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The EU’s Retail Investment Strategy marks an important regulatory shift aimed at strengthening investor protection, increasing transparency, and ensuring better value for money across retail investment products. Through targeted changes to frameworks such as MiFID II, UCITS, AIFMD, PRIIPs, and IDD, the strategy will introduce new rules in terms of product governance, cost disclosure, and distribution practices, with direct implications for fund managers’ operating models and product design. This article offers a brief overview of the forthcoming regulatory developments, outlines their anticipated impact for fund managers, and highlights key recommendations to help fund managers prepare proactively and remain competitive in an increasingly retail investment environment.
RIS expected impact on fund managers’ operations
RIS is expected to have a material business impact on fund managers, driving meaningful changes across product design, governance, distribution, pricing, and data capabilities. Stricter Value for Money (VfM) requirements, stronger inducement controls, and more prescriptive product governance will increase operational and compliance demands, requiring enhanced data, more frequent product reviews, closer engagement with distributors and supervisors, and robust remediation processes where products underperform. At the same time, greater scrutiny of costs, incentives, and suitability may compress margins for certain products and challenge traditional distribution and remuneration models, particularly in the retail segment. Find below a short summary on what will change to fund managers and some of the practical implications of these changes:
Value for Money
The Commission has confirmed a dual Value for Money (VfM) framework under the Retail Investment Strategy, with peer‑group assessments applying to MiFID products and supervisory benchmarks applying to insurance‑based investment products (IBIPs). Level 2 measures will further define product governance expectations for peer‑group construction, including eligibility criteria, sample representativeness, and fallback approaches where peer groups cannot be established. Where a product is found to no longer deliver VfM, firms will be required to take appropriate remedial actions to limit detriment to existing investors, without this being directly tied to the initial product approval process.
Key impact:
Under RIS, fund managers should expect a more explicit, measurable and continuous VfM obligation. In this context, they will be required to include peer‑group VfM assessments as part of their product governance arrangements, meaning that fund costs, performance and features will be assessed relative to comparable products. Such changes may lead to:
- Increased pressure to justify fund fees and cost structures relative to comparable strategies
- Greater scrutiny of fund ranges, particularly retail funds with weaker performance or higher costs
- Expectation to take remedial measures (fee reductions, strategy adjustments, mergers or closures)
- Stricter overall Product Governance requirements
Inducements
The inducement test has been included in the Level 1 legislation. The concept of tangible benefit is now reframed through a proportionality test, requiring inducements to be proportionate to both the value of the product and the level of service provided to the client. The rules also clarify the prohibition on inducements linked to variable or contingent sales targets. Finally, the inducements regime will be subject to a formal regulatory review five years after entry into force, allowing for reassessment of its effectiveness and market impact.
Key impact:
Although inducement rules apply primarily to distributors, the new rules are likely to have an indirect but significant effect on fund managers depending on their distribution models. Some of the practical impacts may be:
- Risk that certain funds become less distributable if inducements are no longer considered proportionate
- Potential restructuring of share class, particularly for retail distribution channels
- More intense distributor due diligence
- Existing revenue sharing arrangements between product manufacturers and distributors need to be reviewed and potentially amended
Investment suitability
A light suitability test will be introduced covering a wide range of well‑diversified, non‑complex and cost‑efficient “very simple” products, with detailed conditions to be specified at Level 2 and without an apparent restriction to independent advice models. Where clients decline to disclose assets held with third parties, firms will be permitted to assess portfolio diversification based on the information available to them. A recital will emphasize the opportunities offered by digital transformation in retail investing, underscoring the need for a regulatory framework that supports both in‑person and digital advice, with Level 2 acts and ESMA guidance expected to clarify the respective legal boundaries.
Key impact:
The introduction of a light suitability test is expected to segment the retail market into two distinct product categories. On one hand, a new class of “very simple” retail products (characterized by strong diversification, limited complexity and cost efficiency) will benefit from streamlined suitability assessments and easier access to digital and scalable distribution channels. On the other hand, more complex or less standardized products will remain subject to the full suitability framework. Although the responsibility for conducting suitability assessments continues to firmly rest with distributors, eligibility for the lighter regime will be largely determined through fund design. Product features such as diversification parameters, investment strategy simplicity, liquidity profile and cost structure will directly influence whether a fund qualifies for the simplified treatment, effectively making product structuring a key driver of retail accessibility. Some of the practical implications for funds managers may be summarized as follows:
- Stricter product governance requirements
- Increased incentive to structure simple retail‑friendly fund products
- Competitive disadvantage for complex or high‑cost strategies in mass retail distribution
- Enhanced importance of clear investment strategy communication, particularly for digital distribution models
PRIIPs
Agreement has been reached on several targeted amendments to the PRIIPs disclosure framework. A voluntary interactive digital tool will be introduced. Moreover, PRIIPs KIDs will need to be made machine‑readable, though not fully data‑extractable, with firms benefiting from an extended 30‑month implementation period following entry into force. In addition, the Commission, European Parliament, and Council have agreed to prepare a joint political statement supporting the development of an online comparator tool, subject to a future feasibility and cost assessment informed by experience once ESAP is operational. Finally, a reference to sustainability will be introduced at Level 1, although the practical scope and regulatory implications of this addition remain to be clarified.
