Response to joint Discussion Paper on Key Information Documents (KIDs)
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The RIY, showing the impact of costs on the gross return is helpful for products where the primary aim is investment returns but is less so when other aims form part of the product – such as an insurance element. The cost does not reflect a sum assured benefit for instance and therefore comparisons against investment products which do not contain life insurance elements are potentially misleading. This can also be expended to other investments such as structured products where a significant proportion of costs could reflect a protection element. It is also not relevant for products with algorithm-based returns, as there may not be close correlation between the return of the underlying assets and the product. To separate costs from returns, we believe the cost calculation should focus only on the cumulative costs for a given investment over each time scale, without showing “what you might get back at X%”. It should also contain narrative explanations to highlight where costs also relate to an insured benefit.
The ten examples shown range from an overly simple visual (1) to overly complex (4, 8, 9, 10). Some options (1, 3) involve comparison with other products, but it is not always clear how this comparison is made. No example stands out as suitable for all products, as each has its drawbacks, while few have the benefits of being engaging, understandable and comparable. Option 1, while clear and simple, fails to use only plain language (“variability”); the graphical option (7) does not work if printed in black and white; the tables in options 8, 9 and 10 contain too many numbers and many consumers are put off by numbers.
It is not clear in option 8 whether the “best” and “worst” scenarios are actually the best and worst possible and the probability scenarios in option 9 are unclear. If manufacturers will be liable for losses due to performance worse than the “plausible worst case”, the danger is that they may simply show a total loss of capital as the worst case, to be on the safe side, rendering the document uninformative in this regard.
One acceptable option is for a single overall cost over a range of timescales, with no growth rate (similar to the RIY table in option 6, but without the columns headed “What you might get back at X%” and “Reduction in Yield”).
In respect of portfolio management techniques, consideration should be given to what the impact would be on the consumer if those techniques were not employed. If the consumer is worse off as a result of the techniques, the net cost should be included, but if the manufacturer keeps the net income generated, this does not amount to a cost to the consumer. Otherwise, it would also be necessary to show the opportunity cost of not generating potential returns through employing such techniques.
On the other hand, if the manufacturer does not pass on dividends that a direct investor in the underlying asset would receive, that would be a cost.
Many funds quote an initial charge that may be waived, depending on the distribution channel, so inclusion of this is likely to distort the actual costs that will be incurred by the consumer. Where this is the case, this charge should not be included in any calculation, but shown separately, along with other contingent costs, such as performance fees and exit charges (whether for anti-dilution or for early redemption).
Look-through costs for funds that invest in other funds are almost impossible to predict, particularly as the underlying funds may change over time. One solution may be to signpost to the KIDs or KIIDs of the underlying funds, although the top level fund may receive a rebate on the quoted annual charge.
The other items listed in Table 12 all reduce the returns to the consumer, so should be included in the aggregate costs.
For products available on a continuous basis, the KID should be updated as soon as practical after the manufacturer is aware of a material change (in advance of the change, if applicable), so the latest version is always available on the manufacturer’s website and those of relevant aggregators or distributors.
We believe a KID should be reviewed on an annual basis and updated where necessary.
As all KIDs follow a similar format and are to be written in plain language, the time necessary to read and understand the document is less relevant.
For funds investing in funds provided by other groups (and also for the groups providing those underlying funds), there are likely to be ongoing costs associated with providing those fund KIDs and/or incorporating updated data and determining how material the impact is on the PRIIPs concerned.
If there is an obligation for manufacturers to provide updated KIDs to existing investors (not recommended), costs for firms will increase significantly, as will the costs to aggregators/online fund supermarkets, which will ultimately be borne by investors.
2: Do you agree with the description of the consumer´s perspective on risk expressed in the Key Questions?
