Retail Investment Strategy: Commission asks ESMA for Level 2 advice by 1 October 2027

The request, from the Commission's Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), asks ESMA for technical advice, including draft legal text, on delegated acts that will supplement the Retail Investment Strategy (RIS) amendments to MiFID II, the UCITS Directive and the Alternative Investment Fund Managers Directive (AIFMD). Every item listed in the annex is due by 1 October 2027.

The Commission sent the request before the RIS is formally adopted, on the assumption that the text will be published in the Official Journal without major amendment by January 2027 at the latest, so that ESMA can start work at once. ESMA is asked to consult stakeholders openly, assess the costs and benefits of the options, test consumer disclosures where feasible and relevant, coordinate with EIOPA and the Joint Committee of the European Supervisory Authorities where the directive requires it, and follow the Commission's simplification objective. Its advice will not prejudge the Commission's final decision on the delegated acts.

Value for money. Investment firms that manufacture or distribute packaged retail and insurance-based investment products (PRIIPs) for retail clients, and UCITS management companies and AIFMs for the funds they manage, will have to assess whether costs, charges and inducements are justified and proportionate compared with a peer group of similar products. ESMA must propose criteria for building peer groups, for products with no or very few comparable products, for comparing costs, charges and performance, and for deciding when a product is at a significant distance from the peer-group average to the client's detriment. A distributor may rely on the manufacturer's assessment if it takes into account all distribution costs, including inducements.

Inducements. The RIS adds an inducements test so that fees, commissions and non-monetary benefits do not impair the duty to act in the best interests of retail clients, in particular for non-independent advice. ESMA is to assess whether criteria are needed, and where appropriate set them, on: compliance with that duty when inducements are received in respect of independent advice, portfolio management, investment research, underwriting and placing; whether an inducement gives the client a tangible benefit; and whether it is proportionate to the value of the instrument and the service. It should also include any necessary amendments to Delegated Directive (EU) 2017/593.

Suitability, appropriateness and simple advice. The amended directive limits assessments to the information needed, requires firms to explain their purpose, to warn clients when a product or service is not appropriate and to give clients the information collected on request. It also creates simple advice on well-diversified, non-complex and cost-efficient instruments, without collecting information on the client's knowledge and experience. ESMA is to advise on what information firms should collect, criteria for other non-complex instruments that need no appropriateness test, which instruments qualify for simple advice, whether Delegated Regulation (EU) 2017/565, in particular Articles 52 to 58, should be amended to align with the new rules, and whether its rules on records, client agreements and periodic reports can be simplified. For today's rules, see our study note on suitability.

Marketing, investor journey and undue costs. ESMA is to specify the essential characteristics every marketing communication aimed at retail clients must show, and the conditions for marketing to be fair, clear, not misleading and balanced. The amended rules also reinforce firms' responsibility when they use third parties, such as financial influencers, for marketing: written agreements, internal controls and records of all marketing communications kept for at least five years, or up to seven if a supervisor asks. ESMA is also asked for targeted simplification of the retail investor journey, building on its report of 12 March 2026, and, for UCITS management companies and AIFMs, minimum requirements for a process that prevents undue costs being charged to funds and investors and compensates them where it happens. The request does not cover client categorisation, although the December 2025 political agreement also changed when experienced retail investors can be treated as professional clients. The Commission notes that further requests to ESMA under the RIS may follow.

The Commission proposed the RIS on 24 May 2023: an omnibus directive amending MiFID II, the Insurance Distribution Directive, the UCITS Directive, AIFMD and Solvency II, and a regulation amending the PRIIPs Regulation. The European Parliament and the Council reached a provisional agreement on 18 December 2025; the Council approved the compromise in Coreper on 5 June 2026 and Parliament's ECON committee on 23 June 2026. According to the request, the text was under lawyer-linguist review, final votes were expected in the fourth quarter of 2026 and publication in the Official Journal by January 2027 at the latest. The Parliament's Legislative Observatory lists 11 November 2026 as the indicative date of the plenary vote.

Member States will have 24 months from entry into force to transpose the directive. On the Commission's working assumption of publication in January 2027 and a 30-month implementation period, the new rules and most Level 2 measures would apply from July 2029. ESMA's 2027 work programme likewise says the exact timing of its RIS deliverables depends on the approval of the package.

Nothing changes today. Cyprus investment firms, UCITS management companies and AIFMs continue to apply the current MiFID II, UCITS and AIFMD rules, Delegated Regulation (EU) 2017/565, Delegated Directive (EU) 2017/593 and ESMA's existing guidelines.

Firms can still use the time. Distributors of PRIIPs to retail clients can start collecting the cost, charge and performance data that peer-group comparisons will need; firms that receive inducements can map them against the coming tangible-benefit and proportionality tests; firms that market through affiliates, introducers or influencers can check whether their agreements, controls and records would meet the new standard; and fund managers can document how costs charged to funds are identified, checked and allocated. ESMA's consultation on this advice will be the first chance to comment on the detail.