Key impact:
Some of the potential implications for fund managers are:
- Investment in data infrastructure and KID production systems in order to render KIDs machine‑readable,
- Introduction of a voluntary interactive digital KID, signaling a shift away from static documents
- Deeper integration with SFDR data
- Anticipation of greater product comparability and scrutiny via future EU‑level comparison tools
Key insights for fund managers to prepare for RIS implementation
Even though RIS may bring additional regulatory efforts, a proactive and timely understanding of the requirements may provide fund managers with strategic opportunities. For instance, fund managers that embed value for money into their operating model can use transparency, cost efficiency, and product simplicity as competitive differentiators, strengthening trust with both investors and distributors. Furthermore, the light suitability assessments may enable scalable distribution of well‑designed, cost‑effective products, while digital disclosures and machine‑readable PRIIPs KIDs may create opportunities for innovation in online and hybrid advice.
Some key insights for fund managers are:
- Strengthen product governance frameworks to ensure VfM is assessed on an ongoing basis, not only at product launch. This includes regular reviews of costs, performance, and target market outcomes, and clear escalation paths where VfM deterioration is identified, in line with the new obligation to take remedial action for existing investors.
- Develop internal methodologies for peer‑group construction aligned with expected Level 2 criteria.
- Conduct a forward‑looking review of total cost structures, including management fees, operational costs, and distribution-related charges, to ensure they are defensible against VfM scrutiny. Where margins are thin, consider simplification, cost efficiencies, or product rationalization rather than relying on legacy pricing models.
- Update inducement frameworks to clearly demonstrate proportionality between inducements, product value, and service level. Documentation should clearly articulate the tangible benefit to the client, anticipating supervisory scrutiny given the elevation of the inducement test to Level 1 legislation.
- Assess whether parts of the product range can qualify as well‑diversified, non‑complex, and cost‑efficient offerings suitable for the expanded light suitability test. This presents an opportunity to simplify distributor engagement, support scalability, and enhance competitiveness in the retail segment.
- Adapt PRIIPs KIDs to be machine‑readable, ensuring data consistency across disclosures and preparing for future comparator tools.
- Align advisory and distribution models with the RIS emphasis on supporting both in‑person and digital investor journeys. Ensure internal policies clearly delineate how suitability, disclosures, and VfM assessments are applied consistently across channels, anticipating future ESMA guidance at Level 2.
- Move beyond minimum compliance by positioning VfM as part of the firm’s value proposition through transparent communication, simplified product ranges, and demonstrably competitive outcomes for retail investors. Firms that can evidence strong VfM outcomes may benefit from regulatory credibility, distributor confidence, and investor trust in an increasingly outcomes‑driven market.
Next steps
Retail Investment Strategy is expected to be published in the Official Journal in 2026. Member States will then have 24 months to transpose the Directive. The new rules will apply 30 months after entry into force. PRIIPs amendments, on the other hand, will apply earlier, within 18 months after entry into force.
How EY can help
Navigating RIS requirements demands strategic transformation. EY Luxembourg offers end-to-end support to help firms turn regulatory obligations into resilience and competitive advantage.
EY’s Supervisory Intelligence Platform (SIP) is a proprietary solution designed to transform large volumes of regulatory and product data into clear, actionable insights. The platform enables firms to better understand, benchmark and actively manage their financial competitiveness and Value for Money (VfM) outcomes. By fully automating the end‑to‑end process (from data collection and extraction to quality controls and Power BI visualization) EY SIP enables:
Dynamic comparison of investment products and product options across markets
- Granular analysis of costs, performance and structural features by market and by peer group
- Automated detection of compliance or calculation anomalies
- Customizable VfM indicators, tailored to supervisory expectations and firm‑specific methodologies
With just a few clicks, users can clearly see how their products position themselves within the European landscape (whether above, in line with, or below the market) supporting informed decision‑making, targeted remediation and proactive supervisory readiness.
EY Luxembourg can also support you through a range of additional services, including:
- Regulatory impact & gap assessment - Interpret RIS requirements across MiFID II, AIFMD and UCITS and identify priority remediation areas
- Value for money frameworks design - Design compliant cost, pricing and peer benchmarking assessments aligned with supervisory expectations
- Product governance uplift - Embed enhanced product approval, review and escalation processes into existing operating models
- Implementation & supervisory readiness - Support policy updates, documentation, disclosures and regulator engagement
Summary
The EU’s Retail Investment Strategy marks an important regulatory shift aimed at strengthening investor protection, increasing transparency, and ensuring better value for money across retail investment products.
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