Q1. Should the PRIPS initiative focus on packaged investments? Please justify or explain your answer.

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1 European Commission PRIPS -CONSULTATION Dear Sirs, The Federation of International Advisers (FEIFA) represents the interests of Independent Financial Advisers (IFAs) operating across, at present, 24 EU/EEA countries. FEIFA members provide independent financial advisory services that include, in the vast majority of cases, advising on products that are likely to fall into the final definition of PRIPS. For further details please see: FEIFA is pleased to have the opportunity to comment on the European Commission s Consultation on Packaged Retail Investment Products (PRIPS). FEIFA supports the general concept of the initiative and the inclusion of investmentorientated life insurances, and we are in close communication with both AILO (the Association of International Life Offices) and FECIF (the Fédération Européenne des Conseils et Intermédiaires Financiers) on this issue and many related matters. We are, indeed, generally in agreement with AILO s opinion that platforms and unit linked life insurance occupy a unique space and are better considered as being structures that may enable investment into PRIPS rather than as products under the PRIPS definitions. We would agree that, should the underlying investment be a PRIP then it seems to us that the KII for that product should be supplied to the investor together with the appropriate disclosure for the structure, which should also include the total costs to be incurred by the consumer (i.e. the costs of the structure and costs of the underlying PRIP investment). Q1. Should the PRIPS initiative focus on packaged investments? Please justify or explain your answer. In essence, yes although, as noted above, FEIFA believes that structures such as unit linked life insurances and platforms occupy a special place and that this needs to be acknowledged. We believe that it is crucial to establish a level playing field, to ensure the highest possible level of consumer protection. We are also in agreement with FECIF that the PRIPS initiative should not necessarily deal exclusively with the general definition of packaged investments, as this would result in the exclusion of large sections of retail investment products from both PRIPS and MiFID, such as bank savings accounts for instance.

2 Q.2 Should a definition of PRIPS focus on fluctuations in investment values? Please justify or explain your answer. This should be key to the definition of a PRIP, in our opinion; however, fluctuations in income values are also highly important. Q.3 Does a reference to indirectness of exposure capture the packaging of investments? Please justify or explain your answer. We feel that this may be potentially too restrictive. As noted above, such a move could exclude a significant portion of retail investment products from the scope of PRIPs, and thus not meet the objective of a level playing field. Q.4 Do you think it is necessary to explicitly clarify that the definition applies to fluctuations in reference values more generally, given some financial products provide payouts that do not appear to be linked to specific or tangible assets themselves, e.g. payouts linked to certain financial indices, the rate of inflation, or the overall value of a fund or business? Such clarification would be of assistance, ensuring transparency and avoiding confusion and misunderstanding for consumers. Q.5 Do you have any other comments on the proposed definition? If you consider it ineffective in some regards, please provide alternatives and explain your rationale in relation to the criteria for a successful definition outlined above. In keeping with AILO and FECIF we are concerned that such a definition without further clarity could lead to considerable uncertainty with regards to insurance PRIPS. In principle we feel that AILO s proposed amendment (detailed in bold below) may assist in embracing all relevant insurance products: An insurance PRIP is a policy other than a pure protection policy where the amount payable to the policyholder or beneficiary is exposed to fluctuations in the market value of assets or payouts from assets, through a combination or wrapping of those assets, or other mechanisms than a direct holding. In keeping with AILO, we believe that unit linked life insurance, where the policyholder can choose from two or more funds or assets, requires special consideration (as stated above). Without relevant information, valid comparison with non insurance PRIPS will be impossible and a level playing field will not be created.