For consumers, the primary concerns are likely to be whether or not the chance of higher returns than the risk free rate (generally cash deposits) is sufficient to justify the possible risk of a lower (or no) return and how much higher or lower the possible return could be (including the possibility of total loss and even a loss exceeding the amount invested).3: Do your agree that market, credit and liquidity risk are the main risks for PRIIPs? Do you agree with the definitions the ESA’s propose for these?
We agree that these are the main risks, although the importance of each risk will depend on the individual consumer and on the product type. The questions for many retail consumers are what is the range of possible returns (market risk), what is the opportunity to access the money on demand or in an emergency (liquidity risk) and what happens if the manufacturer or one or more of the underlying investments fails (credit risk).4: Do you have a view on the most appropriate measure(s) or combinations of these to be used to evaluate each type of risk? Do you consider some risk measures not appropriate in the PRIIPs context? Why? Please take into account access to data.
Most of the quantitative measures of risk shown are likely to change over the life of a long term investment, so they can be no more than a snapshot at the point of investment. For robustness and consistency, the risks should be based on measurable historical or current data and should focus on the most important risks for the consumer to consider.5: How do you think market, credit and liquidity risk could be integrated? If you believe they cannot be integrated, what should be shown on each in the KID?
Contingent costs include performance fees, initial charges and exit penalties. It may be necessary to explain some contingent costs using narrative only, while others may be quantifiable and a (maximum) figure could be shown, together with an explanation of when they would apply.6: Do you think that performance scenarios should include or be based on probabilistic modelling, or instead show possible outcomes relevant for the payouts feasible under the PRIIP but without any implications as to their likelihood?
The only realistic way to show performance scenarios is by using historical performance data for the fund or, if there is insufficient history, for representative assets (i.e. a proxy). Assigning probabilities to future scenarios is potentially misleading and indicates that past performance is a guide to the future. Instead, it should be clear that the future performance is indicative only, based on past performance, and is not predictive. As with UCITS KIIDs, special consideration would need to be applied to structured products which do lend themselves more to probability scenarios.7: How would you ensure a consistent approach across both firms and products were a modelling approach to be adopted?
Using UCITS KIIDs as an example, historical performance removes the need for modelling. Guidelines should be provided to ensure that, where modelling is necessary, similar assumptions are used, otherwise comparability will be lost if manufacturers are left to make their own assumptions. As with UCITS KIIDs special consideration would need to be applied to structured products which do lend themselves more to probability scenarios.8: What time frames do you think would be appropriate for the performance scenarios?
For fixed-term products, the exact term must be included, even if that does not match the standard terms for other products. Terms of 3, 5 and 10 years (unless longer than the term of the product) are traditionally the default time frames and help to reinforce the long term nature of investment. 1 year could be included to show the effect of charges in the early years of an investment, particularly if there are exit penalties in the early years.9: Do you think that performance scenarios should include absolute figures, monetary amounts or percentages or a combination of these?
Percentages are not easily understood by consumers, although they are used to show historical performance, so scenarios should include monetary amounts based on standard levels of investment (eg £1,000 or £100 per month) or the minimum lump sum and/or regular amount if higher. If there are any thresholds which change a pro rata calculation (eg where the allocation rate increases) or if there is a fixed product fee that applies at all investment levels, this should be made clear but this should not result in multiple illustrations.10: Are you aware of any practical issues that might arise with performance scenarios presented net of costs?
Consumers tend to focus on returns net of costs, so that provides the most relevant results. All prices and returns for funds should be shown net of costs with the costs applied to an investment shown in a separate section of the KID. Products with algorithm-based returns should show the effect the costs have on possible returns, ie compared to the returns of the underlying assets.11: Do you have any preferences in terms of the number or range of scenarios presented? Please explain.
No more than three scenarios should be shown and that only where there are different scenarios that could result in different returns; only one scenario is necessary for straightforward fund-based products. It is inadvisable to assign probabilities or terms such as “best case” or “worst case” to the scenarios unless there is some form of guarantee, as consumers may take a high probability as certainty, but scenarios should be accompanied by warnings that they are only indicative, not predictive.12: Do you have any views, positive or negative, on the different examples for presentation of a summary risk indicator? Please outline advantages and disadvantages, and provide any other examples that you are aware of that you think would be useful.
