The Commission has carried out a project testing the effectiveness of presented information to retail investors within the PRIIPs framework. It sent out 10 different versions of performance scenarios and past performance information covering 11 products to over 7500 participants in 5 countries.
In terms of the KID, it looked at the current version, a probabilistic approach, a past performance approach and an illustrative scenario version.
Consumers seemed to struggle with identifying products based on their specific features and answer correctly questions on understandability. Across all versions, less than half of the respondents could identify the product with the most unpredictable returns, the highest guaranteed return or the one that guaranteed a positive return or money back.
The key conclusions the Commission drew were:
- the probabalistic KID seemed to cause consumers to answer the questions on product selection better, although only a few seemed to understand the information provided on the likelihood of different scenarios;
- the understanding of and impact on answers of providing information on past performance seemed positive at least in relation to funds and IBIPs. But the more complex the information on IBIPs gets, the greater the chance of negative impact on understanding; and
- there was no significant evidence to support including illustrative scenarios;