On 2 August, the obligation to ask customers about their sustainability preferences came into force. In the months leading up to it, this has caused a tsunami in the industry, which in recent years has had to adjust not only its product range, but also its documentation and the way it deals with customers in order to adapt to the European SFDR rules. This was the subject of the latest FundsPeople Legal Debate.
"The months leading up to August have been very intense," admits Ana Benítez, partner at FinReg360. They have been involved in numerous projects to implement this regulation and have received many enquiries from organisations that have been adapting to the new requirements for more than a year. "The main impact identified is how sustainability preferences are going to constrain the products you can offer to customers, as only products that respond to those preferences can be recommended or included in customers' portfolios according to the definition of the rule, which is very strict. However, organisations have also been overwhelmed in terms of technological development," says Benítez.
Moreover, having to train the network to be able to inform investors has been another of the obstacles encountered. And even more so with the summer in between. "Some organisations have not had the time," adds the expert.
The reality is that the sector has been adapting and doing its best for a long time. And this is something that Inverco acknowledges. After all, "sustainability regulation is very focused on information and should therefore put the investor at the centre, asking for and providing them with comprehensible information", says Elisa Ricón, CEO of Inverco.
And just as the organisations are not prepared, neither is the customer. "In the end, the investor is not prepared for such complex questions and they need the advisor to explain these to them," suggests Natalia López Condado, head of the Financial Regulation and Investment Funds practice at DLA Piper España. Who alludes to the fact that "many changes have been introduced in a very short time".
Could we have waited?
Therefore, the participants of the Legal Debate suggest that we could have waited to include these customer tests. "It would have been better to wait until the roll-out of the regulations that require organisations to disclose information on sustainability had been completed," says José Carlos Sánchez-Vizcaíno, Director of Depositary Supervision at Cecabank.
An opinion shared by José Carlos Vizárraga, CEO of Ibercaja Pensión: "In the end, forcing organisations to do it in record time results in minimum models because it is not possible to deliver. And that is not the goal. We have not been given enough time to be able to properly prepare the response we are going to give to the customer."
In any case, Sánchez-Vizcaíno stresses that the updating of the tests also brings some positive aspects, because "the negative target market has been avoided." By this, the expert means that "even if the customer being advised or under discretionary management, among other reasons, might not understand the very specific questions, they may opt to indicate that they do not have ESG preferences, and thus they can be offered sustainable products and avoid the push-out effect. This allows the industry to continue offering its ESG range. The industry's efforts to offer these specific products will be rewarded," he concludes.