We believe narrative examples, such as on page 40, are too technical and contain unsuitable language; it is difficult to describe the risks only in narrative with suitably plain language. Visuals work better than narrative, although some narrative is required to explain the visuals. Although a single visual would be preferable for reasons of both space and ease of comprehension, risk means different things to different people, so a single rating of all the risks is inappropriate. Overall, we believe the multiple risks on page 39 would be the most appropriate solution and it is doubtful if the overall summary aids comprehension.13: Do you have any views, positive or negative, on the different examples for presentation of performance scenarios? Please outline advantages and disadvantages, and provide any other examples that you are aware of that you think would be useful.
The need for multiple scenarios must be balanced against the need to keep the number of scenarios to a minimum to ensure clarity and engagement with consumers. Disengagement is even more likely if all the figures shown are percentages, as on page 41, or on multiple graphs with multiple lines and data points, as on page 43. A single graph with clear lines works well, but only in colour. Using terms such as ‘plausible best/worst case’ is unhelpful unless the definition of plausible is consistent and there is also a danger that it does not indicate the actual best and, more importantly, worst case, leading to consumer misunderstandings.14: Do you have any views on possible combinations of a summary risk indicator with performance scenarios?
We believe risks need multiple visual elements (Column 3) and returns could be shown with either single or multiple elements, so the most suitable options are 3B or 3C. Narrative-only on either is unsuitable, so any options with Row A or Column 1 are ruled out. In our opinion risks and returns cannot be combined and should be shown with separate visual elements.15: Do you agree with the description of the consumer´s perspective on costs expressed in the Key Questions?
Costs are important inasmuch as they reduce the total return. In the case of a packaged product of any kind, Question 1 is less important than Question 5 as costs must be considered in relation to their impact on returns. Question 8 (comparison to other products) is important, but may be difficult to include unless it is clear what comparable products there are, eg does the inclusion of insurance or any capital protection remove the comparability of a product? Question 7 is covered in the “Other relevant information” section with reference to periodic disclosure documents.16: What are the main challenges you see in achieving a level-playing field in cost disclosures, and how would you address them?
A cost is anything that results in the net return being less than it would be for the given compound return of the underlying asset. The minimum costs for any investment, therefore, are the buying and selling costs. For a packaged product, the costs include all amounts borne by the consumer in return for packaging the underlying asset(s).18: Do you have any views on how implicit costs, for instance costs embedded within the price of a structured product, might be best estimated or calculated?
The greatest challenges are ascertaining the degree of comparability between products with different features, such as added liquidity, insurance and capital protection and also comparability between those products with high initial/low or zero ongoing charges and lower initial/higher ongoing charges. Showing costs over given timeframes would resolve the latter, while only a breakdown of the costs for each element would solve the former. However care must be taken to avoid overwhelming the consumer with minute detail within costs that are not easily understandable.20: Do you agree that a RIY or similar calculation method might be used for preparing ‘total aggregate cost’ figures?
The RIY is a means of demonstrating the effect of all charges on an investment if it is encashed after a certain period of time. Because different products have different charging structures, excluding certain costs, such as the initial charge, could distort comparability between products. But see also Q19 above about the inclusion of contingent costs or costs that may be waived.The RIY, showing the impact of costs on the gross return is helpful for products where the primary aim is investment returns but is less so when other aims form part of the product – such as an insurance element. The cost does not reflect a sum assured benefit for instance and therefore comparisons against investment products which do not contain life insurance elements are potentially misleading. This can also be expended to other investments such as structured products where a significant proportion of costs could reflect a protection element. It is also not relevant for products with algorithm-based returns, as there may not be close correlation between the return of the underlying assets and the product. To separate costs from returns, we believe the cost calculation should focus only on the cumulative costs for a given investment over each time scale, without showing “what you might get back at X%”. It should also contain narrative explanations to highlight where costs also relate to an insured benefit.