3 Q.6 Should simple (non-structured) deposits be excluded from the scope of the initiative? Please justify or explain your answer. We feel that the consumer would be far better served if such deposits were included within the scope. It is difficult so see why they should be excluded, given that they all have costs and risks (interest rate being only one of these). Often, such deposits are sold as alternatives to products that will come under the scope of the initiative and thus, in the interest of a level playing field, they should come under its scope we feel. Q.7 Do you consider option1 or option2 preferable for achieving this? Please explain your preference, and set out an alternative if necessary, with supporting evidence. Option 2 has the advantage of simplicity but care would need to be taken that products could not bypass such a definition and thus lead to a dilution of the level playing field that we all seek. Q.8 Should such an exclusion be extended to financial instruments which might raise similar issues to deposits (e.g. bonds) and if so, how might these be defined? Please justify or explain your answer. As stated above, we see no reason for exclusion. Q.9 Should pensions be explicitly excluded from the PRIPS initiative at this stage? Please justify or explain your answer. We have significant concerns that if pensions are excluded from the PRIPs initiative this would provide a loophole for many providers to label their products as Pensions and then sell under such an exemption. This could endanger the fundamental objective of the PRIPs initiative and, once again, jeopardize the aim of a level playing field. Q.10 Should annuities be treated in the same fashion? Again please justify or explain your answer. We feel that annuities present similar problems to those noted above with regards to pensions, and any exclusion could (and probably would) be exploited.

4 Q. 11 Do you have any comments on the proposed manner of achieving this exclusion? Assuming that an exclusion was deemed desirable, there would need to be very rigid clarification as to what is retirement planning. We would reiterate, however, that any exemption in this regard could and probably would be exploited and thus endanger the fundamental objective of the PRIPs initiative. Q. 12 Do you agree that variable annuities might need to be treated as a special case? If so, how should these be defined, and how do you think they should be addressed? No, we do not consider that variable annuities should be treated differently than other pension products. Q. 13 Do you see benefits from such an indicative list being developed? If not, please provide alternative proposals and evidence for why these might be effective. An indicative PRIPS list could potentially provide greater legal certainty and ensure increased harmonisation but this should not be a replacement for a clear and simple definition. In this light, any list could not be seen as exhaustive and it would be important to provide a mechanism for it to be regularly reviewed to ensure that product developments and innovations were taken into account. Q. 14 Do you have any suggestions on the possible contents for such a list, including on how to define items placed on the list? No suggestions at this time. Q. 15 Should direct sales of UCITS be covered by means of including the relevant rules within the UCITS framework? This would seem to have merit and avoid over-complication.

5 Q. 16 Do you have any comments on the identified pros and cons of this approach, and any evidence on the scale and nature of impacts (costs as well as benefits)? As long as the general approach suggested results in greater uniformity of sales rules across all PRIPS, then it has potential merit. Care needs to be taken to ensure that the impact of having sales and investor protection rules across two directives does not lead to a lack of consistency, thus conflicting with one of the primary objectives of the PRIPs initiative. Q. 17 Should the design of the KIID be focused on delivering on the objective of aiding retail investment decision making? If you disagree, please justify or explain your answer. Absolutely. The focus should be to aid retail investment decision making through simplicity and clarity. Q. 18 Should the KIID be a separate or 'stand alone' document compared with other information that might be necessary, e.g. background information, other disclosures, or contractual information? Please justify or explain your answer. Yes, the KIID needs to be a stand-alone document providing the information necessary for the consumer to make an investment decision. It should probably contain a summary, highlighting the relevant key points an investor must be aware of in relation to the product, while further information and specifics can be provided in detail at the investor s request. Q. 19 What measures do you think will be necessary to ensure KIID remain streamlined and focused solely on key information? The key information needs to be specifically prescribed and presented in a fairly standardised manner; this could include imposing a maximum length and even a standard font size - to avoid information being presented in a way that it is unlikely to be read by consumers. Q. 20 While the same broad principles should be applied to all PRIPs, should detailed implementations of some of these principles be tailored for different types of PRIP? Please justify or explain your answer, and provide examples, where relevant, of the kinds of tailoring you might envisage. Whilst it is tempting to believe that the same rules must apply to all products, in order to ensure the efficiency of the initiative, there are instances (e.g. life assurance bonds) where

