Investment products
If you are an individual investing your own money (known as a retail investor), you benefit from EU rules designed to protect you.
Investment products, funds and investment-linked insurance policies, also known as "Packaged retail and insurance-based investment products" (PRIIPs), are typically offered to you by banks or insurance companies when you want to invest your money rather than put it in a standard savings account. Unlike a standard savings account, the value of investments and the income from investment products can decrease as well as increase.
As the way investment products work can be quite complex, it's not always easy to understand the returns you may gain as well as the potential risks you face. EU rules guarantee that you receive detailed information before you sign up for an investment product, so you're fully aware of the scale or nature of the risks you're taking on.
Warning
These EU rules do not cover occupational pension schemes, direct investments for example by buying shares in a company or purchasing property, investment products for professional investors, and life insurance products with no investment options (i.e. benefits only paid on death/incapacity).
Key information explaining the investment
Before you take out an investment product, the person or organisation selling it must give you a Key Information Document. This standard document is designed to give clear answers to your questions about the features, risks and costs of the investment product you're interested in.
What must be included in a Key Information Document
The information document you're given must be no more than 3 A4 pages long, and must contain the following information:
- general information on the provider and their contact details
- a description of the investment product, what it aims to do and how
- an explanation of the main factors that the return depends upon
- information about the term of the investment product, its maturity date, and the conditions for terminating your investment
- the level of risk of the investment product (classed from 1 to 7)
- an indication of the possible maximum loss from your investment, plus 4 appropriate performance scenarios – stress scenario, unfavourable scenario, moderate scenario and favourable scenario
- a table explaining the costs of your investment over time, in monetary and percentage terms
- a table giving information on one-off costs (such as entry and exit costs), recurring costs (such as portfolio transaction costs per year) and incidental costs, such as performance fees – all expressed in percentage terms
- how to make a complaint, including a link to the relevant complaints website, and a postal address and email address for submitting complaints
Time to compare and choose
The key information document allows you to easily compare investment products from different providers and choose the one that best suits your needs.
You must therefore receive the information document early enough for you to have enough time to consider your options before you are bound by a contract or offer. Even if there's a cooling off period the person selling you the investment product must give you the information document before you sign a contract.
Sample story
The information document can help you choose the right investment product
Leonard wanted to save some money for his retirement. He spoke to his bank about different account options. The bank suggested that he put aside EUR 150 each month in a special life insurance savings plan. They explained that this kind of investment product gave Leonard the possibility to get a better return on his money than with a normal savings account. Leonard asked for more information on the plan, and was given the Key Information Document.
When he read the document, Leonard saw from the different performance scenarios that he risked losing some of his retirement savings if the investments linked to the savings plan didn't perform well. He spoke to the bank and decided instead to choose a standard savings account.
Additional guidance and support
The European Securities and Markets Authority (ESMA) provides guidance and tools for people buying investment products through its Investor Corner. There you can find information on how investing works, check the public register of authorised investment firms, report suspicious offers through an investor alert portal, and find contacts for making a complaint if something goes wrong.
You can also check national rules on investment products below.