22: Do you agree that implicit or explicit growth rates should be assumed for the purpose of estimating ‘total aggregate costs’? How might these be set, and should these assumptions be adjusted so as to be consistent with information included on the performance scenarios?
To show the effect of costs, a growth rate of 0% should be used. Any percentage return figure can give rise to an expectation on the part of the consumer. Choosing a growth rate which is relevant to a diverse range of products could be fraught with difficulties. If performance fees apply, it is difficult to include these, but a narrative explanation of these and other contingent costs not included in the “total aggregate costs” should be included.23: How do you think implicit portfolio transaction costs should be taken into account, bearing in mind also possible methods for assessing implicit costs for structured products?
Portfolio transaction costs can only be estimated in advance, as there are many variables involved, including costs incurred as a result of performance of the underlying assets. Where historical transaction costs and portfolio turnover data is available, this should be used to provide an estimate of future costs. Where no historical data is available, but the design of a product depends on a certain level of turnover (eg particularly high or particularly low), this should be used to determine the estimated transaction costs. Where neither historical nor product design data is available, a prescribed PTR should be used until such data is available for the product in question.24: Do you have any views on possible assumptions that should be made, and how these might be calibrated or set?
See Q16. The format needs to accommodate different products with very different charging structures. The clearest way of doing this is a table to show the total costs on an investment. While contingent costs should not be included in the table, the more that is included in the accompanying narrative instead of the visual, the less comparable the costs disclosure will be.25: What do you think are the key challenges in standardising the format of cost information across different PRIIPs, e.g. funds, derivatives, life insurance contracts?
4.5.1 states that “some consumers may have higher levels of financial capability”, but the KID should assume a low level of financial capability, so all consumers are able to understand the difference between products and can understand the plain language used.The ten examples shown range from an overly simple visual (1) to overly complex (4, 8, 9, 10). Some options (1, 3) involve comparison with other products, but it is not always clear how this comparison is made. No example stands out as suitable for all products, as each has its drawbacks, while few have the benefits of being engaging, understandable and comparable. Option 1, while clear and simple, fails to use only plain language (“variability”); the graphical option (7) does not work if printed in black and white; the tables in options 8, 9 and 10 contain too many numbers and many consumers are put off by numbers.
It is not clear in option 8 whether the “best” and “worst” scenarios are actually the best and worst possible and the probability scenarios in option 9 are unclear. If manufacturers will be liable for losses due to performance worse than the “plausible worst case”, the danger is that they may simply show a total loss of capital as the worst case, to be on the safe side, rendering the document uninformative in this regard.
One acceptable option is for a single overall cost over a range of timescales, with no growth rate (similar to the RIY table in option 6, but without the columns headed “What you might get back at X%” and “Reduction in Yield”).
26: Do you have a marked preference or any objection for any of the presentational examples? If so, why? Please provide any alternative examples which you believe could be useful.
Costs paid by all retail investors over the relevant timescales may be aggregated into a single figure, while contingent costs should be shown separately, with a clear explanation of the circumstances in which they are paid and how much they could add to the base figure. No situation is foreseen where this would not work.27: In terms of a possible breakdown of costs, are you aware of cost structures for which a split between entry or exit costs, ongoing costs, and costs only paid in specific situations or under specific conditions, would not work?
Many consumers do not consciously separate the risks, evaluating a product in its entirety through a combination of the risks, but each consumer may put a different weight on each risk. If each risk is shown separately (as in the Italian example on page 39), consumers can place their own weight on each one and may arrive at a different overall risk level from the one shown. For example, for those investing in a fixed-term product, locking away the investment without access (liquidity risk) may not be very important. Therefore, the preferred visual would be a separate scale for each risk, without an aggregated summary. A visual is important, as many consumers may not pay attention to a narrative explanation of the risks.28: How do you think contingent costs should be addressed when showing total aggregated costs?
