HM Treasury Consultation
PRIIPs and UK Retail Disclosure

ShareSoc Response  

A key element of ShareSoc’s activities is lobbying Government/regulators and campaigning for change, to improve the lot of individual investors. One way we do this is by responding to Government consultations.

We recently responded to the Treasury consultation on PRIIPS and UK Retail Disclosure which closed on 3rd March 2023.

We made the following key points:

We are pleased that the Government is doing this consultation. We agree with the logic set out in the Minister’s foreword and in particular with the statement that “Retail participation in UK capital markets makes them fairer, more open, and more liquid. The UK has a significant and rapidly growing retail investment market.” We support the government’s actions to further increase retail investor inclusion in new capital raises.

We find it very disappointing that the current regulatory regime (in respect of all investing, not only PRIIPs) with its Principles and Guidance on Treating Customers Fairly is not working, and we agree that radical change is required. For many firms, this will require a significant shift in culture and behaviour. Better and more effective PRIIPs regulation is just one part of this process.

The Minister has highlighted many flaws in the existing PRIIPs regulations. Whilst convenient to blame the EU for the mess with KIDs, it is pertinent that the UK was a member of the EU at the time the regulations were introduced and was party to the discussions which resulted in the introduction of KIDs.

The shortcomings of KIDs were flagged in the media at the time they were introduced (Risk, the retail investor and disastrous new rules – John Kay, FT; 19.1.2018). The UK’s regulators must surely take some blame for acquiescing to the evident nonsense of the KID system.

There is serious need for cultural change in the financial services industry. This is not a new issue. There is valid cause for concern about the reputational integrity of the financial services sector. The highly credible 2021 Edelman Trust Barometer in Financial Services shows it to be the second most distrusted industry; second only to social media.

For too long, retail consumers of financial products and services have been treated unfairly. Too often, the financial services industry has exploited weaknesses in the financial education, knowledge and behavioural biases of customers to charge excessive fees and deliver unsuitable products.

We recommend the underpinning principle that consumer information for retail disclosures to be “fair, true and not misleading” should be better enforced.  

We also recommended better education of investors:

The UK sits in the bottom half of OECD numeracy skills rankings (Low adult numeracy is holding the UK back – FT 3rd November 2021). It is also estimated that just under half of working-age adults in the UK have numeracy skills lower than those expected of an 11 year-old child (How much is bad maths costing Britain? – FT 1st July 2021).

We need to get more people into passive ETFs and use simple language that the person in the high street understands (e.g. “Vanguard first”, and interactive’s quick start funds see ).

It is time for a call to arms on financial literacy, guidance, advice and education. Four different government-sponsored bodies profess to offer financial guidance, but not one of them explains the compounding consequences of paying ad valorem fees; not one of them explains the conflicts of interest embedded in the financial advice and product industries; not one of them offers a holistic approach to the chore of personal money management . These points were made in a letter published in the FT, from former UKSA Chair, John Hunter (Britain needs new ways to teach financial literacy; FT Letters 16.12.22).

There are signs of progress from some parts of the industry. For example, the enlightened sponsors of ShareSoc Investing Basics videos, The London Stock Exchange, who held the launch event for Investing Basics, and the Mail whose This is Money is ShareSoc’s media partner aiming to maximise the viewing of these free to view videos.

There are also significant gender diversity issues in respect of investing. Women are under-represented in the industry. They are less likely to invest in shares. See for further background and data, e.g. “Currently 86% of asset managers admit their default investment customer is a man and 73% state that their products are primarily aimed at men.” These issues impact on PRIIPs regulation.

The consultation paper can be read here

Our full response can be read here

This is a ShareSoc news item.

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