‘Commission ban’ – this irritant word which is a red flag in the financial industry – was only in a draft for the retail investor strategy. Under massive pressure from the lobby and probably also after intervention from the German Federal Ministry of Finance, the proposal that the Commission intends to adopt today no longer provides for an attack on the remuneration model that is still common in Germany and so popular in the industry. And yet the strategy will not be applauded either by the industry or by consumer advocates, as my colleague Christof Roche has learned.
The tricky thing is that in both investment advice and non-advisory business, serious changes are difficult to predict even after reading the proposal: After all, details will only be worked out afterwards by the Commission with the relevant authorities, in this case probably the officials of the securities and market supervisory authority ESMA. In any case, the aim of the regulation is to increase the securities quota in the EU. Shouldn’t the strategy do that? In that case, the Commission has incorporated the review clause. The retail investor strategy is thus already on the resubmission list.
The declared aim of the retail investor strategy – the Commission intends to present the proposal today – is to increase the coherence of European financial market regulation. In addition, the Commission wants to make capital market access easier and more attractive for retail investors. The goal of the “New Retail Investment Rules” is welcomed in principle by the players in the financial market industry: it is “important to make it easier to buy securities in order to strengthen asset accumulation and retirement provision”. This applies in particular to Germany, where the participation of retail investors in the securities business is very low by European standards.
However, there are doubts as to whether the Commission will achieve its goal of simplification with the planned adjustments. “As it looks at the moment, the processes for customers and banks are more likely to become more complex and thus ultimately more expensive“, says the industry. In this context, it refers to planned comprehensive changes in investment advice (suitability test), even if these have not yet been concretely defined by the Commission in terms of content.
“There are very many references out of the regulatory package that the concrete details will be determined via the so-called Level 2 procedure. That’s why it’s not yet possible to make any concrete statements on individual points”, the industry continues. In the Level 2 procedure, the legislative framework is adopted by the EU Parliament and Council, but the details of implementation are left to the EU Commission in cooperation with the relevant EU authorities. In this case, this is likely to be primarily the European Securities and Markets Authority (ESMA).
The industry also expects far-reaching changes in the area of non-advisory business (appropriateness test). In addition to the information currently requested from their customers, institutions will also be required to provide information on their risk appetite and loss-bearing capacity. Here, too, it is still unclear how exactly the Commission envisages this. At the moment, there are warnings to customers in the case of risky transactions. With the new rules, “customers may not be able to buy what they want to buy in the future because the bank may no longer sell them certain products”, the report continues. “This borders on paternalism”. In addition, it would be difficult for the institutions to carry out the appropriateness test, as this would not be done in personal consultations.
The industry will also face challenges through changes to product governance. In the future, for example, there is to be a cost benchmark against which products must be measured. However, it is still completely open how the Commission intends to proceed here – whether this should apply to individual product groups or across all classes. In that case, they would first have to be standardized. The cheapest product is not automatically the best. “There are products that contain risk-reducing components, which of course makes them more expensive”, the circles explain. It will be exciting “to see how ESMA and the other EU authorities want to fill this in across the board”.
In addition to the credit industry, funds and insurance companies are also affected by the new regulation. The financial industry is also skeptical about the planned EU-wide standardization of cost information for customers. In the future, not only the amount is to be listed here, but also the way in which the costs are calculated. Whether this will bring more transparency and the necessary knowledge for customers to acquire financial investments remains to be seen. For the industry, in any case, this would mean “a major change”.
There is a lack of understanding in the industry with regard to the planned new regulation of employee qualifications. There are no deficits here, either in Germany or in Europe. However, the qualification of employees is carried out differently in the individual countries. If this is now standardized throughout Europe, it will be an enormous change for many. “Expensive retraining will be necessary, although there is basically no grievance”. On the other hand, the industry takes a positive view of changes in customer categorization. Here, it will be easier in the future for private investors to be classified as professional investors.
