1. Retail investor participation in capital markets is important

Europe is facing significant pension gaps. Pensions alone will not make for comfortable retirements for all, and European citizens must take matters in their own hands. But how? Bank savings alone will not be enough, especially in a high inflation environment. Savers therefore need to become investors and capitalise on economic growth and compounding of interests. And the best and easiest way to do so is to invest in public capital markets which, historically, have produced good returns for long-term investors.

2. What can be done to facilitate and encourage retail investor participation in capital markets?

Retail investor participation in capital markets is influenced by many factors, some of which are not in the realm of securities regulators (for example, tax regimes). What regulators can and what ESMA is striving to do is to help create a regulatory environment that enables retail investors to trust intermediaries providing services to them, to make informed decisions and to choose from product offerings that give retail investors a fair chance of reaching their goals.

3. Recent ESMA initiatives

ESMA continuously emphasises the importance of fees and other charges for the investment success. We not only work on good disclosure of costs and charges, but also single out inappropriate fee structures, for instance certain performance fees in the funds space. Furthermore, we annually analyse the effect of costs and charges on the return of funds and whether retail investors get “good value for money”, for instance in our analyses of the comparative performance of actively and passively managed funds.

We also pay attention to new distribution and business models such as neo-brokers and robo-advisors to make sure that these business models abide to the same standards as traditional ones. We monitor new distribution tools and ways in the digital world; for example, we are wary of gaming features in trading apps steering investors towards speculation and high activity trading, which might not be in their best interest and expose them to significant risks.

These comments would not be complete without mentioning ESG-investing and the risks of greenwashing. Here too ESMA’s goal is a regulatory framework that ensures that investors are getting appropriate information and ultimately investments in truly sustainable businesses when buying ESG-products.

We acknowledge that some of the regulation could be further improved, but - within the framework we have - we do what we can to protect retail investors.
Enhancing retail investor protection is one of our key drivers in everything we do.