits. Thus, entering a market with scarce resources to invest in marketing in order to 
customize the branding poses a non-negligible issue to emerging robo-advisors. 

The marketing strategy of robo-advisors is straightforward: they mainly rely on online 
marketing to advertise themselves. Robo-advisors usually use programmatic advertising 

145 Robo-advice – a true innovation in asset management, DB Research (2017) 
146www.lefigaro.fr/impots/2013/11/12/05003-20131112ARTFIG00607-assurance-vie-nouveau-coup-dur-pour-les-gros-
patrimoines.php, Le Figaro (2013) 
147 www.gov.UK/individual-savings-accounts/, UK Government (2017) 

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encompassing search engine optimization, paid banners on search engines as well as 
advertisements on social media. More rarely, radio advertisement and placed ads are 
used by robo-advisors to actively offer their services. 

8.2.4   Level of development 

To determine investment flows, Assets under Management (AuM) in the robo-advisory 
segment are compared for each Member State in Graph 41.  

Graph  41:  Investment  flows  of  robo-advisors  (in  EUR,  per  Member  State  in 
scope of Study) 

1.1bn

722m

199m

132m

91m

5m

5m

60m

64m

4m

8.4m

117m

87m

Source: Deloitte analysis (2017) 

In  terms  of  assets  under  management,  the  European  robo-advisory  market  is 
particularly  developed  in  the  UK  and  Germany.  Especially,  the  UK  offers  a  rich 
opportunity for automated advice with 22 players. As such, there is a significant “advice 
gap”,  driven  by  the  high  cost  of  advice,  impact  of  RDR,  low  financial  literacy,  low 
engagement  and  a  lack  of  trust  following  past  instances  of  mis-selling.148  149  With 
individuals being increasingly tasked with managing their own pension provision, and in 
the context of a relatively low state pension, automated advice can play a key role in 
generating  low-cost  solutions.  These  factors  are  fostering  the  increase  in  AuM  of  UK 

148 The Financial Advice Market Review Final Report, HMT & FCA, 2016 
149 Bridging the advice gap, Deloitte, 2012 

 April 2018          133 

 
 
  
 
 
 
 
 
 
 
 
                                           
 
 
robo-advisors.  Indeed,  Nutmeg150,  the  largest  UK  robo-advisor  stated  to  have  661m 
EUR  AuM  on  behalf  of  250,000  customers  end  of  December  2017  although  its  AuM 
amounted to 441m EUR in August.151 Another competitor, Money on Toast152, recorded 
a total number of Assets under  Management of 165m EUR in 2015. In Germany, the 
market is quickly embracing and fuelling the new trend of robo-advisors. As of now, 38 
different  robo-advisors  operate  in  Germany153  with  total  AuM  of  722m  EUR. 
Nevertheless,  less  than  0.03%  of  the  population  currently  use  these  services  in 
Germany. But the forecasts look promising: The number of clients is expected to triple 
by 2021 and both Deutsche Bank and Oliver Wyman believe the AuM of German robo-
advisors will reach between 20 and 30 billion EUR. Expected annual growth rates of AuM 
in Europe are particularly impressive beyond just the  UK and Germany.  Indeed, they 
vary between 50% in France and 100% in Estonia.154 Markets such as Estonia benefit 
widely from the online provision of public services as well as the population’s skilfulness 
in using digital technologies and internet services, which makes the country a European 
champion in the space as well as a member of the High performing cluster of Member 
States.155 

8.2.5   Costs and account minima 

Generally, robo-advice fees include an annual portfolio management fee as well as a fee 
based on the underlying investment funds. The annual portfolio management fee can 
range from 0.61% on average in Germany to 1.88% in France with an average of 0.94% 
per  year,  see  Graph  42.  Management  fees  are  often  subject  to  a  volume  discount 
pricing model.  
Graph  42:  Average  management  costs  of  robo-advisors  (in  %,  per  Member 
State) 

1,88%

1,06%

0,72% 0,72% 0,72%

0,85%

0,61%

1,22%

1,03%

1,32%

0,72% 0,72% 0,72%

0,72%

0,93%

Source: Deloitte analysis (2017) 

150 Nutmeg is based in the UK and regulated by the Financial Conduct Authority 
151 http://UK.businessinsider.com/nutmeg-review?r=US&IR=T & http://UK.businessinsider.com/nutmeg-review?r=US&IR=T 
152 Money On Toast is based in the UK and regulated by the Financial Conduct Authority 
153Deloitte (the sample of surveyed robo-advisors consists of 50% non-German entities) 
154 Statista 
155 Europe's Digital Progress Report (EDPR), European Commission, 2017 

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On top of that, most robo-advisors charge investment fund fees based on the underlying 
ETFs or other funds ranging on average from 0.21% in Denmark to 0.45% in France. 
Some  robo-advisor  solutions  allow  for  actively-managed  investment  funds  to  be 
included in a more personalized portfolio. The related fees usually exceed 1% but cover 
only a small part of the portfolio. 

Graph 43: Average ETF costs of robo-advisors (in %, per country) 

0,45%

0,22% 0,22% 0,21% 0,22%

0,30%

0,25%

0,25%

0,27%

0,30%

0,29%

0,22% 0,22% 0,22%

0,22%

Source: Deloitte analysis (2017) 

Robo-advisors require  relatively low account minima ranging from an  average of 100 
EUR in Member States such as Czech Republic and Romania, to 13,000 EUR in Italy. On 
average, robo-advisors in the Member States under scrutiny require an average account 
minimum of 2,700 EUR. In Italy, the high average account minimum is due to the early 
adopters being wealthier investors than in the remaining European Member States. In 
other Member States such as Romania, Poland and Estonia, the account minima are low 
at 100 EUR due to the presence of solely one robo-advisor which covers 32 European 
countries. Other Member States, such as Spain and the UK have low average account 
minima,  which  may  be due  to  competitive  pressure  from  the  many  providers  in  both 
Member  States.  Decisions  around  setting  account  minima  are  mainly  shaped  by  two 
factors: whether the robo-advisors charge a fee per trade and the target client. In case 
fees per trade are charged, many robo-advisors adapt the account minima in order to 
make sure to adequately diversify an investor’s portfolio and to minimize trading costs. 
When targeting retail investors, the account minima often depends on the target age 
range,  investment  objectives,  financial  literacy  as  well  as  the  relative  wealth  of  the 
target customer. One robo-advisor interviewed in the framework of this Study pointed 
out that the account minimum might be reduced in the wake of a significant cooperation 
with a retail bank in order to expand the customer base beyond its originally wealthier 
clientele towards the less well-off clients of the retail bank. 

 April 2018          135 

 
 
  
 
 
 
 
 
 
 
 
Graph  44:  Average  account  minima  of  robo-advisors  (in  EUR,  per  Member 
State) 

13000

10000

5000

4500

4200

2000

2000

100

100

100

100

100

150

100

200

Source: Deloitte analysis (2017) 

8.2.6   Benefits and risks 

8.2.6.1   Benefits 

Robo-advisors offer their services at comparatively lower prices than traditional wealth 
managers.  Indeed,  our  research  suggests  that  in  Europe,  most  providers  charge  an 
annual management fee that normally ranges between an average of 0.60% and 1.30% 
of  the  assets  under  management,  with  the  notable  exception  of  France  at  1.88%.  In 
addition,  clients  are  charged  about  0.30%  for  the  underlying  investment  funds, 
amounting  to  a  total  average  annual  fee  of  0.90%  to  1.60%  of  assets  under 
management.  Traditional  wealth  managers,  according  to  their  own  price  lists,  charge 
about 2.00% to 3.00% in fees. The significant difference highlights that the variance in 
pricing may enable increased affordability of robo-advisors to a wider population that 
has become more cost sensitive. Indeed, for less wealthy investors, the affordability of 
financial advice is central. Taking the UK as an example of the most developed Robo-
advice market in Europe, UK adults are certainly willing to pay for investment advice, 
around 80% would be willing to pay at most 1% for an investment amount of 50,000 
GBP.156 This is in the range that European robo-advisors propose but below the range 
of fees charged by traditional wealth managers.  

A third benefit is related to the practicality and overall user-friendliness of robo-advisors. 
Through their internet-based nature, robo-advisors provide an end-to-end service that 

156 FAMR Baseline Report, HM Treasury (2017) 

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is  delivered  through  multiple  devices.  In  addition,  robo-advisors  provide  added 
convenience  to  their  clients  by  being  available  24  hours  a  day  and  7  days  a  week. 
Indeed, robo-advisors are renowned for attractive user front-ends that change roles and 
allow clients to sit in the driving seat, while giving necessary support and information 
to  make  them  comfortable.  Some  set  themselves  apart  from  the  crowd  with  very 
intuitive dashboards, analysis tools with comprehensive visualizations and many options 
for customer support, where hotlines are supplemented by chat clients and bots. 

Thanks to full automation, robo-advisory services could allow for improved compliance 
and record keeping157 that provide advice consistent across clients with a full auditable 
trail158  holding  them  accountable  for  providing  misleading,  incomplete  or  otherwise 
inadequate advice. 

8.2.6.2   Risks 

The risks partially mimic the benefits of robo-advisors. Indeed, while client onboarding 
may prove to be intuitive and time effective, risks arise around an over-simplification of 
the process. A number of potential shortcomings exist in the first step, which is the risk 
in profile assessment. The questionnaires that robo-advisors make use of usually elicit 
basic client information without a comprehensive view of a user’s finances. For example, 
other  potential  sources  of  wealth  and  detailed  monthly  expenses  could  easily  be 
overlooked in a fully automated questionnaire, but financial planning still needs to take 
into  account  the  investor’s  global  financial  situation.  Additionally,  standardized 
questionnaires may not provide sufficient focus on certain aspects.159 For example, if 
two investors want to take out precautionary savings, one could have a potential salary 
reduction in mind while the other wants to save for health-related risks and unavoidable 
expenditures.  Putting  both  in  one  basket  may  lead  to  the  same  portfolio  allocation 
although the saving targets are different. Moreover, questionnaires assume in advance 
that investors with similar underlying characteristics will respond to subjective questions 
similarly.  Yet,  the  subjective  answers  of  individuals  may  involve  a  certain  “response 
bias”, which could prove itself misleading for algorithms. For example, if there are two 
investors with factually similar understandings of ETFs, one may think that one investor 
has “some” understanding of ETFs, while the other describes that same understanding 
as “good” due to overconfidence which is quite frequent as seen in section  8.2. Thus, 
wrong  assumptions  or  incomplete  data,  which  cannot  be  recalibrated  by  algorithms, 
could lead to inadequate financial advice.160 These deficiencies can be reduced by using 
longer and more detailed questionnaires or by involving a human advisor at some point 
in the process (hybrid-model). 

Another  risk  is  associated  with  the  algorithm  at  the  core  of  asset  allocation.  While 
automation  can  reduce  certain  issues  of  conflict  of  interest  and  provide  greater 
transparency, it is also technically possible to program the underlying algorithm to direct 
investors towards a specific range of investment products or intermediaries for which 
the  platform  or  its  affiliates  may  receive  higher  commissions  or  other  forms  of 
compensation.161  In  addition  to  an  intentionally  detrimental  programming  of  the 
algorithm,  the  programming  itself  may  already  be  unintendedly  faulty.  Failing  to 
understand  the  methodology  implanted  in  the  algorithm  and  whether  the  algorithm 

157 Digital disruption, Medcraft (2015) 
158 The future of automated financial advice in the UK, Deloitte (2017) 
159 Report on Digital Investment Advice, FINRA (2016) 
160 Research Report on Financial Technologies, IOSCO (2017) 
161 Research Report on Financial Technologies, IOSCO (2017) 

 April 2018          137 

 
 
  
 
 
 
                                           
 
 
aligns  with  a  firm’s  anticipated  approach,  could  lead  to  systematic  mis-selling  of 
investment  products  to  clients,  or  to  the  algorithm  making  suboptimal  investment 
decisions  such  as,  for  example,  from  a  tax  planning  standpoint.162  Additionally,  a 
number  of  studies  observed  that  different  robo-advice  platforms,  guided  by  different 
algorithms, yielded widely different advice even for identical investor profiles.163 

A recent study164 of 15 UK online investment services including robo-advice platforms 
found that costs and charges were poorly communicated, often misleading and difficult 
to find. They were typically disclosed in a way that made it difficult for financially less 
literate and less tech-savvy consumers to understand how much they would be paying 
and what for. This finding is corroborated by our own research. 

As robo-advisors like all online platforms, try to minimize human intervention, there is 
a risk that a less sophisticated investor will not understand the language used and might 
be  misled  by  the  explanations  without  a  human  advisor  providing  additional 
explanations where necessary. 

Robo-advisors  are  subject  to  a  set  of  technological  risks  beyond  those  owed  to 
algorithms.  The  design  of  an  automated  platform  must  implement  the  appropriate 
compliance  policies  and  procedures  required  to  keep  all  activities  within  regulatory 
guidelines. Also, its controls must be up to the task of keeping the algorithm resilient 
and compliant over the long term. In practice, however, many firms dedicated to the 
robo-advisory business are start-ups that may not invest sufficiently in building strong 
governance  and  compliance  frameworks.  As  such,  their  controls  for  data  integrity, 
resiliency,  and  capacity  may  not  be  adequate  enough  to  handle  adverse  market 
conditions  and  prevent  system  failures.  In  addition,  online  platforms  are  subject  to 
cybersecurity threats. 

8.2.7  Comparison with robo-advisors domiciled in North America and Asia  

Robo-advisory  solutions  have  first  emerged  in  the  USA  during  the  financial  crisis. 
Betterment and kaChing (later rebranded to Wealthfront) started rebalancing investor 
assets within target-date funds, while giving investors a modern, online interface. Upon 
starting  out,  US-based  robo-advisors  profited  greatly  from  a  new  generation  of  retail 
investors  who  trust  technology  to  delegate  important  tasks,  yet  are  knowledgeable 
enough to realise the importance of saving even with lower wealth levels.165 While early 
adopters in Asia, who are also described as highly employed as well as risk-taking and 
knowledgeable  investors166  are  rather  similar  to  the  U.S.,  the  initial  customers  of 
European  robo-advisors  significantly  differ.  More  explicitly,  European  clients  were 
usually around 40 to 50 years old males with moderate financial knowledge and greater 
wealth.167 According to recent statistics, these individuals make up a growing segment 
of robo-advisors globally and contribute to the continued growth with their propensity 
to invest larger amounts that verge on 100,000 USD.168 Besides targeting a standard 
customer profile, North American robo-advisors are now seeking out different customer 
niches  by  offering  investment  management  services  directed  towards  females  and 
socially responsible customers. 

