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ABI Research into new KID on the block

The ABI has published results of consumer research which will help inform the key information document (KID) being developed for Packaged Retail Investment Products (PRIPs). 

The research was designed to explore how best to present information on investments and returns to consumers, to help improve their understanding and encourage reasonable expectations.  

On 17 September MEPs will be voting on proposals in draft Regulation on PRIPS, which would require firms selling PRIPs products to produce a new key information document (KID) for investors.  These proposals are based on the disclosure document already in place for Undertakings for Collective Investments in Transferable Securities (UCITS) funds. 

The ABI research shows that the UCITS document is a useful starting point for developing better disclosure for other investment products.  However, the difference between UCITS funds and PRIPs products needs to be recognised and reflected during the upcoming discussions on the PRIPs proposals. PRIPs products are a substantially different proposition from investing in a single UCITS fund. A unit-linked investment product, for example, can offer investment into dozens of different funds.

Only if this distinction is recognised, will there be progress in producing disclosure documents that provide meaningful, relevant information to customers. The ABI is concerned that MEPs have not yet addressed this sufficiently, and further work is required on the amendments to ensure the Regulation delivers this for consumers. 

The ABI’s research showed that:

  • The format of UCITS disclosures was popular with consumers and contained much of the information that they wanted.
  • The key sections of the document: charges, past performance and risk and reward, were rated helpful or very helpful by approximately 80% of consumers.
  • In addition to these sections, consumers want information about future performance but more research will be necessary to determine how best to present it.
  • Consumers are both wary of investing and acknowledge that basic savings rates are at all-time lows – which leave them uncertain what to do. Estimating risk is a key issue (both in terms of risk to capital and investment risk).
  • Overall, the test documents were received extremely well, with respondents being pleasantly surprised at their reasonably short length and clarity.

Maggie Craig, Director of Financial Conduct Regulation at the Association of British Insurers said:

"We welcome the EU initiative to improve information for consumers about investment products.  However, the original proposals, and many subsequent amendments proposed by MEPs, fail to recognise the important distinction between a fund, and a product. Unless this is addressed we will not make genuine progress in producing document that provide consumers with meaningful information about products.

"The KID is intended to give consumers the key information they need to make an informed decision about purchasing a product, in a short, easy to understand document. Our research shows that less is more and consumers do want short documents in plain English.”

Download the document (pdf 3.9MB)

Last updated 01/07/2016