The European Union’s Retail Investment Strategy (RIS) is nearing final approval. Two features merit attention in Canada: its focus on whether investment products deliver value for money and its effort to impose greater accountability when firms use financial influencers, or “finfluencers,” to promote investments.
The RIS would require firms to assess product costs, charges, performance and other benefits, including through comparisons with similar products. Supervisory benchmarks would play a role in parts of the framework and could help regulators identify products warranting closer scrutiny. The objective is not simply to make fees more visible, but to require firms to consider whether investors receive reasonable value from the products they manufacture or distribute.
Canadian regulators have improved cost transparency and require costs to be considered in suitability assessments. These measures, however, do not amount to a value-for-money assessment. Suitability asks whether a product is appropriate for a particular client, taking account of the client’s circumstances and reasonably available alternatives; value for money asks whether the product’s costs are justified by its performance, services and other benefits. A separate issue is who makes that determination. Disclosure leaves investors to assess value for themselves, whereas a value-for-money framework would place a clearer responsibility on firms to assess value when designing, approving and reviewing products.
The RIS would also require firms that use finfluencers to have written agreements and oversee their promotional activities. This recognizes that firms benefit when online personalities market their products and should not be able to distance themselves from misleading or non-compliant promotions. Clear oversight obligations could also help ensure that advertising standards apply consistently across traditional and social-media channels.
In Canada, existing securities laws—including registration, disclosure and marketing requirements—apply to finfluencers and to firms that work with them. The RIS would go further by expressly requiring written arrangements and oversight when firms engage finfluencers for marketing. Canada does not currently have an equivalent set of finfluencer-specific requirements at the national level.
Canada need not replicate the EU regime. However, the RIS contains proposals worth considering as Canada examines how to strengthen investor protection.