162 Report on Digital Investment Advice, FINRA (2016) 
163 Putting Robo Advisors to the Test, Wall Street Journal (2015) 
164 https://www.fs-cp.org.UK/sites/default/files/final_panel_position_paper_online_investment_and_advice_services.pdf 
165 https://www.cnbc.com/2015/06/21/millennials-and-robo-advisors-a-match-made-in-heaven.html 
166 Hype vs. Reality: The Coming Waves of “Robo” Adoption, A.T. Kearney (2015) 
167 Robo-advice – a true innovation in asset management, DB Research (2017) 
168 Robo-advice – a true innovation in asset management, DB Research (2017) 

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The  significant  demand  for  robo-advice  in  the  U.S.  has  propelled  a  variety  of  robo-
advisors  to  significant  heights.  Betterment  boasts  more  than  10  billion  USD  in  AuM, 
Personal Capital customers invest 5 billion USD and Wealthfront counts more than 7.5 
billion  USD  in  assets  under  management.  Asian  and  European  robo-advisors  are 
catching  up  but  remain  at  a  significant  distance  from  North  American  robo-advisors, 
having started out considerably earlier than their peers across the ponds. Specifically in 
China, a key deterrent  to robo-advisory growth is the lack of  ETFs.  Indeed, only 789 
billion RMB are invested in ETFs, compared to 4 times as much in Europe and 20 times 
as  much  in  the  United  States.169  In  addition,  the  nascent  industry  faces  additional 
challenges  including  tight  government  controls  on  capital  flows  and  an  uncertain 
regulatory environment that could lead to a government crackdown.170 

Moreover, differences between geographies arise in the way the service is distributed. 
While in North America traditional financial services companies such as Charles Schwab 
rapidly caught up with stand-alone robo-advisors, European banks and asset managers 
have been more reluctant to cooperate with robo-advisors. In Asia, very few traditional 
financial  services  companies  are  offering  robo-advisory  services.  Besides  being 
composed of corporate and independent robo-advisors, the ecosystem also comprises 
third parties such as Uber. After initially partnering with Betterment in the UK to provide 
individual  retirement  accounts  (IRA)  to  its  drivers,  MoneyFarm  has  inked  a  similar 
partnership, providing both retirement and investment accounts to Uber drivers.171 This 
complements an already common offering from most U.S.-based robo-advisors, which 
entail 401k retirement plans for corporate customers. 

While traditional financial institutions and stand-alone robo-advisors still make up most 
of  the  market,  technology  companies  and  online  brokers  are  entering  the  space  too. 
Tencent, the company developing messaging platform WeChat, has launched Licaitong, 
a robo-advisor that can be accessed through the app. In addition, 8 Securities, a Japan 
and  Hong  Kong  based  broker,  has  recently  added  “Chloe”  to  its  offering;  an  artificial 
intelligence based advisor that can educate and help users in their investment discovery 
process. 

The  Chinese  market  also  displays  the  particularity  of  being  increasingly  attractive  to 
foreign robo-advisors. 8 Securities from Japan and Robinhood from the U.S. are both 
aggressively  going  after  U.S.  citizens  in  Hong  Kong  and  Chinese  citizens  in  mainland 
China to leverage their 50,000 USD allowance per person for investments in the U.S. 
market.172 

The heterogeneity of the Asian robo-advisory market makes it difficult to compute the 
average costs charged by Asian robo-advisors, but the US and Europe provide a good 
basis  for  comparison.  Robo-advisors  from  both  geographies  have  similar  pricing, 
generally composed of an annual portfolio management fee as well as a fee based on 
the underlying investment funds. In addition, management fees are often subject to a 
volume discount pricing model; as the investment amount increases, management fees 
decrease.  In  Europe,  the  range  is  particularly  wide.  Robo-advisors  charge  a  portfolio 

169 http://www.ey.com/gl/en/industries/financial-services/asset-management/ey-global-etf-survey-2016 
170https://UK.reuters.com/article/us-china-wealth-roboadvisors/rise-of-the-machines-chinese-investors-flock-to-robo-
advisors-idUKKCN10S2GT 
171 Moneyfarm chosen as Uber’s latest UK partner, MoneyFarm (2017) 
172https://financial.thomsonreuters.com/content/dam/openweb/documents/pdf/financial/digital-wealth-management-
asia.pdf 

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management  fee  varying  from  0%  to  around  2.60%,  with  an  average  of  0.90% 
according  to  the  countries  researched  in  the  scope  of  the  Study.  In  the  U.S.,  the 
management fee is significantly lower with an average of 0.31%.173 The same picture 
can be drawn for fund-related fees. While in the U.S. these fees average at 0.11%174, 
European robo-advisors charge more than twice as much: 0.26%.  

As for the investment products underlying the portfolios assembled by robo-advisors in 
the U.S., Europe and Australia, most robo-advisors use ETFs as the primary investment 
product with the largest of them diversifying with alternate investment products such 
as tax-loss harvesting and retirement funds. As written above, France sticks out through 
the packaging of its portfolios into life insurance products, while in the  UK, customers 
can invest through tax-efficient Stocks & Shares ISAs. In Asia, especially in emerging 
economies like India, robo-advisors tend to offer a broader range of investment options 
including stocks, debt products and hybrid products.175  

8.2.8   Findings 

  Robo-advisors leverage client survey data into complex algorithms that produce 
customized  financial  plans  and  asset  allocations.  They  digitalize  and  automate 
client  onboarding,  investor  risk  profiling  and  investment  allocation  through 
algorithm-based  assessments,  and  providing  online  investors  with  on-demand 
access to financial advice. 

  Robo-advisors  leverage  their  technological  solutions  for  both  B2C  and  B2B 
clients. B2C clients are currently composed of retail investors, who make use of 
the  automated  portfolio  allocation  tool.  They  are  digitally  savvy,  relatively 
knowledgeable  in  financial  matters,  and  invest  low  investable  amounts.  While 
these clients are considered to be early adopters, we expect the robo-advisory 
client spectrum to widen. B2B customers of robo-advisors are essentially retail 
banks,  asset  managers,  family  offices,  full-service  investment  banks  and, 
increasingly, insurance companies.  

  Although the market share of robo-advice is strongly increasing across Europe 
over the last years, only a tiny fraction of retail investors rely on such platforms, 
with the UK and Germany leading in terms of current user adoption.  

  Robo-advisor usually focus on portfolios composed exclusively of ETFs due to the 
associated  low  costs.  Some  platforms  allow  complementing  the  ETF  portfolios 
with stocks, commodities, insurance, cash and bonds. 

  While  the  algorithm  proposing  or  deciding  on  the  asset  allocation  to  a  specific 
client is the centerpiece of a robo-advisor, they also provide various degrees of 
human  assistance  ranging  from  pure  technical  assistance  to  support  in 
investment decisions. The latter is of particular importance, as a retail investor 
might need to discuss the proposed investment portfolio or might have questions 
about specific product features that are not explained through the website. 

  On average, robo-advisors are cheaper than traditional wealth management with 
total  annual  fees  ranging  between  0.90%  and  1.60%  of  assets  under 
management. The fees are often difficult to find on the webpage and displayed 

173https://investorjunkie.com/42668/true-costs-robo-advisors/; https://www.valuepenguin.com/comparing-fees-robo-
advisors 
174 https://investorjunkie.com/42668/true-costs-robo-advisors/ ; https://www.valuepenguin.com/comparing-fees-robo-
advisors 
175 http://www.burnmark.com/wp-content/uploads/2017/Burnmark%20Report%20April17.pdf 

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in a complex way, making it hard for an average retail investor to understand 
the fees he will be paying. 

 

In view of upcoming regulations, robo-advisors seem to have significant potential 
to develop themselves faster and cater to a large potential client base. 

8.3   Social trading platforms 

Social  trading  platforms,  also  referred  to  as  “copy  trading”  platforms  allow  novice 
traders to mimic the strategies of more experienced investors. The premise is simple: 
if a trader decides to “copy” another professional and the latter bets, for example, on 
the pound rising against the dollar, then so will the novice trader.  Today a large number 
of social trading platforms exists with a high diversity of products and services offered.   

8.3.1   Target client segments 

In  general,  customers  of  social  trading  platforms  can  be  split  into  two  main  groups: 
signal providers and signal followers: 

1.  The first group corresponds to professional traders who wish to make additional 
revenues  by  letting  other  investors  copy  their  trades  in  order  to  receive  a 
commission. 

2.  The “followers” group is composed of two types of traders: 

The first type involves traders who want to trade by themselves but at the same 
time  wish  to  leverage  on  the  information  from  other  people’s  trading  to  make 
their own investment decisions. The second type relates to traders who do not 
want  to  devote  the  time  and  effort  necessary  to  search  for  good  investment 
opportunities  and  prefer  to  automatically  copy  the  trade  of  well  performing 
traders. 

Based on the interviews conducted with C-level executives of social trading platforms, 
the average client profile of signal followers self-directed investors between 19 and 38 
years  old,  with  low  to  medium  education  levels  (school  diploma)  and  an  average 
annually  income  of  30,000  EUR.  Clients  can  originate  from  all  kinds  of  countries,  as 
social  trading  platforms  are  available  across  Europe,  Asia  and  the  U.S.  However, 
depending  on  the  country,  restrictions  arise  on  certain  investment  products,  as 
highlighted in the following section. 

8.3.2   Products and services 

Social trading builds on the concept of “collective wisdom” by connecting traders and 
investors through a platform where they can share their views and trades in real-time. 
Social trading platforms have a copy trading feature that allows clients to automatically 
execute  user-generated  investment  ideas  while  providing  a  platform  to  share  their 
insights about market trends. According to the platforms, it is an attractive option for 
inexperienced  yet  self-directed  investors,  who  have  the  opportunity  to  leverage  on 
crowd knowledge to mitigate their investment risks. 

Social  trading  platforms  can  operate  as  brokers  or  networks.  The  majority  of  the 
platforms  function  as  brokers,  opening  accounts  for  clients  and  dealing  with  the 

 April 2018          141 

 
 
  
 
 
 
 
 
 
 
 
 
 
brokerage  themselves  instead  of  using  external  brokers.  Historically,  these  social 
trading platforms used to solely be brokers and added a social trading feature in order 
to attract new customers who before may have been uncomfortable trading on Forex 
markets  but  feel  more  comfortable  by  copying  the  trades  from  more  experienced 
traders. These platforms essentially make money from the spread on every trade (i.e. 
difference between the buy and sell price). As such, their aim is that these social trading 
features ultimately increase the number of trades going through their platform. 
Other  platforms  may  function  as  a  network  only,  positioning  themselves  only  as  a 
marketplace  where  clients  can  join  through  their  account  with  partner  brokers.  The 
platforms essentially make their revenue from deals they negotiated with the brokers 
that investors use to execute the trades. This normally involves a cut from the spread 
the broker makes per trade but can also include a sign-up bonus. 
The platforms can also function as both brokers and networks, allowing clients to open 
an account with the platform itself or to link an existing account with one of the partner 
brokers of the platform. As such, the platforms receive the full spread if the client uses 
the  proprietary  broker,  whereas  they  only  receive    a  percentage  of  the  spread  if  the 
client uses a partner broker. 

In terms of investment products, social trading platforms typically offer over the counter 
(OTC)  trading  with  contracts  for  difference  (CFD).  A  CFD  is  a  short  term  total  return 
swap  on  the  returns  of  an  underlying  asset  versus  an  interest  rate,  i.e.  the  buyer  of 
such a swap receives the difference between the current value of an underlying asset 
and its value at contract time and pays an interest to the seller. It is also possible to 
hold short positions in CFDs. In this case, the buyer realizes a profit if the value of the 
underlying  asset  declines  after  contracting.  Unlike  futures,  CFDs  do  not  have  a  fixed 
expiry date or contract size. The high flexibility in terms of contract sizes allows for a 
fractional  mapping  and  hence  ensures  a  precise  proportionality  between  the  signal 
provider’s  and  follower’s  account.176  Since  the  counterparty  usually  closes  out  the 
position once the initial margin is used up, CFDs are solely offered on underlying assets 
with  an  appropriate  market  depth  and  liquidity.177  Thus,  the  investment  universe  on 
social trading platforms is constrained to foreign exchange (Forex), equity indices and 
major single stocks, commodities and bond indices. 

Accordingly, it is not surprising that among the entities that were researched in Europe, 
US and Asia, the most common product offering is Forex, followed by commodities and 
indices. In addition, in Europe all main social trading platforms offer cryptocurrencies 
and Sharia-compliant accounts. Nevertheless, a key differentiator in the US is the lack 
of CFDs. Indeed, CFD trading is not permitted to US residents due to restrictions by the 
Securities Exchange Commission (SEC) on OTC financial instruments.  

8.3.3   Distribution strategy 

Depending on whether the social trading platform operates solely as a network, whether 
it integrates a proprietary broker or whether it does both, different distribution channels 
can be observed. The common basis of all types of social trading platforms is the online-
based  acquisition  of  customers.  Due  to  social  trading  catering  to  a  niche  sector  of 
customers,  they  are  often  already  familiar  with  the  platforms.  As  mentioned  by  an 
interviewed  C-level  executive,  most  first-time  clients  access  the  website  by  directly 

176 Next Generation Hedge Funds, Doering, Heyden & Surminski (2013) 
177 Market Risk Analysis Volume III: Pricing, Hedging and Trading Financial Instruments, Alexander (2008) 

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inserting the name  of the platform in the browser bar.  Others reach the site through 
search engines or targeted online ads. 

