On 29 August 2022, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published for consultation a supplement to the Guideline for investment advice and asset management service providers (Leidraad advies- en vermogensbeheerdienstverlening, the Guideline).
The results of research conducted by the AFM, which were published earlier this year, show that there are significant differences on expected returns determined by investment firms. When providing investment advice or asset management, investment firms are required to assess whether a certain portfolio is suitable for the client. This portfolio should match with the objectives, risk appetite and financial position of the client. To this end, investment firms are required to present a realistic expected return to their clients. The AFM found that investment firms use different methods and assumptions which means that there is wide variation in the expected return for investors with a similar profile.
The AFM therefore considers it necessary that investment firms present a realistic expected return. In order to achieve this the AFM has published for consultation a supplement to the Guideline, which describes its expectations with regard to a qualitative good calculation method of realistic returns. The AFM describes the characteristics of a good calculation method for expected returns, including, but not limited to, a traceable and recorded calculation, an annual update of the calculation method and sufficient transparency about the calculation and the outcome. In addition, the supplement includes several examples of good practices, as well as examples of inadequate practices.
The consultation document is available here (Dutch only). The consultation period ends on 29 September 2022.