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The Packaged Retail and Insurance-based Investment Products, also known as PRIIPs, have made their way to the front scene and entered our everyday language. In the course of the year, the word “PRIIPs” may feel as natural as “pen” or “press print”, at least to professionals in the affected industries.
PRIIPs rarely come alone. From January 2018, all entities in the EU advising on or selling PRIIPs will be required to provide a Key Information Document (KID) to their retail investors. This document will only be a couple of pages long and should give anyone, especially those without a financial background, a clear understanding of the costs and risks involved in a specific financial instrument, along with a description of the product and its investment objectives. Different stakeholders within the financial industry are impacted, and as in every family, the new KID will bring joy and amusement and also some logistical challenges that do require proper planning and preparation.
The most effected trio are above all asset managers, banks and the insurance industry. These three sectors will now have to find brand new ways to cooperate and share responsibilities, to make sure they are all compliant with the PRIIPs regulation in nine months from now. Each member of this parenting trio depends on the others to be ready on time, and they will have to define who will produce and provide what level of information for the final KID to be strong and healthy. This is a fresh challenge, and not just for banks.
The slow birth of KIDs for PRIIPs
Last spring, before the European Commission decided to postpone the initial implementation date for PRIIPs by one year, Deloitte conducted a survey among asset managers, banks and the insurance sector to check their PRIIPs readiness. The survey indicated that at that time in the process, the different industries were far from ready for the PRIIPs KID. A lot of open questions remained as for who should do what in the nesting phase. On 8 March 2017, the European Commission published a revised draft of the PRIIPs Regulatory Technical Standards which shed light on certain complex aspects, and banks are now getting ready to work on their new KID checklist.
It is beyond doubt that the intentions behind the PRIIPs regulation are good. As for other new regulations such as the MiFID review, the overarching goal is to enhance investor protection, in other words to protect retail investors from making financial investments without understanding the risks and potential consequences. The decade that has passed since the financial crisis has above all been marked by an increased level of regulation, with a clear focus on protecting the investors and reducing the risks for another crisis. The PRIIPs KID is a result of this.
At Deloitte, we have built up all the expertise you will need to prepare for a new KID, and are ready to assist you in your ups and downs during the nine exciting months to come. We will also be there afterwards to help you take care of little PRIIPs KID. We know the whole PRIIPs KID family and would be happy to introduce you, because we want you to have a healthy 9 months ahead.