6 this could be inadvertently misleading, as stated above. The highest level of standardization possible should be the aim, as this is most likely to have the maximum consumer benefits. Equally, however, the principles for products such as insurance PRIPS may well require considerable tailoring, whilst structures such as platforms and life assurance bonds that facilitate investment rather than being a true PRIP themselves may either need tailoring or separate categorization to ensure that consumers understand them appropriately and thus benefit accordingly. Q.21 Do you foresee any difficulties in requiring the KIID to always follow the same broad structure (sequence of items, labelling of items)? Please justify or explain your answer. Subject to the various provisos referred to earlier, a common structure, layout, and sequencing would seem to be crucial to the success of PRIPs, particularly with consumers. We cannot foresee any reason why difficulties should arise for providers and issuers of KIIDs in adopting such an approach - irrespective of markets, products or language. Q.22 Do you foresee any difficulties in requiring certain parts of the key information and its presentation (e.g. on costs, performance, risks, and guarantees) to be standardised and consistent as possible, irrespective of tailoring otherwise allowed? Please justify or explain your answer. As a level playing field for all products and structures covered by this initiative is sought, we believe that a standard approach should be the main objective, with agreed distinctions only amongst differing product types as detailed above. Q.23 Can you provide examples and evidence of the costs and benefits from your experience that might be expected from greater standardisation of the presentation and content in the KIID? The key benefit will be that consumers should be able to understand and compare the products available to them, thus they and their advisors may then more successfully select the ones that most closely match their needs. Better and cheaper products should result, particularly due to this increased comparability and also the resultant greater transparency. The adoption of a common key document may involve significant initial compliance costs, although these will probably be more than offset by reduced ongoing costs, particularly related to point of sale compliance and reduced complaints and compensation payments.

7 Improved business retention levels seem highly likely and this will, of course, be another positive financial benefit for providers and consumers. Q.24 Should the content of the KIID be controlled so that there is no possibility for firms to add additional information unless expressly allowed for? Yes. KIIDs should as far as possible be identical. Q.25 Do you foresee any difficulties in applying these broad principles to the KIID for all PRIPS, as the building blocks on content and format for a level 1 instrument? Please justify or explain your answer. As previously stated, FEIFA perceives potential issues for investment-related insurance policies. For other PRIPS, we do not foresee any problems in the adoption of such an approach. There is a perfectly valid argument that if the key information regarding a particular product cannot be explained in 2 pages then the product itself may be problematic and/or unsuitable for most retail investors. Q.26 Are there any other broad principles that should be considered on content and format? Content should be totally factual as far as possible, and clearly comparable. Q.27 Should product manufacturers be made generally responsible for preparing a KIID? Please justify or explain your answer. Yes. Only product providers should produce KIIDs to avoid any possibility of misinterpretation and/or misrepresentation. This will also be, in our opinion, a more successful method of maintaining the uniformity necessary for the KIID to achieve the intended consumer protection. Q.28 Are you aware of any problems that might arise in the distribution of particular products should responsibilities for producing the KIID be solely placed on the product manufacturer? We do not feel that any major problems should arise. Clarity will be needed as to who is a product manufacturer in the case of the use of unit linked life insurance structures and

8 platforms. We are in general agreement with AILO that it should be the clear responsibility of a life insurer to produce the KIID for its internal range of unit linked funds; however, it should be the sole responsibility of the manufacturer of the underlying PRIP investment to produce the KIID for those. Q.29 If intermediaries or distributors might be permitted to prepare the documents in some cases, how would these cases be defined? FEIFA is not convinced that there is a case to permit intermediaries to prepare KIIDs. Intermediaries should be able to build composite client presentations using individual providers KIIDs. Where particular arrangements between manufacturer and Distributors exist, the latter should be able to input to the document production process but the authorisation of the document, as well as the ultimate responsibility for its contents and format, must lie with the manufacturer. This approach will ensure the greatest level of comparability, compliance and, ultimately, consumer protection. Q.30 What detailed steps might be taken to improve the transparency of the social and environmental impacts of investments in the KIID for PRIPS? FEIFA has no comment on this aspect at this time. Q.31 How might greater comparability and consistency in product labelling be addressed? We are in favour of a more standardised approach to product labelling using non misleading descriptions. It is essential, however, that this takes intro account the particularities of families of PRIPS and products and does not stifle product innovation by hampering development of products that do not fit clearly into an existing label. Product labelling should enable customers to simply compare the basic purpose and features of various product types. Q.32 Should the summary prospectus be replaced by the KIID for PRIPS? Please outline the benefits and disadvantages you see with respect to such an approach. FEIFA believes the KIID should be the main information source and summary for any given product. It should not, however, replace the full prospectus, or for insurance PRIPS the policy terms and conditions, which should be available as a downloadable document in case