Cumulative costs that apply to all investors should be accrued over the relevant timescales. No growth should be included. Contingent costs should not be included, but should be shown separately with an explanation of when they would apply.29: How do you think should cumulative costs be shown?
Revenue to the manufacturer is not necessarily the same as cost to the consumer.In respect of portfolio management techniques, consideration should be given to what the impact would be on the consumer if those techniques were not employed. If the consumer is worse off as a result of the techniques, the net cost should be included, but if the manufacturer keeps the net income generated, this does not amount to a cost to the consumer. Otherwise, it would also be necessary to show the opportunity cost of not generating potential returns through employing such techniques.
On the other hand, if the manufacturer does not pass on dividends that a direct investor in the underlying asset would receive, that would be a cost.
Many funds quote an initial charge that may be waived, depending on the distribution channel, so inclusion of this is likely to distort the actual costs that will be incurred by the consumer. Where this is the case, this charge should not be included in any calculation, but shown separately, along with other contingent costs, such as performance fees and exit charges (whether for anti-dilution or for early redemption).
Look-through costs for funds that invest in other funds are almost impossible to predict, particularly as the underlying funds may change over time. One solution may be to signpost to the KIDs or KIIDs of the underlying funds, although the top level fund may receive a rebate on the quoted annual charge.
The other items listed in Table 12 all reduce the returns to the consumer, so should be included in the aggregate costs.
30: Do you have any views on the identity information that should be included?
For the identity of the competent regulator, the full name and the URL of the contact page on their website, together with the telephone number of a help line, should be sufficient. The head office address of the manufacturing entity should be shown alongside a link to the contact page of their website. The full legal name and ISIN code (where applicable) of the PRIIP provides a universal identifier.31: Do you consider that the criteria set out in recital 18 are sufficiently clear, or would you see some merit in ESAs clarifying them further?
The requirements of recital 18 are not carried through to the wording of the comprehension alert, as it does not explain in what way the product is not simple or what makes it difficult to understand. As it stands, the comprehension alert does not help consumers and, without further explanation, may only cause greater concern, so there should be the facility to explain why the comprehension alert is required. We also believe that an investment possible within a UCITS is too high a hurdle for the base level for comprehension as UCITS can contain securities with which retail consumers are not familiar.32: Do you agree that principles on how a PRIIP might be assigned a ‘type’ will be needed, and do you have views on how these might be set?
We agree that this assignation should be applied to different PRIIP types. This could form the basis for some variations in the PRIIPs KIDs should it prove impossible to apply a single template across different products. In accordance with the need to be comparable and discriminatory and for regulators to be able to assess compliance, there should be no scope for subjectivity on this. Where a suitable classification system already exists, this should be used. When a new product is created for which no existing definition is suitable, a name and definition needs to be agreed between the manufacturer and the regulator, which should maintain a glossary on its website of PRIIP types issued by its regulated entities. If space allows, a link to the relevant web page should be shown alongside the PRIIP type on the KID for consumers to see the definition if they wish.33: Are you aware of classifications other than by legal type that you think should be considered?
The legal type is the most sensible classification, but may not make it clear to consumers, in plain language, what type of product it is, unless that is shown on the glossary mentioned in Q32.34: Do you agree that general principles and as necessary prescribed statements might be needed for completing this section of the KID?
The more subjectivity that is allowed, the harder it is for the KID to be comparable and discriminatory, so prescribed statements are necessary. As stated in 5.4.2.2, it “should not be read as a description of the engineering of the product, so much as a description of the pay-off structure”, so only high-level detail is required (no mention of “total return swaps” as in the second bullet). Although “describing how the return is determined in a short and easy to understand format may be very difficult for some particularly complex structured instruments”, this needs to be achieved and is easier if prescribed statements are used.36: Do you have views on the information PRIIPs manufacturers should provide on consumer types?