Consumer protection circles said that the proposed measures are not sufficient. The conflict of interest, “which arises from commissions and often leads to incorrect and false advice, remains”. Even with adjustments to the suitability and appropriateness test, the quality of advice cannot be safeguarded. The same applies to the qualification of financial product sellers.
“Qualification is a necessary prerequisite for quality of advice, but by no means a sufficient one”, consumer advocates say. “After all, high qualification does not change the information gap or the conflict of interest”. The cost benchmark, they say, is an instrument “that the industry will try to lobby away”. Although the measures do not address the root of the problem, it is important to “implement these tools at all costs”. It is necessary to prove “that forever regulating around the conflict of interest is not enough“.
Consumer protection groups emphasized that the planned cost reduction would not solve the misaligned incentive of acquisition commissions. The problem remains. One ray of hope, however, is the review clause. Should it become apparent that the harmful effect of commissions continues to exist, the ban on commissions would then be mandatory. The prediction is “that the problem will continue”. Unfortunately, however, valuable time is being lost for the important cause of consumer finances.
There is more at stake than simply filling the twelve of 17 regional parliaments when elections are held in Spain on Sunday. Since 1982, the results of these elections have regularly indicated who will also win the parliamentary elections a little later. The main question is whether the parties in the governing coalition – the Socialist Party (PSOE) and the left-wing alliance Unidas Podemos – will be able to win most of the municipalities, or whether the conservative Partido Popular (PP) will win them. In some regions, the PP could even achieve an absolute majority.
In the final phase of the election campaign, a survey by the state-run Centro de Investigaciones Sociológicas (CIS) shows that the PP is gaining approval, while the PSOE is losing slightly in the polls. While the Socialists were predicted to win 31.7 percent on May 10, the forecast now drops to 30.2 percent. For the PP, the last poll predicted an election result of 27.3 percent, which has now risen to 27.9 percent. The CIS, whose president José Félix Tezanos is close to the PSOE, often tends to favor the left in its polls. This time, the CIS suggests a tie between the two most extreme parties: the right-wing Vox and the left-wing alliance Unidas Podemos. Each would garner eight percent of the electoral vote. With this estimate, the CIS poll shows an increase in the vote for Vox.
In Madrid, the PP candidate, regional government president Isabel Díaz Ayuso, could win with 61 to 70 seats, as was forecast. This would bring the absolute majority (68 seats) within reach for the PP. Most recently, her party had crashed in the regional elections in Madrid. Díaz Ayuso came to office only with the support of the right-wing Vox and the liberal Ciudadanos.
This time, too, Vox would help out should Díaz Ayuso miss out on an absolute majority. They are predicted to have eight to eleven deputies. The possibility of a PP government without Vox depends on whether Podemos gets enough votes to enter parliament – that remains an open question. It would be a major blow for Podemos to fail the five-percent hurdle in the region where the party was founded in 2014.
The party is currently in crisis. And it is firing with all guns blazing: Pablo Iglesias, the founder and former leader of Podemos, is railing against PP candidate Díaz Ayuso via his private television station Canal Red. Podemos has also hung a banner with the image of Díaz Ayuso’s brother on the facade of a building in one of Madrid’s main streets, charging him with a corruption case involving the purchase of masks during the pandemic. The Spanish judiciary has already closed the case without finding any crime.
With Vox’s support, the PP would be able to wrest from the PSOE its largest regional government: the Valencia region. Socialist Ximo Puig has already served two terms at the head of this region. However, the PP could win by 31 to 36 seats, just two seats short of an absolute majority. An alliance with Vox – the party is traded between eight and 12 seats – would give the PP the majority it needs if it lacks mandates. However, if Socialist Puig wins between 30 and 34 seats, he could hold the mandate by repeating the alliance with the left-wing Compromís alliance and even without including Podemos.
While the race for the Valencia region is open, the PP is likely to win the race in the municipal elections in Valencia, according to the SIGMA poll for the newspaper El Mundo. The PP with its candidate María José Catalá would thus wrest his office from the previous mayor Joan Ribó of Compromís.
