European asset managers are underestimating the change that will kick in when the Key Investor Information Documents become legal requirements for all UCITS funds in just ten weeks, RBC Dexia has said.

The financial services firm, equally owned by Royal Bank of Canada and Dexia, said that KIIDs will completely transform the way that financial information is prepared and distributed in Europe, even if the changes have not been hitting the headlines as much as the US regulator’s FATCA or the UK’s RDR.

The main hurdle for asset management firms is likely to be the criterion which demands funds’ prospectus to be translated into plain language: “Rather than just changing some words to make it sound less technical, we believe this applies to the entire approach of writing and describing an investment policy,” said Martin Bock of RBC Dexia. “It means taking a fresh look at how investment strategies are explained.”

Bock also argues that well-crafted KIIDs could give fund managers an edge over rivals: “It’s a competitive environment for asset managers today and investors have a wider choice of funds than ever,” he said. “Distributors will rely on the document to encourage investors to subscribe to the fund. In our view, the better the KIID, the more it contributes to the attractiveness of the fund for investors.”

While the EU directive has not specified any penalties for missing the deadline on 1 July and instead left the question of punitive action up to the individual supervisory body, RBC Dexia highlights that fund managers could be punished by the market as lack of compliance could taint a company’s brand.