Now,  depending  on  the  business  model,  different  channels  are  used.  In  the  case  of 
network-only  social  trading  platforms,  most  of  them  market  their  services  online  or 
through their partner brokers. On social trading platforms with integrated brokers, users 
of the underlying broker are  encouraged to have a look at the  social trading feature. 
Regarding the social trading platforms that have a proprietary broker as well as different 
partner brokers, both distribution strategies apply.  

The  platforms  are  online  based  and  so  is  their  marketing  strategy.  Online  marketing 
tools  are  widely  used  to  attract  new  clients,  making  use  of  paid  search  and  online 
advertisements.  These  marketing  operations  do  not  vary  depending  on  the  Member 
State.  

8.3.4   Level of development 

Most social trading platforms are available throughout Europe, allowing any European 
citizen  to  use  their  services.  On  top  of  being  available  throughout  Europe,  these 
platforms operate in an average of 185 countries and are generally headquartered either 
in Cyprus or in the UK. 

Comparable  public  data  on  the  number  of  transactions  concluded  on  social  trading 
platforms is not available across European Member States. However, one can highlight 
the development of social trading platforms in certain Member States. Germany-based 
social trading platforms have  encountered  rapid growth  over the last  years.  In 2015, 
the total traded assets in this sector reached 190 million EUR, which is 68% more than 
the year before. A majority of the market is shared by the three market leaders: German 
Ayondo,  Austrian  Wikifolio  and  British  eToro.178  eToro  has  more  than  6  million  users 
worldwide and at least 25,000 in Germany.179  

8.3.5   Costs and account minima 

Customers  can  mainly  trade  CFDs  and  Forex,  yet  some  platforms  such  as  eToro  or 
LiteForex offer customers to trade additional products such as commodities, stocks, and 
cryptocurrencies.  The  product  range  of  social  trading  platforms  is  relatively  small 
compared to other investment platforms. For instance, eToro which is the social trading 
platform with one of the broadest offerings, only has a limited number of about 1,000 
different investment products. 

Even though most of the platforms require minimum deposits, these are quite low, and 
range from 5  EUR to a  maximum of 1,000 EUR while the average lies at around 200 
EUR. Thus, social trading platforms are rather affordable. 

178 Bundesfinanzministerium - Fintech-Markt in Deutschland 
179 www.finanztreff.de/news/social-trading-marktfuehrer-etoro-mit-trader-baskets/11645219, Finanztreff (2016) 

 April 2018          143 

 
 
  
 
 
 
 
 
 
 
 
 
                                           
 
 
Graph  45:  Average  account  minima  of  social  trading  platforms  (in  EUR,  per 
Member State) 

190

170

140

270

240

200

120

120

120

130

110

150

135

70

50

Source: Deloitte analysis (2017) 

In terms of costs, social trading platforms essentially charge a spread that depends on 
the underlying asset but can reach up to two price interest points (pips). On top of the 
spread, clients of social trading platforms are often charged withdrawal fees, entry fees 
and inactivity fees.  

8.3.6   Benefits and risks 

8.3.6.1   Benefits 

Social  trading  networks  allow  investors  to  subscribe  to  one  or  more  signal  providers, 
whose trades are then executed within the investor’s brokerage account proportionally 
and  in  real-time.  Besides  providing  the  technology  for  trade  mirroring,  the  platforms 
mainly  act  as  intermediaries  between  investors  and  signal  providers,  providing  them 
with services that enable the social nature of the platform. For example, social platforms 
offer real-time track records of the signal providers, allowing investors to visualize the 
trades,  their  outcomes  as  well  as  the  overall  trading  strategies.  A  financially  literate 
investor can thus determine whether the approach is suitable for mirroring. In addition, 
these  platforms  provide  complementary  elements  such  as  rankings,  search  functions 
and  discussion  forums,  which  investors  can  leverage  to  take  investment  decisions. 
Accordingly,  social  trading  platforms  provide  a  relatively  high  degree  of  transparency 
and  information  to  retail  investors.180  In  addition,  the  social  nature  of  the  firms  may 

180 A Primer on Social Trading Networks, Doering, Neumann & Paul (2013) 

 April 2018          144 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
                                           
 
 
prove to be attractive to Millennials who are keen to use social media in their day-to-
day life. 

8.3.6.2   Risks 

In some cases, the signal providers, who may or may not have any bona fide expertise, 
are  sometimes employees  of the firm who actively trade derivative products for their 
own account and receive a split of the firm’s commissions generated by the clients that 
mirror  their  trades.  These  people  are  usually  knowledgeable  but  cannot  necessarily 
guarantee reliability and proficiency in the long run, which the average retail investor 
may  not  be  aware  of.  In  addition,  signal  providers  may  be  biased  towards  specific 
products due to associated benefits that they may receive.  

In addition, the social nature of these trading platforms leads to behavioural biases of 
retail investors. Indeed, less sophisticated customers may overlook risks associated with 
seemingly  well-performing  investment  strategies  and  potentially  develop  unrealistic 
expectations  of  gains.  In  addition,  they  may  feel  excessively  confident  in  the  signal 
provider, resulting in undue or unreasonable reliance on signal providers.181 Finally, due 
to a lower tolerance to short-term poor performance, customers may switch too often 
between  investment  strategies,  leading  to  suboptimal  returns  and  incentivising  bad 
behaviour amongst signal providers. 182 As such, the use of social trading platforms by 
retail investors may result in investment portfolios unsuitable to their needs. 

Furthermore, social trading platforms pose a risk to retail investors in offering access to 
highly leveraged products such as CFDs. Two regulators in particular are alarmed about 
the operation of OTC derivatives, which include CFDs as well as forex and binary options, 
on  trading  platforms  where  clients  are  encouraged  to  copy  the  trades  of  a  signal 
provider.183 Due to the products being complex and highly speculative, it would make 
them  suitable  solely  for  a  small  number  of  very  sophisticated  clients.  In  many  cases 
however,  they  are  marketed  to  unsophisticated  retail  investors  using  aggressive 
marketing tactics.  

As  any  other  online  platform,  social  trading  platforms  are  subject  to  cybersecurity 
threats. 

8.3.7   Findings 

  Today  there  is  a  number  of  social  trading  platforms,  also  referred  to  as  “copy 
trading” platforms, which allow novice traders to mimic the strategies of more 
experienced investors. Social trading platforms might be operating as brokers or 
networks.  

 

In terms of investment products, social trading platforms typically offer complex 
products  and  target  retail  investors  who  are  digitally  savvy,  knowledgeable  in 
financial  matters,  and  invest  low  amounts.  As  a  consequence,  social  trading 
platforms are less adapted to the average retail investor with little knowledge on 
financial products in search for a simple investment.    

181 Research Report on Financial Technologies, IOSCO (2017) 
182 The Future of Financial Services, World Economic Forum (2015) 
183 Update to the Report on the IOSCO Automated Advice Tools Survey, IOSCO (2016) 

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  Followers on social trading platforms very much rely on the performance of their 
signal providers’ strategies and combined with the complex nature of the offered 
products, exposes a less sophisticated investor to substantial risk. 

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8.4  Views of stakeholders regarding online investment platforms 

In  this  section,  the  goal is  to list  suggestions  provided  by  market  players  in  order  to 
improve the policy and regulatory framework surrounding online investment platforms. 
More specifically, the objective is to gather views on how to create the right regulatory 
environment  to  fully  benefit  from  the  new  possibilities  offered  by  these  advances  in 
technology while managing any new risks they may create for consumers and ensuring 
a  high  level  of  investor  protection.  As  such,  the  recommendations  are  both  oriented 
towards optimizing the market for consumers as well as online investment firms, where 
success  factors  as  well  as  potential  barriers  for  their  expansion  across  the  EU  are 
analysed.  The  views  originate  from  suggestions  made  by  market  players  such  as 
platform providers,  Fintech companies,  consumer and  retail investor  organisations  as 
well as industry associations.  

  The lack of harmonization and homogeneity of the regulatory requirements for 
financial  services  across  the  Member  States  is  a  common  point  among  all  the 
Fintech  platforms  who  were  interviewed  in  the  context  of  this  Study.  The 
companies see it as a factor hindering competitiveness and business expansion 
across borders. The fact that the Single Market might face some issues related 
to  the  harmonisation  of  regulations  in  the  context  of  cross-border  business  is 
also  pointed  out  by  EBA’s  discussion  paper  launched  on  August  2017,  with 
regards to EBA’s approach to financial technology (Fintech) (EBA/DP/2017/02). 
Rules  should  also  tend  towards  simpler  and  more  consistent  disclosure 
requirements across the product landscape. In this context, some market players 
suggest the following: 

o  To release more regulations that can be implemented with no adaptations 
or  different  interpretations  to  all  Member  States,  instead  of  texts  as 
directives  that  can  be  adapted  into  the  Member  States  local  laws  or 
principles that are not mandatory to follow; 

o  Study the difference among the Member States markets with regards to 
regulatory  requirements  for  financial  markets  and  how  they  could  be 
brought to the same level of specifications; 

  A topic that was mentioned in all interviews that were conducted for this Study 
is  the  European  Union  regulatory  environment’s  complexity  and  the  lack  of 
adequacy  to  different  business  models  and  company  sizes.  Small  sized 
companies of the financial market, such as some Fintechs, do not have the same 
size  and  business  complexity  as  incumbent  banks,  yet  still  have  to  meet  the 
same regulatory  requirements in many cases. The majority of the interviewed 
companies  classified  the  European  Union’s  financial  regulatory  landscape  as  a 
factor  that  hinders  the  Fintech  market  in  reaching  its  full  potential  as  well  as 
hinders the further development of their business.  

Fintechs  bring  to  the  market  new  business  models  that  might  not  fit  in  the 
already existing regulatory models yet are obliged to comply with requirements 
that are not made for that specific business model, which might force them to 
comply with requirements that damage their business model. In addition, small 
companies have a smaller structure and number of employees, and tend to focus 
on  their  primary  business.  However,  the  compliance  processes  become  more 
laborious for them and shift the focus from business development and innovation 
to compliance. The interviewees mentioned the efforts spent to comply with the 
complex regulatory landscape as a big challenge for their business.  

In this context, the Fintech market players suggest: 

April 2018          147 

 
 
  
 
 
 
 
 
o  Creating  proportionality  principles  for  its  regulatory  requirements  that 
would  allow  less  complex  and  smaller  companies  to  have  lighter 
regulatory  requirements  than  more  complex  and  bigger  companies. 
Business model, size of the organisation and geographical reach could be 
taken into consideration for such proportionality principles.  

o  Ensuring  the  proper  consideration  of  innovative  technologies  and  new 
business  models  in  regulatory  texts.  This  would  allow  to  regulate  new 
Fintech businesses, including their use of new technologies, in a manner 
to  foster  the  development  of  the  market,  at  the  same  time  as 
understanding better how they can contribute to the further development, 
soundness and security of the European financial markets.  

In addition, it would be interesting to consider a strategy to maintain an open 
communication channel with the all the players on the market, regardless of its 
size,  so  the  dialogue  with  different  perspectives  could  enrich  the  outcome  of 
discussions around market and regulatory development. 

  A ‘digital passport’ that once completed and validated by a single provider would 
allow  a  consumer  to  open  securities  accounts  or  purchase  other  investment 
services  –  including  UCITS  –  with  more  providers  (even  in  different  Member 
States)  and  individually  manage  his/her  digital  account  in  a  consolidated 
manner. This digitalization of savings solutions will necessarily be adapted to fit 
both execution-only products, as well as those requiring investment advice.184 

  A recurring issue raised by the interviewees and surveyed entities of this Study 
is the lack of financial education of the overall population. In general, individuals 
do not receive formal education on financial topics such as savings, investments 
and financial instruments. While, most of the online investment platforms invest 
on educating their customers by making available on their website a dedicated 
section  with  financial  education  material  in  text  and  video,  thus  making  an 
important  contribution  to  the  overall  financial  literacy,  they  request  further 
support by the authorities. On one hand, the government agencies could assess 
potential  policy  actions  to  ensure  that  financial  education  programs  are 
strengthened  targeting  the  most  vulnerable  customer  segments.  On  the  other 
hand,  authorities  should  investigate  means  to  support  retail investors  through 
financial guidance providing retail investors with objective and comprehensible 
information to support their financial decision-making (see section 6.1). 

  Several  regulators  and  consumer  protection  agencies  insist  on  the  need  to 
complement  automated  advice  through  human  interaction  with  a  qualified 
advisor when there is a need. This could help provide investors with additional 
information and mitigate the risks associated with the fact that online platforms 
rely on the investor’s self-assessment to provide relevant information in terms 
of suitability. Moreover, an additional human component could alleviate the risks 
of a faulty algorithm allocating unsuitable products to a (potentially large) set of 
customers. 

  Due  to  the  rise  of  different  types  of  online  investment  solutions    (e.g.  fund 
supermarkets  and  robo-advisors)  and  the  patchy  framework  of  consumer 
protection  in  retail  investment,  consumer  associations185  warned  about  the 
blurring boundaries between: 

184 http://www.efama.org/Publications/Public/EFAMA%20response%20to%20EC%20CMU%20Mid-Term%20Review%20 
consultation%20-%2017%20March%202017.pdf 
185 http://www.beuc.eu/publications/beuc-x-2017-73_Fintech_a_more_competitive_and_innovative_eu_financial_sector.pdf 

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o  execution-only (where the customer shoulders the responsibility) 

o  discretionary portfolio management and  

o  business  models  where  “regulated”  advice  is  provided  and  the  robo-
advice companies bear the responsibility for the suitability of the product 
sale.  

This  situation  creates  uncertainty  for  consumers  and  might  lead  to  a  rising 
number of legal disputes due to unclear allocation of responsibility. When using 
online  platform  across  borders,  customers  should  be  made  aware  of  the 
applicable national legal framework including consumer protection laws. 