In the Canary Islands, the PSOE would win with 33 percent, followed by the PP with 20 percent. The same applies to the Balearic Islands (PSOE 31.5 percent, PP 26 percent and Vox in third place with 13.6 percent). In Castilla-La Mancha, too, an absolute majority of 17 seats would give the PSOE 16 to 22 seats. In the Murcia region – important for agriculture and known as the vegetable garden of Europe – the PP could retain the government with the help of Vox. Things also look good for the PP in the wine region of La Rioja, as well as in the coastal region of Cantabria.
Meanwhile, President Pedro Sánchez of the Socialists is trying to make up ground politically. On May 14, he announced that he would encourage people over 65 to go to the movies, “with tickets for two euros every Tuesday”. The measure is among those adopted by the government in recent weeks in the midst of the election campaign. Since April, the Sánchez government has promoted homeownership guarantees for young people and families with minor children and passed the Housing Law to combat the rental crisis. Sánchez has also announced investments in tourism, with discounts for young people on Interrail trips in Europe and on trains and buses in Spain.
Asked about her marathon best of 3:14 hours, Alena Kühlein laughs. “Well researched”, she says. “That’s actually up to date”. When asked what digitization and marathon running have in common, she doesn’t have to think long: “Digitization is a very dynamic topic that develops rapidly and always challenges you to keep up with the pace“. It’s quite similar to running, she says.
Kühlein heads the digital economy department of the German Chamber of Industry and Commerce (DIHK). In this role, she monitors the progress of German companies in implementing digitization and informs them about current and planned digital legislation in Germany and the EU. For her, digitization is especially two things: a key contemporary issue and a tool that helps to better manage several crises at once.
Kühlein became aware of the organization of chambers of commerce while studying economics: She completed an internship at the Chamber of Commerce Abroad (AHK) in France. Later, during a trainee program, she got to know the network of chambers of commerce and AHKs, including AHK Peru and IHK Pfalz. In 2020, she took on the position of Head of Unit for Digital Economy, and ever since then she has been working in Berlin.
The fact that, as a woman in her late twenties in a management position, she is asked about her comparatively young age doesn’t bother her much. “The experience advantage is limited when it comes to digital topics, because we always have to familiarize ourselves with new developments”, she says. She sees her age as an advantage: Kühlein has points of contact with the new topics, and prefers to try everything out directly herself.
According to Kühlein, digitization is not a topic of the future, but of the present: “We are right in the middle of it and have to help shape it in the here and now“, she emphasizes. The challenges are of various kinds: “Broadband expansion and the digitization of the administration have been with us for many years, these are not new topics” – in contrast to the many innovation-driven topics, such as artificial intelligence in particular.
A survey of 4,000 companies commissioned by the DIHK has come to the conclusion: The digitization process in Germany shows little progress. “Of course, companies are trying very hard and making progress”, says Kühlein. “But in relative terms, they are running in circles”.
This is due to many current challenges: the aftermath of the Corona pandemic, the issue of supply chains, the shortage of skilled workers and the energy crisis. As a result, companies often lack the time, financial and personnel capacities to devote to the complex tasks of digital transformation.
In this context, digitization can be a suitable tool for overcoming many crises, says Kühlein. As for what she would like to see, “I’m convinced that digitization brings insane opportunities, and it’s important to see it as part of problem-solving“. As an example of how it can help address energy crises, she cites the use of AI: “In industry, AI can reduce or even eliminate the idle time or waiting time of a machine, and utilization can be optimized significantly”. Ultimately, this would also have a positive impact on energy efficiency.
