European regulators have released a discussion paper today calling for improved, standardized disclosure in the €10 trillion ($14.1 trillion) European Union (EU) market for retail investment products.

The Joint Committee of the European Supervisory Authorities published a joint discussion paper Monday on new rules governing the disclosure documents provided to retail investors that aim to help investors better understand and compare packaged retail and insurance-based investment products (this includes structured products, investment funds, and insurance-linked investments, but not direct equity or bond holdings).

The regulators note that, while retail investment products can help build savings and support capital markets activity and economic growth, existing disclosure about the risks, rewards and costs of investment products “can be overly complex, difficult to find, and hard to compare for retail investors”.

As a result, they are developing new standards on the content and presentation of disclosure for these sorts of products. The paper says that the aim of the disclosure is to provide retail investors with “consumer-friendly information about investment products with the ultimate aim of improving transparency in the investment market”.

The paper, which was published by the European Insurance and Occupational Pensions Authority (EIOPA), European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), is aiming to improve the quality and comparability of information provided to retail investors on investment products that are often complex. “The need for EU action reflects the difficulties retail investors have faced in comprehending and comparing investments, hampering the emergence of efficient EU markets,” it says.

The new standards will contain detailed rules on the contents and presentation of the disclosure documents, including calculation methodologies for risk disclosure, performance scenarios, and cost disclosures. “The measures should be designed to be engaging for retail investors, and to help them better comprehend and compare the many different products that fall within the scope of the [regulations],” it says. It will also address standards for the timing of delivery of the disclosure.

The paper outlines the challenges for, and needs of, retail investors in understanding and comparing the risks and rewards of these sorts of products. It explores the different dimensions of risk; market, credit and liquidity risks, and examines possible ways of measuring or classifying and aggregating these risks. In terms of returns, it sets out two basic approaches to performance scenarios. And, it looks at a variety of ways to present risk and return, including the use of benchmarks.

It does much the same for costs. “Key challenges for retail investors include comparing different cost structures, and understanding how the costs of a product will apply in practice for the investor,” it says. “Creating a fair level-playing field between products will be important, and this will involve ensuring a consistent treatment of costs, including costs that are implicit, such as those embedded in prices, for instance for structured products and portfolio transaction costs for funds.”

As for the timing of disclosure, the paper stresses that this disclosure should be delivered to investors before they make a decision on a possible investment. “There should be no pressure on the retail investor in this regard, should they wish to take a few days, for instance, before making a decision,” it says.

The regulators are seeking feedback by February 17, 2015. They intend to publish draft rules in the autumn of 2015, and to finalize the rules by the start of 2016.