  When investing through online investment platforms, retail investors will depend 
on a high level of transparency in terms of cost in order to understand the fees 
associated with an investment product. According to a recent study186, costs and 
charges  were  poorly  communicated,  often  misleading  and  difficult  to  find  on 
online  investment  platforms.  Only  one  of  the  15  consumers  who  used  the 
investigated  websites  was  able  to  calculate  correctly  what  the  total  cost  of  a 
£1,000 investment would be. 

  Market  players  also  raised  the  importance  of  controls  and  testing  during  the 
development and maintenance of the algorithms calling for regulatory oversight 
of these algorithms guiding consumers through the advice process.187 Platforms 
should  develop  appropriate  systems  and  controls  to  ensure  the  overall 
consistency  of  the  information  collected  from  clients  and  to  minimize  the 
potential  for  customers  to  overstate  (willingly  or  unwillingly)  their  experience 
with investment products. This is of particular importance as a faulty algorithm 
could  lead  to  mis-selling  on  an  unprecedented  scale.  Thus,  regulators  should 
develop the capacities to test and control algorithms used by online investment 
platforms. 

  Comparison tools (CT) nowadays are wide-spread across many types of products 
and services covering also different types of online investment service providers 
and  financial  products,  e.g.  fund  supermarkets,  D2C  platforms,  online  brokers 
and robo-advisors. A certification scheme for such comparison tools of financial 
products  could  ensure  that  certified  platforms  effectively  guide  the  retail 
investors  to  the  service  provider  and  investment  product  responding  to  his 
needs, e.g. the cheapest provider in relation to a specific investment scenario. 
In order to serve the investors needs such a  certification scheme should cover 
the following aspects: 

-  CTs  should  be  transparent  about  their  business  and  financing  models, 
including owners, shareholders and relationships with manufacturers, sellers 
or providers of the goods and services featured. 

-  Comparison  should  be  impartial  and  not  be  affected  by  any  contractual 
relationship  with  the  sellers,  manufacturers  or  providers.  Sponsored  links 
and advertisements should be clearly indicated to the consumer.   

-  CTs should clearly explain the way in which they source data, their coverage 

as well as the frequency with which it is updated.  

-  Criteria used for the rankings should be clearly and prominently indicated, 

as well as, where relevant, any specific methodology used.  

186  Online  investment  and  advice  services  –  the  consumer  experience  Consumer  Panel  Position  Paper;  Financial  Services 
Consumer Panel 
187 http://www.beuc.eu/publications/beuc-x-2016-025_gve_automation_in_financial_advice.pdf 

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-  Information provided by CTs should be relevant for assessing and comparing 
offers from a consumer perspective and be displayed in a uniform manner 
to  ensure  comparability.  It  should be  written in simple language, avoiding 
complex legal and technical terms.  

-  CTs should publish the full and final purchase price including any applicable 
charges, taxes etc. in accordance with existing legal obligations – and where 
such obligations do not apply, to the extent possible. Full prices, particularly 
those which may enter into force for services after any discounts, should also 
be clearly stated with full prominence.  

-  Main terms of purchase should be specified, including main contract terms 

and special clauses etc. 

-  CTs should comply with existing financial regulations, consumer protection 

legislation as well as data protection legislation.  

-  CTs should have a complaint handling policy in place.  
-  CTs  should  provide  consumers  with  information  on  available  redress 

mechanisms. 

Additionally,  other  voluntary  public-private  initiatives  aiming  at  educating 
people  and  delivering  transparent  and  comprehensible  information  could  be 
explored, e.g. public databases on key information of investment products. 

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9  Annex 1: Detailed Methodology 

9.1   Description of scope  

9.1.1   Countries in scope 

The tender specifies the following criteria to define the geographical coverage for this 
Study:  

  The geographical scope strikes a balance between  

o 
o 

o 

Small and large EU Member States;  
Member States that have joined the European Union before the year 
2004 and those that joined later; and  
Member States having already taken measures to improve the 
functioning of their retail distribution systems and the others. 

  The scope represents a diversity in terms of policy framework in terms of  

o 
o 

o 

Rules banning inducement policies; 
Stringent provisions regarding the information provision to retail 
investors; 
Specific redressing procedures for retail investors. 

As  a  result  of  this  analysis,  the  following  15  Member  States  were  chosen  and  should 
thus  be  representative  of  the  European  Union:  Belgium,  Czech  Republic,  Denmark, 
Estonia,  France,  Germany,  Italy,  Luxembourg,  the  Netherlands,  Poland,  Portugal, 
Romania, Spain, Sweden and the UK. The following table explains why we chose those 
countries: 

April 2018          151 

 
 
  
 
 
 
 
 
 
 
 
 
9.2   Definitions 

For the sake of this Study the following definitions are used: 

9.2.1   Retail 

investor,  execution-only,  discretionary  management  and 

investment advice 

 

 

‘Retail Investor’: the Study will focus on the customer segment of retail investors. 
Retail investors  will be defined within the definitions provided by the  Directive 
2014/65/EU of the European Parliament and of the Council of 15 May 2014 on 
markets  in  financial  instruments  and  amending  Directive  2002/92/EC  and 
Directive 2011/61/EU Text with EEA relevance. The Directive states that retail 
investors  are  clients,  who  are  not  considered  professional  clients  under  the 
criteria laid down in Annex II of the Directive. Further, in the scope of the mystery 
shopping,  we  focus  on  investors,  which  the  UK  Financial  Services  Authority 
referred to as “high-street” advice seekers, who have assets to invest in the shop 
below 150,000 EUR, and who will not be redirected towards advice services for 
wealthier customers. 

‘Execution-only’  refers  to  selling  of  financial  instruments  without  advice.  The 
service usually consists of receiving and transmitting orders (RTO) or executing 
orders on behalf of clients and are provided by investment firms/banks, online 
platforms  or  securities  brokers.  Due  to  its  nature,  execution-only  does  not 
provide  any  advice  component  and  has  thus  not  been  covered  in  the  mystery 
shopping exercise.  

April 2018          152 

> 10M< 10M> 7< 7> 10%< 10%EasternNorthernSouthernWestern < 2004> 2004Ban on inducementsInfo provisionRedress proceduresAustria X7.4113.3XXXBelgium X10.312.3XXXXBulgaria X--XXCroatiaX4.6612.3XXXCyprusX--7.9XXCzech RepublicX7.7910.3XXXDenmark X7.0313.8XXXEstoniaX-11.6XXXFinland X-6.8XXXFranceX8.5614.8XXXGermanyX8.9217XXXXGreeceX--1.4XXXHungaryX-11.8XXXIrelandX7.219.5XXXItalyX8.3810.4XXXXLatviaX-2.3XXLithuaniaX--XXXLuxembourgX-15.3XXXMaltaX-XXXNetherlandsX12.3813.6XXXXPolandX5.172.9XXXPortugalX-4.2XXXRomaniaX--15.4XXXSlovakiaX-10.3XXXSloveniaX-14XXXSpainX4.589.4XXXXSwedenX5.1018.4XXXXUnited KingdomX6.934.2XXXXX1315103781612Gross saving rate (2015)Source: AMECOBased on our internal sourcesSize (pop. 2015)Households investment rate (2016Q1)Joining EUPolicies to protect retail investorsGeography 
 
  
 
 
 
 
 
 
 
 
 
 

 

‘Discretionary management’ refers to a form of investment management in which 
the investment manager decides what products to buy and sell on behalf of the 
customer,  based  on  a  mandate  agreed  with  the  customer.  In  contrast,  the 
advisory-based model is based on giving recommendations to an investor on the 
merits of taking an action (e.g. buying, selling) in relation to a specific financial 
product and, ultimately, the customer still needs to take affirmative actions to 
execute the transaction. 

‘Advice’: According to MiFID, investment advice means ‘the provision of personal 
recommendations to a client, either upon his request or at the initiative of the 
investment  firm,  in  respect  of  one  or  more  transactions  relating  to  financial 
instruments’ (Article 4(4)). That recommendation must be presented as suitable 
for that person or must be based on a consideration of the circumstances of that 
person (Article 52 of the MiFID Implementing Directive). 

9.2.2   Products 

The  Study  focuses  on  six  key  categories  of  investment  products:  Investment  Funds, 
listed Bonds, listed Equities, Insurance products with investment components, Pension 
products and structured products. We understand the product categories to be defined 
as described below.  

Investment funds: An investment fund is an investment vehicle managed by finance 
professionals that raises capital by selling shares (often called units) in a diversified and 
balanced  set  of  securities  to  the  public.  An  investment  fund’s  capital  is  invested  in  a 
portfolio  of  stocks,  bonds,  short  term  money  market  instruments,  other  securities  or 
assets,  or  some  combination  of  these  instruments.  The  Study  will  include  domestic, 
foreign  and  round-trip  funds.188  Within  the  scope  of  the  Study  will  be  the  following 
subtypes: 

i.  Money market funds: A money market fund is considered as a type of fixed 
income investment fund that invests in high quality, short-term debt securities. 
These investments are considered as cash equivalents. 

ii.  Bond funds: A bond fund is a type of fixed income investment fund that invests 
in bonds. It can contain one type of bond only or a combination of bond types. 
iii.  Equity funds: Equity funds invest predominately in equities, otherwise known 
as  stocks  or  shares.  The  investment  strategies  of  equity  funds  generally  aim 
towards long term growth through capital appreciation and/or receiving income 
from underlying equities, in the form of dividends to reinvest or pay out.  
iv.  Mixed  funds:  A  mixed  fund  (also  referred  to  as  hybrid  or  balanced)  is 
understood as a type of investment fund that is made up of a mix of stocks and 
bonds, which can vary proportionally over time or remain fixed. 

v.  Exchange traded funds (ETFs): An ETF is an investment fund investing in a 
basket  of  securities  and  commodities  generally  designed  to  track  the 
performance  of an underlying index. They  are listed on stock exchanges and 
can  be  traded  in  the  same  way  as  common  stocks.  Different  ETFs  exist 

188 In the Study, the following definitions apply. A domestic fund is defined as an investment fund sold in the Member State 
where it is domiciled; a foreign fund is an investment fund that is sold in other Member States and a round-trips fund is 
defined as an investment fund domiciled in one Member State but where the asset manager is located in Member State of 
marketing 

April 2018          153 

 
 
  
 
 
 
 
 
 
 
                                           
 
 
depending  on  their  regulatory  structure,  management  style,  investment 
objective and indices tracked. Within the scope of the Study will be the following 
subtypes:  Index,  Equity,  Fixed  income,  Commodity,  Currency.  As  far  as 
possible  (depending  on  information  availability),  it  will  be  indicated  whether 
synthetic replication ETFs or physical replication ETFs are concerned. Physical 
replication  ETFs  are  considered  as  those  where  the  ETF  manager  simply 
purchases the underlying assets of the index whether they are stocks, bonds, 
or even gold bars, whereas ETFs applying synthetic replication, are considered 
to be those where the ETF manager enters a swap contract with an investment 
bank that agrees to pay the index return in exchange for a small fee and any 
returns on collateral held in the ETF portfolio.189 

vi.  Real  estate:  A  real  estate  fund  is  a  professionally  managed  portfolio  of 
diversified  real  estate  holdings.  Most  real  estate  funds  invest  in  commercial, 
corporate  or  rental  properties,  although  they  may  occasionally  invest  in 
residential  properties.  This  type  of  fund  can  invest  in  properties  directly,  or 
indirectly through real estate investment trusts. Real estate funds can invest 
domestically, overseas or both. 

Both UCITS and AIFs potentially sold to customers are considered within the scope of 
this  report.  UCITS  are  considered  as  Undertakings  for  Collective  Investment  in 
Transferable Securities, as initially identified in EU Directive 85/611/CE of 20 December, 
1985, and which describe “collective investment schemes (UCI) that invest in securities 
(such  as  shares  and  bonds)  quoted  on  a  recognised  stock  exchange.  Furthermore, 
UCITS must be open ended, so that the investor can redeem their holdings at any time. 
The  investment  policy  must  also  respect  a  number  of  rules  relating  to  portfolio 
diversification, asset liquidity and the use of hedging”.190  

An  AIF  is  defined  as  “any  collective  investment  undertaking,  including  investment 
compartments thereof, which raises capital from a number of investors with a view to 
investing  it  in  accordance  with  a  defined  investment  policy  for  the  benefit  of  those 
investors  and  which  does  not  require  authorisation  pursuant  to  the UCITS  Directive. 
Both  open-ended  and  closed-ended  vehicles  and  listed  and  un-listed  vehicles  can  be 
AIFs for the purposes of the Directive. The definition captures a broad range of vehicles 
that would be regarded as “funds”, including all non-UCITS investment funds, wherever 
established.”191  

Listed Bonds: Government bonds and notes, as well as corporate bonds are included 
in the scope of this Study. 

i.  Government  (sovereign)  bonds:  Governments  borrow  money  by  selling 
bonds.  In  return  the  government  will  periodically  pay  interest  (coupon)  over 
the life of the bond and at maturity will pay the last coupon plus the amount 

189 Morningstar Education, Physical Replication vs. Synthetic Replication, available at 
http://www.morningstar.co.UK/UK/etfs/etfsolutions.aspx?docid=324200  
190 Definition of UCITS, Luxembourg for Finance, available at http://www.luxembourgforfinance.com/en/products-
services/investment-vehicles/ucits  
191 Definition of AIF under the AIFMD directive, Linklaters, available at: 
http://www.linklaters.com/Insights/20100218/Pages/03_Scope-AIF.aspx 

April 2018          154 

 
 
  
 
 
 
 
 
 
                                           
 
 
borrowed back to bond holder. Maturity dates of bonds can be a few months to 
30 years or more. 

ii.  Corporate bonds: A corporate bond is issued by a company to help fund its 
activities and future investments. These bonds pay coupons over their duration 
and return the face value and the last coupon to the bond holder at maturity.  

Listed  Equities:  Listed  Equities  refers  to  listed  stocks  or  any  other  listed  securities 
representing an ownership interest into a company.  