Kühlein draws another parallel with running: “In marathon running, it’s not enough to run three intervals; you have to keep at it throughout the year”, she says. It’s a similar story with digitization: “For companies, it’s not just a matter of introducing a technology and that’s it” – rather, digitization requires a comprehensive, structural, organizational, and also corporate cultural adjustment. Carlos Hanke Barajas
‘Commission ban’ – this irritant word which is a red flag in the financial industry – was only in a draft for the retail investor strategy. Under massive pressure from the lobby and probably also after intervention from the German Federal Ministry of Finance, the proposal that the Commission intends to adopt today no longer provides for an attack on the remuneration model that is still common in Germany and so popular in the industry. And yet the strategy will not be applauded either by the industry or by consumer advocates, as my colleague Christof Roche has learned.
The tricky thing is that in both investment advice and non-advisory business, serious changes are difficult to predict even after reading the proposal: After all, details will only be worked out afterwards by the Commission with the relevant authorities, in this case probably the officials of the securities and market supervisory authority ESMA. In any case, the aim of the regulation is to increase the securities quota in the EU. Shouldn’t the strategy do that? In that case, the Commission has incorporated the review clause. The retail investor strategy is thus already on the resubmission list.
The declared aim of the retail investor strategy – the Commission intends to present the proposal today – is to increase the coherence of European financial market regulation. In addition, the Commission wants to make capital market access easier and more attractive for retail investors. The goal of the “New Retail Investment Rules” is welcomed in principle by the players in the financial market industry: it is “important to make it easier to buy securities in order to strengthen asset accumulation and retirement provision”. This applies in particular to Germany, where the participation of retail investors in the securities business is very low by European standards.
However, there are doubts as to whether the Commission will achieve its goal of simplification with the planned adjustments. “As it looks at the moment, the processes for customers and banks are more likely to become more complex and thus ultimately more expensive“, says the industry. In this context, it refers to planned comprehensive changes in investment advice (suitability test), even if these have not yet been concretely defined by the Commission in terms of content.
“There are very many references out of the regulatory package that the concrete details will be determined via the so-called Level 2 procedure. That’s why it’s not yet possible to make any concrete statements on individual points”, the industry continues. In the Level 2 procedure, the legislative framework is adopted by the EU Parliament and Council, but the details of implementation are left to the EU Commission in cooperation with the relevant EU authorities. In this case, this is likely to be primarily the European Securities and Markets Authority (ESMA).
The industry also expects far-reaching changes in the area of non-advisory business (appropriateness test). In addition to the information currently requested from their customers, institutions will also be required to provide information on their risk appetite and loss-bearing capacity. Here, too, it is still unclear how exactly the Commission envisages this. At the moment, there are warnings to customers in the case of risky transactions. With the new rules, “customers may not be able to buy what they want to buy in the future because the bank may no longer sell them certain products”, the report continues. “This borders on paternalism”. In addition, it would be difficult for the institutions to carry out the appropriateness test, as this would not be done in personal consultations.
The industry will also face challenges through changes to product governance. In the future, for example, there is to be a cost benchmark against which products must be measured. However, it is still completely open how the Commission intends to proceed here – whether this should apply to individual product groups or across all classes. In that case, they would first have to be standardized. The cheapest product is not automatically the best. “There are products that contain risk-reducing components, which of course makes them more expensive”, the circles explain. It will be exciting “to see how ESMA and the other EU authorities want to fill this in across the board”.
In addition to the credit industry, funds and insurance companies are also affected by the new regulation. The financial industry is also skeptical about the planned EU-wide standardization of cost information for customers. In the future, not only the amount is to be listed here, but also the way in which the costs are calculated. Whether this will bring more transparency and the necessary knowledge for customers to acquire financial investments remains to be seen. For the industry, in any case, this would mean “a major change”.
There is a lack of understanding in the industry with regard to the planned new regulation of employee qualifications. There are no deficits here, either in Germany or in Europe. However, the qualification of employees is carried out differently in the individual countries. If this is now standardized throughout Europe, it will be an enormous change for many. “Expensive retraining will be necessary, although there is basically no grievance”. On the other hand, the industry takes a positive view of changes in customer categorization. Here, it will be easier in the future for private investors to be classified as professional investors.
