The European Securities and Markets Authority (Esma) revealed that the costs associated with investing for retail clients has decreased in the last decade.
In its analysis of data between 2012 and 2021, the regulator found a continued yet “small decline” in how much retail investors need to pay to invest their money.
More specifically, the products available in the market are proving their value for money, Esma said.
For instance, investors who paid €3,000 for an investment of €10,000 over the last decade, received a final net value of €18,500 (£16,350, $20,000) by the end.
Esma also highlighted that the recent inflationary spikes have weighed on investor returns after a decade of low inflation, which saw around €2,000 wiped out from the net value of investments to €16,500.
“Beyond performance and costs, the overall utility that investors can derive from investment products is gaining growing attention,” the watchdog said. “Cost efficiency, as well as product design and quality, determine final investor outcomes.”
Demand for ESG products unsurprisingly grew over the period across equity, bond and mixed funds. The asset classes largely outperformed their non-ESG counterparts in 2021, with the only exception of ESG bond funds.
ESG products, however, remained cheaper than non-ESG options, with only equity ESG ETFs coming in more expensive that non-ESG ones.
Careful consideration
Even though investing in retail products is becoming cheaper, Esma warned investors they should still consider fund fees “carefully”.
For instance, active Ucits remained more expensive than passive funds and ETFs, and their net performance was lower in comparison, as a result.
Unsurprisingly, costs for cross-border funds were higher than for domestic ones, mainly due to differing distribution channels.
Verena Ross, Esma chair, said: “Investors are faced with an environment of high economic uncertainty, high inflation and relatively low market performance. In this context, the high costs of certain investment products, particularly for retail investors, raise concerns about actual investment outcomes.
“Esma’s reporting on the cost and performance of retail investment products provides an annual snapshot of the market. Whilst the cost incurred by investors is slowly declining compared to the past years, the availability of well-designed and cost-efficient products is a key element to encourage increased consumer participation in the European capital markets.”
Esma’s analysis follows recent reports regarding a potential ban on commissions in the EU for the sale of financial products by advisers, as a way to attract more retail investors to European capital markets.
