What are packaged retail investment and insurance products?
Packaged retail investment and insurance products (PRIIPs) are at the core of the retail investment market. They are investment products that banks typically offer to consumers, for example, when they want to save for a specific objective such as a house purchase or for a child’s education. PRIIPs cover a range of investment products which, taken together, make up a market in Europe worth up to €10 trillion.
Despite their potential benefits for retail investors, PRIIPs are often complicated and lacking in transparency. The information which institutions make available to investors when selling these products can be overly complex. They often contain too much jargon and can be difficult to use for comparisons between different investment products. Since institutions selling these products often also play a role in advising investors, conflicts of interest may arise producing advice which may not be in the investor's best interests.
Key information documents for PRIIPs
In order to tackle these shortcomings, the EU adopted a Regulation on PRIIPs, which obliges those who produce or sell investment products to provide investors with key information documents (KIDs).
KIDs should be a maximum of 3 pages and provide clear information on investment products.
KIDs should include the following information
- the name of the product and the identity of the producer
- the types of investors for whom it is intended
- the risk and reward profile of the product, which includes a summary risk indicator, the possible maximum loss of invested capital and appropriate performance scenarios of the product
- the costs investors have to bear when investing in the product
- information about how and to whom an investor can make a complaint in case there is a problem with the product or the person producing, advising on or selling the product
Retail investors’ preferred option regarding performance scenarios and past performance information within the PRIIPs Key Information Document.
Study carried out by Deloitte Luxembourg for the European Commission.
Commission interpretative guidelines on the key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs).
Consumer testing study of the possible new format and content for retail disclosures of packaged retail and insurancebased investment products