Insurance  Products  which  include  an  investment  component:  Life  Insurance 
products  are  defined  as  products  providing  assurance  on  survival  to  a  stipulated  age 
only, assurance on death only, assurance on survival to a stipulated age or on earlier 
death, life assurance with return of premiums. Life insurance products offer a wide range 
of investments based on the following categorisation: 

  Guaranteed return products, with or without discretionary profit sharing; 
  Non-guaranteed products linked to investment funds that may be set up through 
external funds (shares in undertakings for collective investments issued by third 
parties)  or  internal  funds  (aggregated  individualized  assets  of  an  insurance 
undertaking, whether collective or dedicated). 

  A combination of non-guaranteed and guaranteed return products. 

Note that for our data collection on costs & charges, only products listed under the 
“Life  insurance”  section  of  intermediaries’  websites  were  taken  into  account. 
Additionally, only products with an investment component were considered (death 
and other risk insurance, although listed under the “life” section of websites, are out 
of  scope).  A  distinction  between  guaranteed  capital  policies  and  non-guaranteed 
capital policies is made when possible. Note that unless mentioned otherwise, the 
level of return guaranteed by policies in the “guaranteed” category is 0% (capital 
protection).  The  cost  and  charges  data  collected  does  not  include  biometric  risk 
premiums.  Finally,  please  note  that  the  life  insurance  policies  analysed  across 
Member States have a minimum holding period of 5 to 15 years (average around 10 
years) depending on local fiscal policy. 

Pension products: Only pillar III voluntary individual pension schemes are included. 
In the interest of reflecting the view of the average retail investor, only products listed 
under  the  “pension”  section  of  intermediaries’  websites  are  considered  for  the  data 
collection on costs & charges. They include pension savings contracts as well as mutual 
funds marketed as supplementary pension products. Pension savings contracts provide 
regular  payments  to  an  individual  after  they  have  retired  from  work.  The  individual 
makes  regular  payments  over  many  years,  prior  to  their  retirement.  The  money  is 
invested accordingly to provide retirement payments. Note that in the case of pension 
savings contracts, a distinction between guaranteed capital policies and non-guaranteed 
capital policies is made when possible. Additionally, policies that did not allow for lump 
sum contributions were not taken into account, since they did not fit the needs of retail 
investor  profiles  A  and  B  as  part  of  the  mystery  shopping  section  of  the  Study  (see 
mystery shopping methodology below). 

Structured Products: Various structured products, including certificates, contracts for 
difference  (CFD),  options,  financial  futures,  structured  bonds  and  structured  deposits 
will be considered.  

April 2018          155 

 
 
  
 
 
 
 
 
 
Note that structured products were neither included in the mapping of retail investment 
products distributed by financial institutions through the internet, nor in the analysis of 
cost  data,  due  to  their  limited  popularity  as  an  asset  class  for  retail  investors  across 
Europe. Based on our research, although they are relatively common retail investment 
products in Germany and Italy, the outstanding volume of Structured Products across 
EU-28 Member States amounts to less than 0.7% of EU-28 households' total financial 
holdings. In addition, information related to structured products was overall scarce on 
distributors' websites across Member States and did not allow for proper comparisons. 

9.2.3   Distribution channels 

In view of the Study’s focus on retail investors, the definitions of the various distribution 
channels covered have been drafted with retail investors in mind. 

Banks: A bank is a regulated financial institution. Banks can broadly be classified in two 
groups: Commercial/retail banks and investment banks.  

  Retail banks: A retail bank will normally serve individuals and small to medium 
enterprises. Their services include: current and savings accounts, loans, credit 
cards,  mortgages,  lines  of  credit,  financial  advice,  wealth  management  and 
pension planning.  

  Investment  banks:  An  investment  bank  provides  specialist  services  to 
companies  and  wealthy  investors  that  include:  underwriting/advising  on 
securities,  capital  raising,  mergers  and  acquisitions  and  trading  on  capital 
markets. 

The  Study’s  focus  on  retail  investors  results  in  a  main  focus  on  retail  banks  for  the 
mystery shopping and product availability desk research, rather than investment banks. 

Insurance  companies:  An  insurance  company  provides  financial  protection  against 
potential loss. The insured will enter into a contract with the insurance company, which 
will provide financial protection in exchange for a one off or regular payment (premium) 
in  return.  Should  the  potential  loss  become  realised,  the  insured  will  make  a  claim 
against the company to cover the loss.  

Independent  Financial  Advisors  (IFAs):  IFAs  are  professionals  who  offer 
independent  financial  advice  and  plan  financial  investments  to  individual’s  needs  and 
aspirations. Such advisors are independent from product manufacturers, and therefore 
are able to propose products from all firms across the market, and have to give unbiased 
and unrestricted advice. 

Non-independent  financial  advisors  /  Traditional  advisors:  Non-independent 
financial advisors, also called traditional advisors in this Study, are professionals who 
also offer financial advice and planning but are linked/tied to a particular company or 
group of companies and offer products of this company/group. 

April 2018          156 

 
 
  
 
 
 
 
 
 
 
Fund supermarkets/Online brokers: A fund supermarket is a platform that allows 
an investor to invest in a wide range of funds from many different fund providers using 
a single account. For the sake of this Study, so-called D2C platforms, which are run by 
a particular fund provider and propose only in-house funds of this specific provider, are 
included in the definition of fund supermarkets as the basic functionalities offered to a 
retail  client  are  similar.  Often  the  fund  supermarket  will  provide  research  and 
information to help investors make a decision that best suits them. An online broker is 
another type of fund supermarket - more specifically an order execution broker only – 
that, in general, will not provide any research or advice. Hence, they can make deals on 
clients’ behalf for a smaller fee than full service brokers. 

Robo-advisors: Robo-advisors are automated investment services that use algorithms 
to manage and allocate people’s assets. Algorithms are a set of rules/calculations used 
to  find  solutions.  Robo-advisors  will  provide  digital  asset  management  services  to  its 
customers, carrying out suitability checks and managing assets in their name, but do 
not provide advice to their customers. Automated financial advice provided by a robo-
advisor  is  an  online  tool  on  which  a  consumer  completes  a  questionnaire  with  their 
personal details dependant on what kind of product they seek advice on. Details could 
include risk appetite; investment goals when looking for investment funds or personal 
income  and  outgoings  when  looking  for  a  bank  loan.  According  to  our  current 
understanding,  robo-advisors  only  provide  digital  asset  management,  in  contrast  to 
advice. 

Social trading platforms: A social trading platform is an online platform that allows 
traders/investors to see what investments other investors are making, normally in “real 
time”. This allows other investors to replicate those trades. Traders and investors can 
use the platforms to exchange data, strategies and ideas. 

9.3   Objectives and methodologies used 

This section details the methodologies used in the elaboration of this report and their 
objectives.  

9.3.1   Desk research & literature review 

The desk research and literature review of retail investment product distribution systems 
represents  an  important  part  of  the  data  collection  activities  within  the  scope  of  this 
Study. The objectives of these two activities were as follows: 

Desk research - The desk research resulted in the compilation of a list of data sources 
and data, which were used in the literature review, the mystery shopping and the data 
analysis phases. The result of the desk research were: 

  A  list  of  sources  describing  the  retail  investment  landscape  on  a  European 

level, as well as in the target Member States; 
  A target list of financial providers to research;  
 

Information on products provided and distribution channels.  

Literature review – The literature review provided a structured overview of the current 
available  literature  regarding  the  distribution  systems  of  retail  investment  products 
across the European Union. The outcomes of the literature review helped to prepare the 

April 2018          157 

 
 
  
 
 
 
 
 
 
 
 
 
data analysis phase, the mystery shopping and online survey phases. Furthermore, we 
conducted specific literature reviews for each research question in order to complement 
the results of the various data collection exercises. Depending on the topic the literature 
encompassed  publications  by  national  or  EU  authorities,  industry  reports,  scientific 
publications and other types of documents of relevance.  

9.3.2   Online surveys & interviews  

The  main  goal  of  these  surveys  and  interviews  was  to  collect  data  and  to  enrich  the 
findings from the desk research, literature review and the mystery shopping. The main 
objectives can be summarised as follows:  

  Completion of the previous data collection, especially in those areas where 
the  desk  research,  literature  review  and  the  mystery  shops  have  identified 
omissions or in areas where we would like to have a particular focus. 

  Enrichment  of  collected  data  through  ground-level  input  -  This  can  be 
particularly  important  in  two  ways.  Firstly,  it  helps  to  capture  nascent  trends 
which have not yet become established enough to have been reported in other 
channels.  Secondly,  in  cases  where  no  reliable  statistics  are  available,  the 
qualitative data findings from surveys can serve as a substitute. 

  Investigation of possible explanations for findings identified in the desk 
research,  the  literature  review  and  the  mystery  shopping,  as  well  as  any 
questions raised during those phases. 

  Understanding regarding judgement of policy frameworks by identifying 

potential obstacles and barriers to policy instruments. 

A  total  of  12  interviews  has  been  conducted  with  NCAs  across  the  Member  States  in 
scope.  In  addition,  23  financial  sector  consumer  protection  agencies  and  dispute 
resolution bodies have been surveyed across Member States as part of this Study. 

9.3.3   Collection of information on retail investment products 

The objective of this collection of information was to provide data for an analysis of the 
distribution systems for retail investment products across all of the  Member States in 
scope, as well as within individual Member States. The data analysis team carried out 
an extensive data collection exercise on the websites of the most important distribution 
channels across the 15 Member States under Study. This exercise had a twofold aim: 

  Measure  the  number  of  investment  products  actively  distributed  to  retail 

investors  

  Collect and compute the associated fees 

All information including on cost and charges was collected on intermediaries’ websites 
by mid-2017. The following steps were taken during the data collection process: 

  A  list  of  banks,  insurance  companies,  fund  supermarkets,  online  brokers  and 
social  trading  platforms  was  created  during  the  inception  phase  of  the  Study. 
The list was created with the intent to cover 80% of the retail market in terms 
of  assets  under  management  as  well  as  the  most  relevant  online  platforms. 
Depending on the country 8 to 15 of such entities were identified to be part of 
the scope of the Study.  

April 2018          158 

 
 
  
 
 
 
 
 
 
 
 
 
 
  Our researchers visited the webpages of said institutions and in a first step looked 
for  central  tariff  sheets.  Fees  such  as  custody  fees  and  execution  fees  are 
generally directly mentioned in these tariffs sheets. The values for each type of 
fee were then inserted into a global database. Some tariff sheets also disclosed 
information about fees related to investment funds. Such information was also 
added to the database. 

  Then researchers went to the pages/sections dedicated to retail investors. Here 
they  recorded  all  individual  investment  products,  including  type  of  product 
(according to the above-mentioned definition) under which they were marketed.  

  The next step of the methodology was to identify costs for all that were not listed 
in the central tariffs sheets. In the vast majority of cases, three products groups 
were  offered  whilst  not  being  specifically  mentioned  in  the  tariff  sheets: 
investment funds, life insurance products and pension products.  

  For  investment  funds,  information  on  costs  &  charges  was  gathered  from  the 
funds’  prospectuses  and  UCITS  KIIDs.  In  most  cases,  these  documents  were 
available on the websites; in a few cases, our researchers collected the required 
data from Morningstar using the ISIN of the relevant product.  

  The different fees were collected at share-class level for each type of fund (i.e. 
equity, bond, money market, mixed, ETFs, real estate). Every share-class was 
analysed, or, when an actor distributed more than 200 share classes per fund 
category,  a  representative  sample,  based  on  underlying 
investments, 
geographies, and managers, was taken ensuring to include around 50% of the 
available  share  classes.  The  median  value  of  the  fees  was  computed  for  each 
type  of  fee  (e.g.  ongoing  charges,  entry,  and  exit)  for  each  type  of  fund  (i.e. 
equity,  bond,  money  market,  mixed,  exchange-traded  funds,  and  real  estate 
funds). This resulting value was used to obtain a specific value for every type of 
investment fund in a given country.  

  Pension  products  and  life  insurance  fees  were  collected  using  the  same 
methodology as previously described for bonds & equities. Our researchers found 
that  life  insurance  providers  usually  presented  their  product  details  in  a 
downloadable sheet, where information on costs was also displayed. If an actor 
offered multiple life insurance contracts and pension products, an average of the 
different  fees  was  computed,  differentiating  capital  guaranteed  policies  form 
policies without a capital guarantee when possible. Note that all fees and values 
presented  in  this  report  are  solely  based  on  publicly  available  data,  which  is 
accessible to retail investors; they thus represent the view that retail investors 
have when conducting their own research. As a result, in some cases, the cost 
and  charges  data  represented  in  this  report  may  not  capture  the  entire  costs 
associated  with  the  different  products  if  the  information  provided  was  not 
complete. 

  Please note that in the few instances where fees were disclosed as absolute EUR 
amounts  (as  opposed  to  percentages),  they  were  translated  into  percentage 
points based on a 10.000 EUR investment amount. 

  Please  note  that  the  fees  presented  are  medians  of  maximum  fee  values 
potentially  charged  to  retail  investors,  since  distributors  usually  disclose  the 
value of each fee as an “up to x%” figure. Median values have been calculated 
for those investment products that actually charge this fee type (thus funds that 
did not include a certain type of fee/charge were not considered in the calculation 
of the median). 

  All fees and values presented in this report are solely based on publicly available 
data, which is accessible to retail investors; they thus represent the view that 

April 2018          159 

 
 
  
 
 
 
 
 
 
retail investors have when conducting their own research/analysis. Any form of 
discount  limited  in  time,  including  but  not  limited  to  commercial  gestures  and 
promotional campaigns, have been excluded from the results. 

The  below  table  gives  an  overview  of  the  number  of  financial institutions  (banks  and 
insurance  companies)  in  total  and  per  country  from  which  cost  data  were  actually 
collected. A low number of institutions in a particular country is due to the fact that only 
a  few  (or  none)  institutions  in  this  country  did  show  information  on  costs  for  the 
investigated investment products.   