9 the consumer or the adviser require the details on the full legal basis of the investment. In these circumstances a summary prospectus seems unnecessary. Q.33 Should Solvency II disclosures provided prior to the investment decision be replaced by the KIID for PRIPS? Please outline the benefits and disadvantages you see with respect to such an approach. Yes, predominantly as duplication should be avoided wherever possible. Q.34 Do you agree with the suggested approach for UCITS KIIDs? Yes. Q.35 Are there any disclosures, e.g. required by the existing regimes, which you believe the PRIPS KIID should not include, but which should still be disclosed, e.g. separately to the KIID? Do you have any practical examples for such elements? No. A transparent, simple approach to the disclosure of full information via the KIID to the consumer should obtain the desired result. Q.36 What in your view will be the main challenges that will need to be addressed if a single risk rating approach is to work for all PRIPS? Attempting to accommodate all of the very different attributes of PRIPS in order to try and find a common measure for risk rating will be a significant challenge. Over-simplification could result in most PRIPS being classed as risky thereby merely serving to confuse the consumer rather than add clarity. Equally, if not more importantly, would be the need to ensure that any rating structure did not undervalue risk, of course. Expected volatility parametres may be one way forward. In addition, an indication of possible and probable downside performance over pre-set timescales may assist the consumer to tally their tolerance to falling values with an appropriate product. Information should perhaps also show the probability of achieving a certain rate of return over different time horizons. The latter comment is important as, whilst risk ratings need to assist the consumer in choosing the correct products for their circumstances and profile, they also need to avoid scaring them from making any decision at all.

10 Q.37 Do you consider there are any other techniques that might be used to help retail investors compare risks? Expected volatility may well be the most relevant parameter for most consumers. Standard required wording or a Risk Guide might well assist, with an explanation that currency exposure can add substantial further risks. Q.38 What in your view will be the main challenges that will need to be addressed in developing common cost metrics for PRIPs? The costing structures across PRIPS can be very different, particularly when funds of funds, unit-linked insurance and platforms are taken into account. Given that we feel that structures such as platforms and life bonds should be categorized separately, a reduction in yield may be the easiest way for consumers to compare, but this would have to take into account all charges within the PRIPS, not just selected ones. The consumer needs to know the total charges that will impact on the invested capital in a manner that is directly comparable to any other PRIPS he or she may consider. Standardisation of charges could and probably would deter product innovation; thus we need to ensure that what is achieved is standardisation (and comparability) of the disclosure of charges, where at all possible. Q.39 How can retail investors be aided in making value for money comparisons between different PRIPS? Once again, comparability is the key aspect and thus rigid criteria need to be evident with regards to the depiction of costs. For complex PRIPS the added value needs to be included and clear - without this there may well be a false presentation of the cost compared with other, simple PRIPS, leading to a situation where an informed decision cannot be easily made by the consumer. Q.40 Do you consider that performance information should always be included in a KIID? Yes, some form of performance information should always be included. This needs, again, to be comparable and thus pre-set criteria need to be in place and adhered to.

11 Consumers should also be warned that future performance can differ from past performance and be made aware, in a general sense, of the possible effects of currency movements and taxation. Q.41 What in your view will be the main challenges that will need to be addressed in ensuring performance information can be compared between different PRIPS? Firstly, ensuring that simple and complex PRIPS are easily and fairly comparable within their own subsets. Secondly, making it clear that they should not necessarily be compared across those subsets on costs and net performance alone. Q.42 Do you agree that a consistent approach to the description of guarantees and capital protection in the KIID should be sought, e.g. through detailed implementing measures for different PRIPs? Yes, as long as this is possible without being misleading. Q.43 What information should be provided to retail investors on the cost of guarantees? The cost of guarantees must be included in the disclosures on total charges. They should be separately detailed if they are optional but we are not sure that this is necessary otherwise, or would lead to a better consumer outcome. In fact, it may simply confuse the retail investor. Yours sincerely Paul Stanfield CEO FEIFA Federation of European Independent Financial Advisers