If a key aim of identifying the consumer type is to “summarise the overall risk/reward profile of the PRIIP”, the appetite for risk must form part of the description. Other information should include, as relevant, the investment time horizon and the investment goal. 5.4.2.3 suggests including “where PRIIPs target narrow or very specific developments of certain underlying assets”, but this should be reflected in the consumer’s risk appetite and the objective of the PRIIP. This includes, for instance, where the product aims to deliver returns linked to a specific investment market.39: Are you aware of specific challenges arising for specific PRIIPs in completing this section?
Consistency should be sought over the wording used for the arrangements that apply to all companies covered by each different compensation or guarantee scheme. If a product is marketed in multiple jurisdictions, it should be clear what geographical limits there may be on the compensation arrangements.41: Are you aware of specific challenges arising for specific PRIIPs in completing this section?
The distributor, if different from the manufacturer, is required to provide a Terms of Business letter with complaint arrangements, as this cannot be included in the KID. No challenges are foreseen in explaining how to complain about the product or manufacturer.42: Do you agree that this section should link to a webpage of the manufacturer?
This should include a link to the prospectus and latest published periodic disclosure documents. The frequency and dates of periodic disclosure documents should also be included.43: Do you agree with the assessment of when PRIIPs might be concerned by article 6(3)?
Where a product has a range of investment options, the product is a PRIIP requiring a KID and each underlying fund is also a PRIIP for which a KID must be produced and be available to the consumer at the point of sale if PRIIPs KIDs are to provide comparable disclosure to consumers across product types. The risk and return profiles for the product are generic and could include a statement about the range available, while the cost section should include costs levied at the product level, alerting the investor to the fact that additional costs will depend on the fund(s) selected. The fund level details will be available on the relevant fund KID. We believe that KIDs for products with a wide range of investment options may be so vague as to be almost meaningless, except to show any additional costs or features at the product level.44: In your market, taking into account the list of criteria in the above section, what products would be concerned by article 6(2a)? What market share do these represent?
Unit linked life insurance contracts are the most common form of PRIIP offering multiple investment options. Other products for which the costs and return scenarios specific to the investor may not be known pre-sale include savings plans with flexible life cover options or where the cost deducted to pay for the life cover depends on the age of the investor. In these cases, a single product KID would show the range of costs and their impact on returns. If multiple fund choices are also available, a separate KID will be produced for each of those as well.46: Do you have views on how you think the KID should be adapted for article 6(3) products, taking into account the options outlined by the ESAs?
Where there are multiple investment options, the “product KID” should contain generic information on the product, with narrative covering the options available. To ensure the consumer does not misunderstand where on a scale of costs, risks, etc, their selected fund falls, there should be a mechanism to supply the relevant “fund KID”. For those sections not represented by a scale (objective, comprehension alert, target market, social and environmental goals), details relevant to the product should be included and a catch-all statement should be inserted, eg “the objectives depend on the fund(s) you select”.47: How do you consider that the product manufacturer should meet the requirements to describe and detail the investment options available?
Product manufacturers produce brochures/leaflets/web pages listing the fund choices available and a link should be provided in the product KID or access to a web portal where the fund KIDs can be accessed. To ensure full disclosure to the consumer, access to these documents must be simple and straightforward.49: Do you agree with the measures outlined for periodic review, revision and republication of the KID where ‘material’ changes are found?
The KID is a pre-sale document that provides details of the product at the point of sale. We do not believe that updates should be required to be sent to existing investors, as this could lead to some choosing to cash in their investments, even if, with hindsight, this could later be shown to be the wrong course of action or if there are penalties for doing so. Periodic disclosure documents are the most suitable method to advise existing investors of material changes.For products available on a continuous basis, the KID should be updated as soon as practical after the manufacturer is aware of a material change (in advance of the change, if applicable), so the latest version is always available on the manufacturer’s website and those of relevant aggregators or distributors.