Consumer protection circles said that the proposed measures are not sufficient. The conflict of interest, “which arises from commissions and often leads to incorrect and false advice, remains”. Even with adjustments to the suitability and appropriateness test, the quality of advice cannot be safeguarded. The same applies to the qualification of financial product sellers.
“Qualification is a necessary prerequisite for quality of advice, but by no means a sufficient one”, consumer advocates say. “After all, high qualification does not change the information gap or the conflict of interest”. The cost benchmark, they say, is an instrument “that the industry will try to lobby away”. Although the measures do not address the root of the problem, it is important to “implement these tools at all costs”. It is necessary to prove “that forever regulating around the conflict of interest is not enough“.
Consumer protection groups emphasized that the planned cost reduction would not solve the misaligned incentive of acquisition commissions. The problem remains. One ray of hope, however, is the review clause. Should it become apparent that the harmful effect of commissions continues to exist, the ban on commissions would then be mandatory. The prediction is “that the problem will continue”. Unfortunately, however, valuable time is being lost for the important cause of consumer finances.
There is more at stake than simply filling the twelve of 17 regional parliaments when elections are held in Spain on Sunday. Since 1982, the results of these elections have regularly indicated who will also win the parliamentary elections a little later. The main question is whether the parties in the governing coalition – the Socialist Party (PSOE) and the left-wing alliance Unidas Podemos – will be able to win most of the municipalities, or whether the conservative Partido Popular (PP) will win them. In some regions, the PP could even achieve an absolute majority.
In the final phase of the election campaign, a survey by the state-run Centro de Investigaciones Sociológicas (CIS) shows that the PP is gaining approval, while the PSOE is losing slightly in the polls. While the Socialists were predicted to win 31.7 percent on May 10, the forecast now drops to 30.2 percent. For the PP, the last poll predicted an election result of 27.3 percent, which has now risen to 27.9 percent. The CIS, whose president José Félix Tezanos is close to the PSOE, often tends to favor the left in its polls. This time, the CIS suggests a tie between the two most extreme parties: the right-wing Vox and the left-wing alliance Unidas Podemos. Each would garner eight percent of the electoral vote. With this estimate, the CIS poll shows an increase in the vote for Vox.
In Madrid, the PP candidate, regional government president Isabel Díaz Ayuso, could win with 61 to 70 seats, as was forecast. This would bring the absolute majority (68 seats) within reach for the PP. Most recently, her party had crashed in the regional elections in Madrid. Díaz Ayuso came to office only with the support of the right-wing Vox and the liberal Ciudadanos.
This time, too, Vox would help out should Díaz Ayuso miss out on an absolute majority. They are predicted to have eight to eleven deputies. The possibility of a PP government without Vox depends on whether Podemos gets enough votes to enter parliament – that remains an open question. It would be a major blow for Podemos to fail the five-percent hurdle in the region where the party was founded in 2014.
The party is currently in crisis. And it is firing with all guns blazing: Pablo Iglesias, the founder and former leader of Podemos, is railing against PP candidate Díaz Ayuso via his private television station Canal Red. Podemos has also hung a banner with the image of Díaz Ayuso’s brother on the facade of a building in one of Madrid’s main streets, charging him with a corruption case involving the purchase of masks during the pandemic. The Spanish judiciary has already closed the case without finding any crime.
With Vox’s support, the PP would be able to wrest from the PSOE its largest regional government: the Valencia region. Socialist Ximo Puig has already served two terms at the head of this region. However, the PP could win by 31 to 36 seats, just two seats short of an absolute majority. An alliance with Vox – the party is traded between eight and 12 seats – would give the PP the majority it needs if it lacks mandates. However, if Socialist Puig wins between 30 and 34 seats, he could hold the mandate by repeating the alliance with the left-wing Compromís alliance and even without including Podemos.
While the race for the Valencia region is open, the PP is likely to win the race in the municipal elections in Valencia, according to the SIGMA poll for the newspaper El Mundo. The PP with its candidate María José Catalá would thus wrest his office from the previous mayor Joan Ribó of Compromís.
