Responding to growing industry pressure, the European Securities & Markets Authority is consulting on changes to MiFiD 2 as it acknowledges current rules may ‘may create unintended obstacles for retail investors’.
Europe’s securities regulator believes one of the continent’s biggest inefficiencies is hiding in plain sight: cash. Households keep 31 per cent of their financial wealth in bank accounts, compared with 21 per cent in the United States. In what amounts to a U-turn after years of prioritising investor protection, ESMA now is questioning whether ‘unnecessary complexity’ makes retail investing ‘daunting or inaccessible’ and thus ‘deters capital market participation’.
Although the consultation covers four broad themes, the authority concentrates on the areas it can change.
It asks whether costs-and-charges tables, loss alerts and lengthy key-information documents make sense on a smartphone; whether suitability questionnaires harvest more data than advisers need; and whether the execution-only knowledge test gives genuine protection or ends in perfunctory box-ticking. Crowdfunding platforms, now under ESMA supervision, also come in for scrutiny: the watchdog wonders aloud if the EU-mandated 24-hour “reflection period” deters first-time investors.
Industry participants will see the consultation as long overdue. During a Tradetech paris 2025 panel about European market structure, Muriel Faure, chair of the AFG’s (the French asset management association) Technological Innovations Commission summed up the situation saying:
“New retail investors hold far more cryptocurrency than equities, often double, we have to understand why they go there, why they feel safer on crypto exchanges than on equity venues. That means a big push for education”
This shunning of capital markets in favour of either cash or deposits, at least relative to the US situation, finally prompted ESMA to launch its consultation on the “retail investor journey”. The consultation, open until 21 July 2025, asks firms if the very safeguards intended to protect savers—MiFID II disclosures, suitability and appropriateness tests, marketing rules and the new layer of ESG preferences—have not become barriers that scare newcomers away. ESMA promises “regulatory adjustments or clarifications” as early as next autumn if the dossier shows they are needed.