We believe a KID should be reviewed on an annual basis and updated where necessary.
50: Where a PRIIP is being sold or traded on a secondary market, do you foresee particular challenges in keeping the KID up-to-date?
The product manufacturer may be unaware of the existence of an unofficial secondary market and may believe that the product is not available for sale to retail investors. In such cases, the obligation to provide a current KID rests with the distributor. If the product is available for sale to retail investors on a regulated secondary market, it should be updated when necessary.51: Where a PRIIP is offering a wide range of investment options, do you foresee any particular challenges in keeping the KID up-to-date?
With a product KID only having information at a product level, the KID should only be updated if there is a material change to the product, such as the introduction of a new fund link whose profile falls outside the generic information on the KID. If there is a material change to one or more of the underlying funds, the fund KID for that PRIIP would be updated in the normal way and the product manufacturer should ensure that mechanisms are in place to capture the latest fund KIDs available.52: Are there circumstances where an active communication model should be provided?
The KID is a pre-sale document and new/potential retail investors must have access to the latest version. For existing investors, other regulations will apply in respect of material changes and no additional communication should be required specifically for the KID.53: Do you agree that Recital 83 of the MiFID II might be used as a model for technical standards on the timing of the delivery of the KID?
It is not possible to determine an investor’s familiarity with the product type, so no realistic difference can be applied to the delivery timing of different PRIIPs. While the KID will normally be supplied pre-sale by the adviser (face-to-face or on-line), many UCITS providers send a KIID with the purchase contract as a matter of course. Doing so allows the investor time to study the document and to ask any questions before the expiry of the cancellation period where that applies.As all KIDs follow a similar format and are to be written in plain language, the time necessary to read and understand the document is less relevant.
54: Are you aware of any other criteria or details that might be taken into account?
If cancellation rights do not apply, the KID needs to be made available in good time before the investor commits to the purchase, but this could cause issues with purchases of products with prices that change in real time. Also, consideration should be given to whether or not a KID needs to be available in advance for execution-only purchases. We believe there should be scope in these instances for the KID to be provided after the purchase has taken place, rather than delay the purchase.55: Do you think that the ESAs should aim to develop one or more overall templates for the KID?
Any template provided by the ESAs will be adopted by PRIIP manufacturers as a de facto “safe harbour”, as companies may be unwilling to innovate with alternative templates. On the other hand, templates provided by the ESAs will ensure consistency throughout the EU, which will help ensure KIDs meet the objective of comparability. As long as manufacturers comply with the requirements on content and clarity, there is no reason for restricting flexibility on layout.56: Do you think the KID should be adjusted to reflect the impact of regular payment options (on costs, performance, risk) where these are offered? If so, how?
Some products are only available for regular savings, in which case the data on the KID should reflect this. However, it should not be necessary to produce two KIDs for products that accept both lump sums and regular savings.59: Are you aware of situations in which costs might be disproportionate for particular options, for instance borne by a specific group of manufacturers to a far greater degree in terms relative to the turnover of that group of manufacturers, compared to other manufacturers?
The costs for manufacturers include those for setting up the systems and processes to produce the KID and to monitor the costs and risks for any material changes, as well as the costs associated with delivering the documents to third parties. In addition, as the costs include elements not previously included in the TER or OCF, new processes will need to be established to collect and calculate the effect of those on future return scenarios.For funds investing in funds provided by other groups (and also for the groups providing those underlying funds), there are likely to be ongoing costs associated with providing those fund KIDs and/or incorporating updated data and determining how material the impact is on the PRIIPs concerned.
If there is an obligation for manufacturers to provide updated KIDs to existing investors (not recommended), costs for firms will increase significantly, as will the costs to aggregators/online fund supermarkets, which will ultimately be borne by investors.