In the Canary Islands, the PSOE would win with 33 percent, followed by the PP with 20 percent. The same applies to the Balearic Islands (PSOE 31.5 percent, PP 26 percent and Vox in third place with 13.6 percent). In Castilla-La Mancha, too, an absolute majority of 17 seats would give the PSOE 16 to 22 seats. In the Murcia region – important for agriculture and known as the vegetable garden of Europe – the PP could retain the government with the help of Vox. Things also look good for the PP in the wine region of La Rioja, as well as in the coastal region of Cantabria.
Meanwhile, President Pedro Sánchez of the Socialists is trying to make up ground politically. On May 14, he announced that he would encourage people over 65 to go to the movies, “with tickets for two euros every Tuesday”. The measure is among those adopted by the government in recent weeks in the midst of the election campaign. Since April, the Sánchez government has promoted homeownership guarantees for young people and families with minor children and passed the Housing Law to combat the rental crisis. Sánchez has also announced investments in tourism, with discounts for young people on Interrail trips in Europe and on trains and buses in Spain.
Asked about her marathon best of 3:14 hours, Alena Kühlein laughs. “Well researched”, she says. “That’s actually up to date”. When asked what digitization and marathon running have in common, she doesn’t have to think long: “Digitization is a very dynamic topic that develops rapidly and always challenges you to keep up with the pace“. It’s quite similar to running, she says.
Kühlein heads the digital economy department of the German Chamber of Industry and Commerce (DIHK). In this role, she monitors the progress of German companies in implementing digitization and informs them about current and planned digital legislation in Germany and the EU. For her, digitization is especially two things: a key contemporary issue and a tool that helps to better manage several crises at once.
Kühlein became aware of the organization of chambers of commerce while studying economics: She completed an internship at the Chamber of Commerce Abroad (AHK) in France. Later, during a trainee program, she got to know the network of chambers of commerce and AHKs, including AHK Peru and IHK Pfalz. In 2020, she took on the position of Head of Unit for Digital Economy, and ever since then she has been working in Berlin.
The fact that, as a woman in her late twenties in a management position, she is asked about her comparatively young age doesn’t bother her much. “The experience advantage is limited when it comes to digital topics, because we always have to familiarize ourselves with new developments”, she says. She sees her age as an advantage: Kühlein has points of contact with the new topics, and prefers to try everything out directly herself.
According to Kühlein, digitization is not a topic of the future, but of the present: “We are right in the middle of it and have to help shape it in the here and now“, she emphasizes. The challenges are of various kinds: “Broadband expansion and the digitization of the administration have been with us for many years, these are not new topics” – in contrast to the many innovation-driven topics, such as artificial intelligence in particular.
A survey of 4,000 companies commissioned by the DIHK has come to the conclusion: The digitization process in Germany shows little progress. “Of course, companies are trying very hard and making progress”, says Kühlein. “But in relative terms, they are running in circles”.
This is due to many current challenges: the aftermath of the Corona pandemic, the issue of supply chains, the shortage of skilled workers and the energy crisis. As a result, companies often lack the time, financial and personnel capacities to devote to the complex tasks of digital transformation.
In this context, digitization can be a suitable tool for overcoming many crises, says Kühlein. As for what she would like to see, “I’m convinced that digitization brings insane opportunities, and it’s important to see it as part of problem-solving“. As an example of how it can help address energy crises, she cites the use of AI: “In industry, AI can reduce or even eliminate the idle time or waiting time of a machine, and utilization can be optimized significantly”. Ultimately, this would also have a positive impact on energy efficiency.
Kühlein draws another parallel with running: “In marathon running, it’s not enough to run three intervals; you have to keep at it throughout the year”, she says. It’s a similar story with digitization: “For companies, it’s not just a matter of introducing a technology and that’s it” – rather, digitization requires a comprehensive, structural, organizational, and also corporate cultural adjustment. Carlos Hanke Barajas
