In an exclusive interview with International Adviser, Stanfield warned the limited timeframe fund manufacturers have to comply with Priips regulation – the deadline is 31 December 2016 – meant many would end up cutting their product ranges.
This will have a knock-on effect on financial advisers, he argued, by reducing the choice of funds they can offer clients.
The legislation, due to come into force on 1 January 2017, means product manufacturers will have to provide a Kid – a three-page easy-to-understand guide – so retail investors can compare packaged retail investments and insurance-based products (Priips).
The final Regulatory Technical Standard, confirming the structure of the Kid, is expected to be released during the third quarter of this year. This will give firms just a few months to implement the changes and meet the deadline.
“You’ve got a regulator saying, ‘We need you to do something by the end of the year, we are not going to tell you what until a few months before but it is going to need a hell of a lot of IT and resources.’ That’s a really difficult situation,” Stanfield said.
He added that although the regulation is “very good in principle”, it contains several flaws that are in “danger of turning it into a fiasco”.
Consumer choice threat
Of critical concern, said Stanfield, is that under clause 14 of the regulation, published by the European Supervisory Authorities in April, insurance companies will have to provide a Kid on open-architecture bonds.
“If implemented it could lead to a reduction in consumer choice and an increase in confusion, neither of which is what the regulation should be about,” he said.
The comments echo those made earlier in the month by Simon Willoughby, head of proposition at Axa Wealth International. He described the proviso as a “nightmare”, arguing that it was “excessive, with no basis in the underlying law”.
Speaking at International Adviser’s Future Advisory Forum in London, Willoughby, a chairman at the Association of International Life Offices, revealed the trade body had written to the European Commission asking it to remove the clause from the Priips regulation.