Today, the watchdogs for financial markets at the German consumer association Hesse published their findings on information regarding financial investments in the gray capital market such as equity interests, subordinated loans or direct investments. Results show that a lack of warning labels and unclear product and cost information reduce the transparency, which is needed for consumers to be able to make a conscious investment decision.
The market watchdogs examined adverts, brochures and asset information sheets from 36 investment providers, who presented their offers on their websites in autumn 2018.
These are the details:
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More than two-thirds of the cases presented inadequate investment specifications on their asset information sheets, so that consumers remained unclear about how exactly their money was invested.
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With 21 investment offers, the sample was dominated by so-called "blind pools" or "semi-blind pools", where providers are not obliged to specify on how the investment is carried out.
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Still, 16 out of these 21 blind pools did not meet the transparency criteria of the market watchdogs – which include information on age, size and leasing status of containers, details on scope, location and performance of infrastructure projects or information on grid connectivity for renewable energies.
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Nine of the 36 providers presented their costs and commissions inadequately in terms of legal requirements. Also, in the given sample the highest commission rates varied between 10 and 31 percent.
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Moreover, 26 of the 36 investment offers did not meet the standard of transparent projections. These are intended to provide information about how different market developments may affect consumers payments.
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With 21 investment offers, the sample was dominated by so-called "blind pools" or "semi-blind pools", where providers are not obliged to specify on how the investment is carried out.
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Still, 16 out of these 21 blind pools did not meet the transparency criteria of the market watchdogs – which include information on age, size and leasing status of containers, details on scope, location and performance of infrastructure projects or information on grid connectivity for renewable energies.
Wolf Brandes, head of watchdogs for financial markets at the consumer association Hesse, noted: "From a consumer perspective, this segment is fundamentally problematic. Consumers can hardly assess opportunities and risks due to the often complex legal structure. Therefore, consumers depend on reliable and transparent information from investment providers. Providers, on the other hand, must consistently comply with legal requirements. Besides mandatory warning labels, this also includes that they clearly and comprehensibly set out all the information on the legally required documents. Consumers needs to know what they invest in after having read the three-page asset information sheet."
Source: Consumer association Hesse, market watchdogs for financial markets
More information and fact sheet