Institutions 
analysed  
Banks 
Insurance 
companies  
Total 

Total  BE  CZ  DK  EE 

FR  DE 

IT 

LU  NL 

PL 

PT  RO  ES  SE  UK 

105 

70 

5 

7 

6 

6 

7 

5 

175 

12  12  12 

7 

1 

8 

8 

8 

16 

7 

0 

7 

8 

5 

5 

7 

5 

5 

9 

8 

7 

1 

7 

6 

10 

0 

8 

3 

6 

8 

13  12  10  17  8 

13  10  11  14 

The following table summarizes the types of fees analysed per product category, as 
well as the source used to gather related cost data: 

April 2018          160 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Recurring fees 

Source  One-off fees 

Investment 
funds 

Ongoing 
charges 

Fees charged on a regular (annual) basis 
including  management  fees  of  the  fund, 
expressed as a percentage of the amount 
invested/held. The value is directly taken 
from the KIID. 

KIID 

Entry fee 

Entry fees are one-off fees charged by a 
provider  when  subscribing  into  a  fund. 
Each time an investor buys additional fund 
units, an entry fee is charged. 

Source 

KIID 

Exit fee 

Exit  fees  are  one-off  fees  charged  by  a 
provider when redeeming out of a fund. 

KIID 

ETFs 

Ongoing 
charges 

Fees charged on a regular (annual) basis 
including  management  fees  of  the  ETF, 
expressed as a percentage of the amount 
invested/held. The value is directly taken 
from the KIID. 

KIID 

Execution 
fee 

Bonds 

Custody 
fees 

Custody  fees  are  fees  charged  by  a 
provider (e.g. bank, insurance company) 
as a fee for the storage / safe keeping of 
the assets of an investor. 

Tariff 
sheets / 
websites 

Execution 
fee 

Listed 
equities 

Custody 
fees 

Custody  fees  are  fees  charged  by  a 
provider (e.g. bank, insurance company) 
as a fee for the storage / safe keeping of 
the assets of an investor. 

Tariff 
sheets / 
websites 

Execution 
fee 

Execution  fees  refer  to  fees  charged  by 
intermediaries  (such  as  banks)  for  each 
trade  executed  by  the  investor,  as  a 
percentage  of  each  amount  of  money 
invested  through  them.  Those  fees  only 
apply for listed products, including ETFs. 

Tariff 
sheets / 
websites 

Execution  fees  refer  to  fees  charged  by 
intermediaries  (such  as  banks)  for  each 
trade  executed  by  the  investor,  as  a 
percentage  of  each  amount  of  money 
invested  through  them.  Those  fees  only 
apply for listed products, including bonds. 

Tariff 
sheets / 
websites 

Execution  fees  refer  to  fees  charged  by 
intermediaries  (such  as  banks)  for  each 
trade  executed  by  the  investor,  as  a 
percentage  of  each  amount  of  money 
invested  through  them.  Those  fees  only 
apply  for  listed  products,  including  listed 
equities. 

Tariff 
sheets / 
websites 

Life 
insurance 

Ongoing 
charges 

Fees charged by the insurer on a regular 
(annual)  basis,  including  management 
fees  of  the  product,  expressed  as  a 
percentage  of  the  value  of  the  policy. 
Note  that  in  some  Member  States,  the 
life 
ongoing  charges  disclosed 
insurance  products 
include  ongoing 
charges related to the policy’s underlying 
assets. Such Member States have been 
listed in the Study. 

for 

Product 
sheets / 
websites 

Entry fee 

Entry  fees  are  fees  paid  by  the  investor 
upon  each  contribution 
life 
insurance policy.  

into  a 

Product 
sheets / 
websites 

Exit fee 

Exit  fees  are  charged  when  the  investor 
buys back his contract (if he does not hold 
it until maturity).  

Product 
sheets / 
websites 

Pension 
products 

Ongoing 
charges 

Fees charged by the insurer on a regular 
(annual)  basis,  including  management 
fees  of  the  product,  expressed  as  a 
percentage  of  the  value  of  the  policy. 
Note  that  in  some  Member  States,  the 
ongoing  charges  disclosed  for  pension 
products include ongoing charges related 
to the contract’s underlying assets.  

Product 
sheets / 
websites 

Entry fee 

Entry  fees  are  fees  paid  by  the  investor 
upon each contribution into a contract.   

Product 
sheets / 
websites 

Exit fee 

Exit  fees  are  charged  when  the  investor 
buys back his contract (if he does not hold 
it until maturity).   

Product 
sheets / 
websites 

Note that for consistency and comparability reasons, certain other categories of fees, 
which had been identified by our  researchers, have been excluded from this analysis. 
The list of such fees can be found below: 

Excluded fees for investment funds:  

  Performance fees. In 95% of the sample of funds researched, the funds’ KIIDs 
stated “None” for performance fees. Therefore, they have been disregarded. 

April 2018          161 

 
 
  
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  Custody fees. As most fund distributors across the 15 Member States  analysed 
offer mostly in-house funds on their website, custody fees for funds (which only 
apply to third-party funds) have been disregarded. 

  Carried interest (for Real estate funds). As the Study does not take into account 

funds performances, they have been disregarded. 

Excluded fees for life insurance and pension products: 

  Arbitrage fees. They are frequently disclosed and have been collected. However, 
like performance fees, they could not be represented over a 10 year investment 
horizon,  as  no  assumption  was  made  regarding  the  number  of  arbitrages 
occurring over the period. In addition, this fee is usually charged after the first 
arbitrage (meaning that the first arbitrage is free of charge). 

  Biometric risk premiums. Such fees were not disclosed for life insurance products 

with an investment component. 

The availability of products across different channels as well as their respective pricing 
also allowed to identify the principal distribution strategies of the main market players. 
The data collected on fees from different distributors across Member States allowed to 
assess  the  level  of  competition  among  actors  in  each  Member  State,  particularly  on 
price.  It  was  also  be  used  to  compare  online  channels  with  traditional  channels 
(purchase at an agency or through phone) in terms of costs. 

9.3.4   Mystery shopping 

The main goals of the mystery shopping exercise were to collect information on the type 
of  products  proposed  by  the  different  types  of  advisors,  as  well  as  to  assess  how 
suitability  checks  are  carried  out  by  these  advisors.  Mystery  shopping  consists  of 
replicating actual consumers’ experiences, i.e. the experience of retail investors seeking 
advice  before  taking  an  investment  decision.  This  phase  allowed  to  obtain  a  set  of 
objective  data  on  retail  investment  experiences.  To  better  reflect  the  diversity  of 
individuals within the population of retail investors, two distinct profiles have been set 
up  for  shoppers  to  adopt  as  part  of  the  mystery  shopping  exercise.  Each  profile  was 
given a specific background: 

Profile A 

Profile B 

Marital status 

Married professional 

Single professional 

Age 

Profession 

Early 30s 

Teacher 

Mid 50s 

Freelancer 

Education / Degree 

Masters (not Business/Finance) 

Masters (not Business/Finance) 

Household Composition 

Household Salary 

Married, 2 children  
(very young 3 & 5) 

Depends on country 

Divorced, children (grown up) 

Depends on country 

Real Estate Property 

Ownership 

Ownership, mostly paid off 

Amount of savings 

Depends on country 

Depends on country 

Monthly household costs 

Depends on country 

Depends on country 

Investment Objective 

Children’s education (long term) 

Additional pension income (short term) 

Investment duration 

15-20 years 

5-10 years 

April 2018          162 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment level 

10,000 EUR 

100,000 EUR 

Investment experience 

no experience 

Low, only life insurance 

Current local bank 

Depends on country 

Depends on country 

Perceived / self-
determined risk appetite 

Low – medium 

High 

Amount of debt 

High, mortgage 

Low, mortgage mostly paid off 

Ability to bear losses 

Low 

High 

Story 

Unhappy with current bank 
(mortgage), looks for options to 
invest small, regular amounts for 
children’s higher education in 15-
20 years 

Mortgage coming to an end, looks for 
best service to invest to complement 
his/her pension 

Clarification on perceived / self-determined risk appetite: 

Profile A shoppers claimed to have a low to medium risk appetite as their character still 
needs  to  pay  back  the  majority  of  their  mortgage  whilst  wishing  to  save  in  order  to 
finance their children’s higher education. Therefore, it is assumed that profile A has a 
low  ability  to  bear  losses  and  consequently  is  rather  risk  averse.  On  the  other  hand, 
profile B has already mostly paid off the mortgage and no longer has to support children. 
Consequently, it is assumed that profile B is in a position to bear losses and therefore 
used a higher risk appetite.  

  Execution of mystery shops 

Prior to mystery shops being conducted, a list of actors to be targeted by shoppers 
was  established  in  each  Member  State,  based  on  desk  research.  The  list  of 
institutions  aimed  to  cover  the  typical  points  of  distribution  which  would  be 
considered by a retail investor unfamiliar with investment products, who is seeking 
first guidance on this topic. The list of distribution actors covered banks, insurance 
companies,  asset  managers,  IFAs  (in  the  UK  and  the  Netherlands),  and  robo-
advisors  (where  available).  The  banks  and  insurance  companies  targeted  in  the 
mystery shops were the same ones as those covered in the collection of cost and 
charges data. Note that while asset managers were identified in the inception phase 
of this Study as a potential distribution channel, mystery shops highlighted that for 
a  “typical”  retail  investor  with  investment  levels  of  up  to  100,000  EUR,  this 
distribution channel is difficult to access. 

Appointments were then made with advisors from these institutions. 532 mystery 
shops were conducted in total, covering the 10 following Member States: Belgium, 
France, Germany, Italy, Luxembourg, Netherlands, Poland, Spain, Sweden and the 
UK. 

Each mystery shop lasted for 45 minutes on average, and resulted in the production 
of a “contact report”, documenting the points raised and the product data obtained 
as part of the conversation with the advisor. The report features three core sections: 
Suitability check, Availability of information, and Overall impression. The template 
used for the production of these reports is presented below: 

April 2018          163 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
1)  Suitability check 

Did the advisor ask about your: 
Level of education 
Profession or relevant former profession 
Source and extent of your regular income 
Current financial situation in terms of assets 
If yes, what types were you asked about? 

Liquid assets (cash) 
Investments 
Bank savings  
Real estate 
Others 

Current financial situation in terms of regular commitments 

If yes, what types were you asked about? 

Mortgage payments 
Other loans (please indicate type under comments) 
Household costs 
Child support 
Financial security/assurance 
Other commitments (please indicate type under comments) 

Ability to bear losses 
Experience with investments 
Desired duration of investment  
Investment objectives 

If yes, please indicate how this was established 

Risk profile 

If yes, please state the questions you were asked to establish your risk 

profile 

2)  Availability of information 

Did the advisor provide information on: 
The consequences of the risk profile of the proposed investment(s)? 
The associated risks for the proposed investment product(s)? 
Did the advisor proactively inform you of the risks or did you have to 
specifically ask? 
Did the advisor propose multiple products to you? 
How many different products were proposed to you? 
Were exchange traded funds (ETFs) proposed to you? 

Please provide the name(s) of the proposed investment product(s) 
Please indicate what type of products were proposed to you 
If the advisor informed you about product details, what details were you 
provided with? 

Required holding period 
Investment liquidity 
Underlying asset classes 
Maturity period and penalties 
Conditions, in particular costs and charges 

Did the advisor present projections for future performance 
Which overall risk level for the proposed investment product(s) did the 
advisor indicate? 

April 2018          164 

 
 
  
 
 
 
 
 
 
 
  
 
3)  Overall impression 

Shopper assessment: 
Was the information provided clear? 
Did the advisor seem biased? 
Was the advisor proactive in providing information? 
Were you mostly asked open-ended or close-ended questions? 
Did the advisor take time to explain how the proposed investments works? 
Did the advisor proactively provide information on the fees? 
Did the advisor proactively explain to you the different risks related to the 
investment? 
Did the advisor explain how he is compensated/paid for the advice 
provided 
If the advisor was paid by the shopper, what payment options were 
proposed by the advisor? 
Overall assessment of advice received 

Finally,  the  data  points  collected  were  stored  in  a  global  database  to  allow  for  the 
production of cross-country, cross-profile, and cross-channel comparisons. 

  Mystery  shop  analysis: focus on the match between  investor  needs  and 

products offered, for each type of advice 

When  analysing  the  outcomes  of  mystery  shops,  a  particular  focus  was  put  on 
differentiating and comparing different types of advice: 

 

Independent advice (in Member States with a ‘ban on inducements’) against non-
independent advice (in Member States with a ‘ban on inducements’ and several 
other Member States);  

  Face-to-face advice against robo-advice, in Member States where robo-advisors 

were available 

The aim of the exercise was to compare how suitability checks were carried out by each 
type of advisor, as well as to identify potential differences in the quality of the advice 
received based on the channel used. Specifically, we investigated how different types of 
advice  channels  (i.e.  face-to-face  independent  advice,  face-to-face  non-independent 
advice, and robo-advice) influences the match between an investor’s profile and needs, 
and the features of the products he is offered. 

Limitations and challenges  

The mystery shop exercise was planned in such a way that it mimics the behaviour of 
a  retail  investor  who  is  not  familiar  with  investment  products  and  is  seeking  first 
guidance on this topic. While this exercise has been planned to analyse in the best way 
the  advisory  process  and  the  product  suitability,  mystery  shopping  in  the  financial 
services  industry  is  an  inherently  complex  process  with  a  number  of  operational 
challenges: 

  Regarding  the  advisory  process,  the  information  gathered  during  the  mystery 
shopping exercise cannot be considered as fully objective. Nuances in shoppers’ 
individual  judgment,  financial  knowledge,  and  investment  experience  will 
necessarily influence results. In addition, the duration of their interactions with 
advisors (45 min on average), makes it difficult to capture all the features of the 
advice, and may result in shoppers being subject to information overload. 

April 2018          165 

 
 
  
 
 
 
 
 
 
 
 
 
 
  Given  the  complexity  of  financial  service  offerings  and  terminology,  shoppers 
may  have  an  inconsistent  understanding  and  interpretation  of  the  mystery 
shopping requirements. To prevent such variations, briefings and trainings were 
given  to  each  shopper  before  starting  the  different  shops  and  assistance  was 
provided to them on a day-to-day-basis. The briefing material was designed to 
ensure consistency across Member States. 

