The FCA has set out a new suite of measures today aimed at empowering retail investment.
With new rules for investment product information, the FCA says it is seeking to build a stronger investment culture, supporting firms to innovate and make investing more engaging for consumers.
Proposals include enhancing how firms classify their clients, giving them more confidence when dealing with professional investors, and a new way for wealthy and experienced individuals to opt out of retail protections.
Making it easier for consumers to understand investments
In retail investment disclosures the FCA will make a decisive shift away from prescriptive and complex templates that consumers don’t find useful. This gives firms more freedom to innovate and help their customers understand potential returns as well as costs and risks.
The FCA is also seeking views on how longer-term regulation can keep up with the evolving retail investment landscape and help shift the dial on risk appetite, to give consumers confidence to access investments that meet their needs and benefit from the potential returns.
Distinguishing between professional and retail
The FCA is setting a clearer boundary between retail and professional investors, allowing firms to deal with professional investors with confidence operating outside retail regulations. This will free up firms to innovate and offer a more diverse range of products to truly experienced clients with the resources to bear more risks.
The threshold to qualify as a professional investor will remain high, so only those with experience, advice, or the ability to bear risk are taken out of retail protections, such as the Consumer Duty, that they don’t need. The regulator says high standards in classification ensures that "wholesale regulation remains proportionate and firms are freed from unnecessary guardrails".
Simon Walls, executive director of markets at the FCA, said: “Today’s measures support investment risk culture right along the spectrum. They ensure that firms can compete to give retail customers material that informs and engages them. They also draw a brighter line for professional markets, defined by contracting parties, informed consent, and regulation that is proportionate to that.”
Barry Cook, interim proposition director at Quilter, commented: “Today’s policy blitz from the FCA on its measures to help boost the UK’s investment culture should be welcomed. While more technical in nature compared to other initiatives in this direction, these reforms should deliver meaningful benefits for both consumers and providers.
“For too long providers have issued lengthy, jargon-heavy documents that discourage engagement with key investment information. This creates friction in the customer journey. As such, it is encouraging to see the FCA look to move towards a regime that allows providers greater flexibility to produce engaging product summaries. This innovation should improve customer understanding and reward firms that prioritise clarity and customer outcomes.
“The FCA’s recognition that professional investors and ultra-high-net-worth clients require different protections than retail investors is also significant. There is a push to widen the investible universe for clients, particularly around private markets, but this will only succeed if regulation reflects the investors’ ability to take on greater risk. Updating definitions alongside creating more bespoke regulation for particular cohorts should help people take positive action in their investment journey, and unlock new avenues for capital allocation.
“Importantly these changes challenge how we perceive risk. Risk should not be seen solely as a negative – far too many people in this country are either not investing or investing too cautiously for their needs and as such wealth creation is being left on the table. The FCA clearly recognises the need to wean the nation off cash savings for the long-term and into investments that suit the customer’s long-term objectives.
“With these changes coming into force following the government backed investment campaign and introduction of targeted support, there is real momentum taking shape that could just help deliver the change in investment culture we need.”
