Am I a retail investor? Requirements and protection level

Retail or professional: what category do I belong to? When investing, we must identify ourselves in one of these two groups, since they have different levels of protection.

In order to find out if we are retail investors or not, we must first define what type of investor profile is considered a professional investor. According to the MiFID (Markets in Financial Instruments Directive), a professional investor has the experience and knowledge required to make investment decisions on their own behalf and third parties, as well as assess the risks they are taking on with these decisions.With this in mind, the most simple way to define the retailers is by exclusion, i.e. they are customers that do not fit in the professional category due to having less experience and/or knowledge. This is the category in which most individual investors are, so you are probably a retail investor.

Unlike professional investors, retail investors have higher protection levels; therefore, they cannot access any product. In addition, as explained by the CNMV, which oversees compliance with MiFID, the regulation seeks to ensure that investors have all the information required to make their decisions and understand the nature and risks of investment products and services.

This means that the better the entity knows you, the easier it will be to provide the investment services that best suit your profile. Therefore, if you want to invest with Crescenta, we will ask you for information to get to know you better and help you make investment decisions. This information is collected through questionnaires known as the MiFID tests.

MiFID tests are forms that must be completed by potential investors. Through these questionnaires, the entity providing the services intends to gain in-depth knowledge about the investor, collecting details relating to their knowledge, experience and investment objectives. This way, they can offer each customer the products that best suit their profile.

In order to invest in Crescenta as a retail investor, you must complete the suitability and appropriateness tests:

• Appropriateness test: it gathers information on your knowledge and prior experience in the financial markets, with the aim of ensuring that you are able to understand the nature and risks of the product in which you wish to invest. By means of this test, the financial institution must obtain the following information: the types of financial instruments, transactions and services you are familiar with; the nature, volume and frequency of your transactions with financial instruments, as well as the period during which they have been carried out; and the level of education, your current profession and, where applicable, previous relevant professions.
• Suitability test: it collects information about your knowledge and source of regular income, your assets (liquid assets, real estate and investments) and your regular financial commitments. In order to determine your investment objectives, you must inform on the desired time horizon for the investment, the risk that you are prepared to assume and the purpose of the investment.

At Crescenta, you can complete both questionnaires fully online and in a few minutes.

Yes, provided that certain conditions are met. If a retail customer wishes to be treated as a professional, they can request it formally, but it will only be granted if they meet two of these three requirements:

• their portfolio size is greater than €500,000
• they have carried out a significant volume of operations within this scope
• they have held a position in the financial sector that requires specific knowledge

Until recently, investing in private capital was not within reach of most retail investors, as the minimum investment amounts required were very high. However, this has changed with the entry into force of the Create and Grow Act, which promotes their participation by reducing the entry limits from €100,000 to €10,000.

In addition to the minimum investment, retailers must take into account that if their assets are worth less than €500,000, they will be able to access this type of vehicles without these investments exceeding 10% of their portfolio and always under advice, which is a service provided by Crescenta.

Thanks to these regulatory changes and the establishment of a platform like Crescenta, retailers can gain access to a type of investment that stands out for its greater potential for profitability and its capacity to reduce portfolio volatility and increase diversification. These have been advantages that professional investors have been making the most of for years and are now within your reach.

This content is merely indicative. This content is merely financial training offered to you by Crescenta, without the intention of giving any type of personalised investment recommendation.

It is neither any type of advertising of financial instruments nor a recommendation or purchase offer.

Author

Crescenta