 

In  order  to  convey  a  realistic  portrayal  of  a  non-sophisticated  retail  investor, 
shoppers  were  briefed  not  to  be  too  probing  on  issues  that  require  a  more 
developed understanding of financial products, e.g. types of risk associated with 
specific products or incentive structures of distributors.   

  To  improve  comparability  and  avoid  (as  much  as  possible)  the  subjectivity  of 
shoppers’  interpretation,  shoppers  had  to  complete  a  so-called  contact  report 
that provided a list of pre-defined options related to the various categories to be 
assessed.  But  as  closed-ended  questions  are  not  adapted  to  capture  more 
detailed  nuances  from  the  advisory  process,  shoppers  were  invited  to  provide 
open-ended comments where appropriate.  

  The mystery shops covered a first contact and the conclusions drawn from the 
mystery  shops  reflect  the  information  and  advice  given  by  the  agent  of  the 
financial institution during this first contact point. In each case, shoppers were 
invited to reflect on the information and advice provided, and a second meeting 
was  suggested  to  continue  with  the  investment  process.  For  the  sake  of  this 
Study,  we  consider  “advice”  to  be  given  when  the  specific  name(s)  of  one  or 
more individual products were proposed as suitable options for the shopper. 

  Advisors may not have asked the all the different questions directly (e.g. level of 
investment experience), if they felt that they could  infer the answers  to those 
questions based  on the rest of the conversation. Our shoppers, however,  only 
considered  a  topic  covered  when  it  had  been  specifically  raised  during  the 
discussion they had with the advisor. 

  Please  also  note  that  shoppers  did  not  always  receive  exhaustive  information 
regarding the products, for instance advisors did not always provide the complete 
documentation related to the recommended investments (e.g. brochures).  

  The  assessment  given  by  the  shoppers  can  also  be  slightly  skewed  by  factors 
that have little importance in terms of suitability of advice but might influence 
the shoppers’ feedback (e.g. the advisor’s friendliness).  

  Concerning financial products that do not fall under the scope of this Study, e.g. 
saving  plans  or  other  products  that  do  not  have  an  investment  component, 
shoppers were briefed to emphasize that their specific interest was in investment 
products with a higher return than a savings account. 

  At the end of the meetings with advisors, the shoppers had to give their personal 
evaluation of the advisory process (e.g. whether the provided information was 
clear or not, if the advisor was proactive in providing some information such as 
fees  and  risks).  While  these  kind  of  information  added  quality  to  the  advisory 
assessment,  they  are  very  subjective  and  depend  highly  on  the  shopper’s 
judgment. Therefore, any comments on the “Overall assessment” section have 
to be interpreted carefully. 

  When  computing  and  designing  the  final  analysis  of  the  results,  sanity  checks 
were  put  in  place  to  ensure  that  shoppers’  outputs  were  complete  and 
comprehensible. If need be, further clarifications were requested from shoppers.   

April 2018          166 

 
 
  
 
 
 
 
 
 
 
10 Annex  2:  Additional  information on Overview  of  costs  and  charges  of investment 

products 

This annex provides additional information on the costs and charges of investment products collected. Beyond the median value that 
is already shown in section 4, the below table also provide the average value and the mode value.  

April 2018          167 

 
 
  
 
 
 
 
 
 
 
 
 
 
  
April 2018          168 

Member StateNumber of share classes analysed MedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin3,00%1.50%0,15%0.20%1.00%5.00%1.02%0.10%5.00%0.07%0.09%0.09%0.73%0.09%0.09%0.17%1.50%0.53%1.11%0.03%0.53%0.22%1.00%0.50%1.00%0.03%2.00%0.72%2.00%0.11%3.00%0.40%0.83%1.00%0.40%0.34%1.00%0.95%0.10%0.11%0.80%0.10%3.00%4.00%1.30%0.23%0.23%0.60%0.88%0.20%3.00%3.00%1.45%0.20%0.20%0.50%5.00%3.00%1.06%0.50%0.50%0.04%0.05%0.05%0.95%0.05%0.05%0.30%0.63%0.23%Exit feesNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot applicable0.09%0,09%#N/A0.40%0,40%#N/A1.50%1,79%1,00%0.48%0,54%0,35%0.56%0,51%0,56%0.43%0,48%#N/A0.35%0,47%0,35%0.30%0,33%0,17%0.31%0,39%0,31%1.00%1,36%0,50%3.00%3,29%3,00%0.25%0,32%0,23%0.45%1,23%0,23%0.91%0,92%0,90%0.80%0,90%#N/A0.05%0,05%0,05%0.05%0,05%0,05%2.00%1,88%3,00%1.00%0,68%1,00%1.00%1,04%1,00%1.00%1,64%1,00%0.16%0,25%0,15%0.53%0,53%#N/A1.00%0,88%1,50%2.00%2,00%#N/A0.10%0,15%0,07%1.00%1,00%1,00%5.00%5,00%5,00%0.48%0,54%0,48%0.45%0,59%#N/A0.09%0,09%#N/A0.43%0,44%#N/A328DenmarkEstoniaFranceGermanyItalyLuxembourgNetherlandsPolandPortugalRomaniaSpainSwedenUKEntry feesBelgium70.30%0,64%0,30%Ongoing charges 0.59%0,62%0,63%0.35%0,45%0,10%11351321Money market funds14108Czech Republic3015710 
 
  
 
 
 
 
 
 
 
 
 
April 2018          169 

Member StateNumber of share classes analysed MedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin3.00%2.50%0.30%0.50%5.00%5.00%2.03%0.10%1.00%0.25%0.80%0.50%1.15%0.08%0.05%0.20%5.00%5.00%1.95%0.30%0.17%0.35%4.50%1.67%0.15%0.10%6.00%1.50%2.04%1.00%0.50%0.21%6.00%3.50%2.25%0.50%0.40%0.27%4.00%1.00%2.24%1.50%0.50%0.39%5.75%1.00%2.33%0.10%0.10%0.10%5.00%5.00%3.56%0.75%0.75%0.67%6.00%2.00%2.35%2.00%0.50%0.52%5.00%3.00%2.05%1.50%0.50%0.60%6.38%5.00%2.61%1.00%0.20%0.10%5.00%1.00%1.95%0.15%0.15%0.11%5.25%5.00%1.44%1.00%5.00%0.28%Not applicableNot applicable0.90%0,99%0,80%Estonia413,00%2,85%5,00%2,00%1,76%2,00%1.35%1,32%1,69%92UKSweden783,00%2,63%3,00%1,00%0,82%1,00%0.81%0,85%0,40%184Spain3,00%2,59%3,00%Romania263,50%3,79%5,00%2,00%1,90%3,00%1.09%26PortugalPoland372,50%2,53%64NetherlandsLuxembourg862,00%2,16%135Italy1,50%1,00%0,76%1,00%1.08%1,26%0,92%Germany533,00%3,44%3,00%1,50%1,35%1,50%1.07%70France1,04%0,72%Denmark24Belgium71Czech Republic841,00%0.93%0,99%0,89%1,97%1,00%Entry feesExit fees5,00%4,09%5,00%Bond funds Ongoing charges 0.66%0,71%0,66%5,00%5,00%#N/A3,00%2,93%1,00%0.68%0,75%0,49%1.10%1,17%1,53%1.03%1,08%1,01%1.52%1,70%1,51%1,19%0,82%2,20%1,93%0,40%0,10%0,20%0,05%0.70%0,73%1,07%0.98%0,86%0,40%1.30%1,33%1,40%3,00%3,21%3,00%1,00%1,13%1,00%1,00%0,67%1,00%3,00%2,00%2,58%0,75%1,00%1,39%1,00%2,00%2,13%2,50%3,00%3,27%3,00%2,50%2,38%2,50%0,31%0,33%0,50%2,50%2,28%2,50% 
 
  
 
 
 
 
 
 
 
 
 
 
 
April 2018          170 

Member StateNumber of share classes analysed MedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin5.75%3.09%2.00%1.00%6.00%6.00%2.80%2.00%5.00%0.95%3.00%2.00%2.80%0.10%0.10%0.55%5.75%5.00%2.85%1.00%0.50%1.26%6.00%1,00%3.40%1.00%0.50%0.75%8.00%5.00%2.80%3.00%1.00%0.94%5.00%0.40%2.86%1.50%0.40%1.03%3.00%1.00%3.61%2.00%0.50%1.23%6.38%3.00%2.72%0.10%0.10%0.45%5.50%5.00%4.66%2.00%2.00%1.72%5.00%5.00%3.82%2.00%0.91%0.50%5.00%5.00%4.16%2.00%2.00%1.20%10.00%4.00%3.67%1.00%0.50%0.14%5.75%2.50%3.30%0.25%0.25%0.20%5.25%5.00%1.87%1.00%5.00%0.48%Not applicableEntry feesExit feesEquity funds Ongoing charges Czech Republic1763,00%3,78%3,00%5,00%5,01%5,00%1,86%1,89%1,70%1,01%0,93%Belgium1392,50%2,96%2,50%1,96%1,96%2,01%UK1414,00%3,64%5,00%5,00%5,00%5,00%0,94%2,08%1,85%Sweden1915,00%3,87%5,00%1,00%1,06%1,00%2%1,66%1,55%Spain1815,00%4,81%6,38%2,00%2,05%2,00%2,12%2,15%2,00%Romania345,00%4,38%5,00%2,00%3,00%2,00%2%2,21%1,68%Portugal383,00%3,56%3,00%1,00%1,48%1,00%2,17%1,22%1,06%Poland904,50%4,01%5,00%4,00%3,46%2,25%4%3,60%4,03%Netherlands865,00%3,97%5,00%1,00%0,74%1,00%1,10%2,11%2,07%Luxembourg1452,00%2,32%2,00%0,50%0,65%0,50%2%1,94%1,98%Italy1054,00%3,76%4,75%0,40%0,40%0,40%2,07%1,80%1,20%Germany1005,00%5,00%5,00%2,00%2,67%1,00%2%1,77%1,40%France1932,50%2,56%2,50%0,75%0,75%0,50%1,80%1,70%2,80%Estonia993,00%3,21%5,00%1,00%1,95%1,00%2%2,00%2,80%Denmark400,30%0,52%1,00%0,31%0,67%0,20%1,54% 
 
  
 
 
 
 
 
 
 
 
 
 
 
April 2018          171 

Member StateNumber of share classes analysed MedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin5.50%2.00%1.50%0.87%5.00%5.00%2.84%1.00%2.00%0.50%1.00%1.00%1.97%0.15%0.05%0.82%5.75%1.03%2.20%0.53%0.53%0.70%6.00%3.23%0.50%0.03%8.00%3.00%3.57%1.50%0.50%0.45%4.00%2.90%2.65%1.50%1.75%1.29%3.00%1.00%2.93%2.00%0.50%0.63%5.00%1.00%1.33%0.08%0.05%0.29%5.00%5.00%4.26%1.63%1.63%0.20%5.00%5.00%3.30%1.05%1.00%0.73%5.00%5.00%5.20%2.00%2.00%0.62%6.38%5.00%4.00%1.00%0.10%0.19%5.75%2.00%2.30%1.00%1.00%0.20%5.25%5.00%1.91%1.00%5.00%0.44%Sweden505.00%3,43%5,00%1.00%1,17%1,00%1.36%Romania205.00%4,50%5,00%4.00%4,00%4,00%1.76%Poland424.00%3,77%5,00%3.25%3,38%2,00%3.26%Luxembourg712.00%2,31%2,00%0.50%0,71%0,50%1.78%1,54%1,00%Germany985.00%4,46%5,00%2.00%1,64%2,00%1.70%1,69%1,77%France1062.00%2,16%1,00%Not applicable1.49%1,37%0,95%Estonia271.03%1,97%1,00%1.00%0,98%1,00%1.59%Spain2485.00%4,54%5,00%3.00%2,83%3,00%1.21%Portugal232.00%2,18%2,00%1.00%1,62%1,00%1.60%Netherlands200.18%1,76%5,00%0.11%0,20%0,08%0.82%Italy483.50%3,04%4,00%2.13%2,23%2,00%1.87%Denmark170.33%0,53%1,00%0.32%0,50%1,00%1.36%Czech Republic723.00%3,35%5,00%5.00%4,50%5,00%1.76%UK110Ongoing charges Exit feesEntry feesMixed funds Belgium373.00%2,87%3,00%Not applicable1.57%1,55%1,25%1,72%1,76%1,40%1,56%1,89%1,88%0,79%0,29%1,69%#N/A1,32%0,62%5.00%4,40%5,00%5.00%5,00%5,00%1.02%1,10%1,05%1,80%1,71%3,01%4,02%1,90%1,76%1,29%0,51% 
 
  
 
 
 
 
 
 
 
 
 
 
 
April 2018          172 

Member StateNumber of share classes analysedMedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin5.50%2.52%2.50%1.71%5.00%5.00%1.86%1.50%5.00%0.42%5.00%1.00%1.84%5.00%1.00%0.09%6.00%2.90%1.90%1.25%6.00%7.00%1.86%3.00%3.00%0.50%5.00%1.90%3.00%1.98%5.00%1.98%5.00%0.23%01.75%2.00%1.21%0.50%0.25%0.35%0.25%0.25%2.01%0.25%0.25%0.85%1.21%0.74%Not availableNot availableNot availableNot available011075.00%5,00%5,00%120Not availableNot availableNot applicable3,00%3,35%3.00%Not applicable51.50%1,31%1,50%2.00%1,65%2,00%1.16%0,98%50.25%0,25%#N/A0.25%0,25%#N/A1.50%1,46%24.00%4,00%#N/A1.94%1,94%5,00%#N/A1.00%1,00%#N/A0.97%0,97%#N/A275.00%5,00%5,00%4.00%4,50%3,00%1.01%0,97%0,50%2.09%2,01%2,10%LuxembourgNetherlandsPolandPortugalRomaniaSpainSwedenUKDenmark0Not availableNot availableNot availableNot applicableNot availableCzech RepublicEstoniaFranceGermanyItaly23.25%3,25%#N/A5.00%5,00%#N/A1.14%1,14%#N/A25.00%Real estate  funds Ongoing charges Exit feesEntry feesBelgium52.50%3,70%2,50%Not applicable2.42%2,22%#N/A#N/A0.84%0,90%0,74%Not applicableNot applicableNot availableNot available#N/A#N/A#N/A0,87%0.73%Not availableNot availableNot available 
 
  
 
 
 
 
 
 
 
 
 
 
 
April 2018          173 

Member StateNumber of share classes analysedMedianMeanModeMaxMinMedianMeanModeMaxMin1.00%0.74%1.00%0.07%1.00%0.60%0.54%0.45%0.40%1.20%0.20%0.09%1.40%0.85%1.10%0.12%2.19%0.75%1.00%0.07%0.90%0.48%0.40%0.30%1.85%0.74%0.36%0.01%0.20%0.91%0.17%0.09%0.52%0.45%0.20%0.09%0.70%0.99%0.35%0.05%0.50%0.70%0.45%0.10%0.35%1.00%0.35%0.07%Not availableNot availableNot availableNot available1.00%1,01%1,00%0.20%0,25%0,20%0.25%0,28%0,20%0.35%0,42%0,30%0.35%0,35%0,35%0.23%0,32%0,49%1.00%0,84%1,00%0.30%0,34%0,20%0.45%0,46%0,45%0.41%0,41%0,60%0.45%0,44%0,45%0.14%0,21%0,12%0.60%0,52%0,60%0.59%0,60%0,56%1.20%1,18%1,20%0.30%0,37%0,30%0.75%0,76%#N/A0.53%0,53%#N/A0.20%0,19%0,20%0.30%0,34%0,20%0.70%0,66%0,70%0.39%0,39%#N/A13917791211220006610556016761.00%1,00%1,00%0.46%0,49%0,46%Execution fees Ongoing charges ETFsSwedenUKBelgiumNot availableNot availableCzech RepublicDenmarkEstoniaFranceGermanyItalyLuxembourgNetherlandsPolandPortugalRomaniaSpain 
 
  
 
 
 
 
 
 
 
 
 
 
April 2018          174 

Member StateNumber of distributors analysedMedianMeanModeMaxMinMedianMeanModeMaxMin0.50%0.15%0.09%0.15%0.53%0.60%0.04%0.15%0.30%0.38%0.04%0.17%0.20%0.84%0.10%0.10%1.44%0.30%0.54%0.16%1.25%1.50%0.50%0.13%0.60%0.80%0.20%0.35%1.09%0.25%0.50%0.15%0.17%0.13%0.08%0.13%0.99%0.60%0.35%0.24%0.65%0.37%0.20%0.20%1.00%0.19%0.10%0.19%2.00%1.00%0.35%0.13%0.50%0.84%0.10%0.05%0.58%0.10%0.29%0.10%Execution fees Custody fees100.60%0,84%0,60%0.70%0,55%0,70%30.41%0,43%#N/A0.10%0,10%#N/A30.17%0,14%#N/A0.13%0,13%#N/A70.43%0,41%0,45%0.30%0,30%#N/A1,40%0.29%0,26%0,30%70.30%0,38%0,50%0.40%0,49%0,40%60.48%0,39%0,50%0.45%0,45%#N/A50.40%0,38%0,40%0.15%0,15%0,15%70.15%0,17%0,15%0.27%0,28%0,25%81.38%1,25%20.67%0,67%#N/A0.42%0,42%#N/A30.12%0,41%#N/A0.19%0,19%#N/A70.50%0,65%0,50%0.16%0,38%#N/A51.00%0,83%1,00%0.20%0,20%0,15%50.15%0,23%0,04%0.30%0,31%#N/A60.20%0,17%0,20%0.20%0,29%#N/ALuxembourgNetherlandsPolandPortugalRomaniaSpainSwedenUKBelgiumCzech RepublicDenmarkEstoniaFranceGermanyItalyBonds  
 
  
 
 
 
 
 
 
 
 
April 2018          175 

Member StateNumber of distributors analysedMedianMeanModeMaxMinMedianMeanModeMaxMin1.00%0.24%0.35%0.24%0.80%0.72%0.11%0.06%0.75%0.38%0.25%0.16%0.35%0.84%0.20%0.12%1.44%0.30%0.54%0.16%1.80%1.50%1.00%0.13%0.90%0.80%0.20%0.35%1.85%0.25%0.45%0.15%0.17%0.13%0.08%0.13%0.95%0.60%0.40%0.24%0.65%0.37%0.20%0.20%0.40%0.19%0.40%0.19%0.70%1.00%0.60%0.13%0.50%0.84%0.05%0.20%0.41%0.10%0.29%0.10%10.40%0,40%#N/A0.19%0,19%#N/A70.45%0,33%0,50%0.45%0,50%#N/A51.00%1,04%0,45%0.20%0,20%0,15%20.68%0,68%#N/A0.42%0,42%#N/A60.20%0,24%0,20%0.25%0,32%#N/A71.00%1,16%1,00%0.16%0,38%#N/AExecution fees Custody fees0.40%0,43%#N/A0.24%0,29%#N/A100.60%0,62%0,60%0.70%0,55%0,70%30.35%0,35%#N/A0.10%0,10%#N/A30.17%0,14%#N/A0.13%0,13%#N/A70.45%0,42%0,20%0.29%0,29%0,20%81.38%1,25%1,40%0.29%0,26%0,30%70.35%0,48%#N/A0.40%0,49%0,40%51.00%0,84%1,00%0.24%0,24%#N/A70.75%0,68%0,75%0.25%0,25%#N/A5PortugalRomaniaSpainSwedenUKCzech RepublicDenmarkEstoniaFranceGermanyItalyLuxembourgNetherlandsPolandBelgiumListed equities  
 
  
 
 
 
 
 
 
 
 
 
April 2018          176 

Member StateNumber of data pointsMedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin4.50%1.50%1.00%0.09%1.50%0.50%1.00%0.04%5.00%0.96%2.00%0.60%4.00%2.15%3.85%1.50%1.05%0.17%3.00%1.20%2.00%1.20%2.50%1.50%1.20%1.50%1.00%0.50%2.60%4.00%1.10%2.60%4.00%0.30%030020002.00%1,79%#N/A0.27%0,27%#N/A1.50%1,33%1,50%3.00%2,67%3,00%1.20%1,20%1,20%0.70%0,70%#N/A4.00%4,00%Not availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot available#N/A2.60%2,60%#N/A1,25%#N/A1.00%0,93%1,00%Not applicableNot applicableNot availableNot applicableNot availableNot available92.75%2,56%3,00%102.00%2,00%#N/A1.25%Not available4.00%3,84%3,00%Life insurance with guaranteed capitalOngoing charges Exit feesEntry fees16102.50%2,56%2,50%0.18%0,35%0,09%0.80%0,81%0,80%300SwedenUKFranceGermanyItalyLuxembourgNetherlandsPolandPortugalRomaniaSpainBelgiumCzech RepublicDenmarkEstoniaNot applicable1.79%1,74%#N/A 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
April 2018          177 

Member StateNumber of data pointsMedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin5.00%1.00%2.00%1.00%0.60%0.12%3.00%0.38%1.85%0.16%0.13%0.05%5.00%1.00%2.00%0.70%5.60%2.10%4.50%0.74%0.54%1.08%5.00%2.00%1.20%1.00%2.00%0.70%0.50%0.50%0.92%0.50%0.50%0.25%3.00%4.37%2.00%0.99%1.50%3.00%2.00%0.25%0.50%0.01%5.00%2.20%1,90%2,20%2.20%3.50%1.00%1.00%0.35%1.64%0.55%126261417020120.50%0,50%#N/A0.50%0,50%#N/A0.65%0,62%0,65%2.35%2,58%#N/A0.95%1,21%1,75%2.00%2,34%1,00%1,00%1.03%0,94%0,96%4.00%3,84%3,00%0.95%0,90%0,85%1.09%1,09%#N/A2.50%2,43%2,00%2.14%2,40%1,50%5.00%4,19%5,00%1.75%1,87%1,00%0.90%0,76%1,00%1.00%1,27%1,00%1.00%1,03%1,50%3.00%2,56%3,00%2.00%2,00%2,00%1.00%1,00%1,00%Not availableNot availableNot availableNot availableNot availableNot availableNot availableNot available0.90%0,94%0,85%0.38%0,35%0,38%0.69%1,32%0,38%LuxembourgNetherlandsPolandPortugalRomaniaSpainSwedenUKBelgiumCzech RepublicDenmarkEstoniaFranceGermanyItalyLife insurance without guaranteed capitalOngoing charges Exit feesEntry fees400015021Not availableNot availableNot availableNot availableNot availableNot availableNot applicableNot applicableNot applicableNot applicableNot available2.50%3,18%2,50%1.00%0,96% 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
April 2018          178 

Member StateNumber of data pointsMedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin7.00%3.50%1.20%5.00%3.50%0.07%1.00%1.00%3.00%0.95%2.00%0.67%1.00%1.45%1.00%1.45%5.00%1.55%3.50%0.70%1.50%0.25%1.50%0.25%2.50%0.05%3.50%0.30%0.05%0.82%4.50%1.20%1.50%1.20%3.00%1.50%0.48%0.50%0.65%0.48%0.11%0.54%0.11%0.54%0.88%2.00%0.88%1.25%1.50%0.07%4.00%1.25%4.00%1.11%207433313030130.88%0,88%#N/A2.75%2,08%#N/A0.96%0,93%0,70%4.75%4,31%3,50%1.68%1,49%#N/A1.00%1,77%#N/A0.05%0,05%#N/A3.50%3,50%3,50%5.00%4,81%6,00%2.50%2,50%#N/A1.00%1,00%#N/A1.45%1,45%#N/A0.18%0,45%0,12%0.81%0,81%#N/APension products with guaranteed capitalOngoing charges Exit feesEntry fees142Not applicableNot applicableNot applicableNot applicableNot applicableNot applicableNot availableNot availableNot available1.00%1,00%#N/A1.50%1,50%#N/A0.25%0,25%#N/A1.20%1,20%1,20%3.00%3,00%#N/ANot applicableNot applicableNot applicableNot applicableNot availableNot availableNot availableNot applicableNot applicable0.11%0,11%#N/A0.54%0,54%#N/A1.18%1,18%#N/A4.00%4,00%#N/APortugalRomaniaSpainSwedenUKCzech RepublicDenmarkEstoniaFranceGermanyItalyLuxembourgNetherlandsPolandBelgium1.50%1,22%1,50%0.48%0,48%#N/A1.63%1,63%#N/A1.10%1,04%1,50% 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
April 2018          179 

Member StateNumber of data pointsMedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin3.00%0.50%1.35%6.00%0.50%0.89%1.00%0.40%2.00%1.07%1.70%0.06%1.00%1.00%1.50%1.00%1.00%1.00%0.96%5.00%0.80%3.50%2.68%2.00%0.26%0.19%4.50%1.20%1.50%1.20%3.15%2.99%0.18%0.42%2.50%1.50%2.00%1.50%1.25%0.50%0.50%4.01%0.17%1.95%1.60%0.19%2.98%1.92%1.00%0.06%0.70%4.51%0.70%1.27%6Not applicableOngoing charges Exit feesEntry feesPension products without guaranteed capital1.62%2,24%#N/A0.70%0,70%#N/A1.46%1,39%2,00%2.08%1,71%2,68%2.00%2,00%#N/A1.38%1,38%#N/A1.13%1,19%#N/A1.85%1,85%#N/A4.38%4,28%3,50%0.96%0,94%0,96%0.50%0,50%#N/A1.25%1,19%1,25%0.71%0,66%0,86%3.00%3,71%3,00%0,29%#N/A2.96%2,78%1,95%1.08%1,04%1,08%2.49%2,24%#N/A1.50%1,28%1,50%4.00%3,50%4,00%1.20%1,20%1,20%2.00%1,88%2,00%1.75%1,64%0,18%1.50%1,33%1,50%1.00%1,00%1,00%1.00%1,00%1,00%Not applicableNot applicableNot applicableSwedenUK12401231502112026141710410FranceGermanyItalyLuxembourgNetherlandsPolandPortugalRomaniaSpainBelgiumCzech RepublicDenmarkEstoniaNot applicableNot applicableNot applicableNot applicableNot applicable0.19%1.00%0,80%1,00%Not applicableNot applicableNot availableNot availableNot availableNot availableNot availableNot availableNot applicable 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
April 2018          180 

Member StateNumber of data pointsMedianMeanModeMaxMinMedianMeanModeMaxMinMedianMeanModeMaxMin3.00%6.00%3.00%3.00%5.00%0.30%1.70%1.45%1.70%0.15%1.00%1.12%1.50%1.00%1.00%0.30%0.52%2.10%0.20%0.96%2.50%1.00%1.42%2.50%1.00%0.78%0.75%0.75%1.51%0.75%0.75%0.15%3.83%3.10%3.83%0.20%3.50%2.50%2.00%1.00%2.00%0.10%1.00%1.00%1.51%1.00%1.00%0.01%0450BelgiumCzech RepublicDenmarkEstoniaFranceGermanyItalyLuxembourgNetherlandsPolandPortugalRomaniaSpainSwedenUK1703800Pension mutual funds Ongoing charges Exit feesEntry fees9722572100.19%0,29%0,15%0.75%0,75%0,75%0.75%0,75%0,75%0.40%0,67%#N/A1.70%1,70%#N/A0.52%0,41%0,52%1.00%1,25%1,00%3.00%2,50%3,00%5.00%5,32%5,00%1.05%1,12%0,96%2.00%1,91%1,50%3.83%3,83%#N/A0.53%0,65%0,01%1.00%1,00%1,00%1.00%1,00%1,00%2.50%2,35%2,50%2.25%2,25%2,00%1.44%1,32%1,44%2.50%2,50%2,50%1.00%1,00%1,00%1.14%1,16%#N/A1.00%1,00%1,00%1.00%1,03%1,00%1.15%1,00%1,20%Not availableNot availableNot availableNot applicableNot applicableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot availableNot applicable 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
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DOI: 10.2874/037900 
ISBN 978-92-79-66737-4 

April 2018          181