FCA considers tweaking guidance rules

FCA considers tweaking guidance rules

The UK’s financial watchdog has said it wants to “explore regulatory changes” to help firms provide support on more “straightforward” investment products such as Isa wrappers.

In its consumer investment strategy, out today (September 15), the Financial Conduct Authority said it wanted to "improve the supply side of the market" by making it easier for firms to give consumers the support they need.

It said it was working on new rules for giving guidance on straightforward products such as Isas and tracker funds.

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The FCA intends to make changes which will mean firms are subject to “proportionate requirements” when providing support on these “simple” products.

In the strategy, it said: “We are exploring how we can make regulatory changes to make it easier for firms to provide more help to consumers who want to invest in relatively straightforward products. 

“This will be restricted to the more straightforward Isa wrappers that do not contain high risk investments, and which are well diversified (such as tracker products).

“We are collecting information from firms to help assess the commercial viability of our proposals, as well as analysing consumer research to identify how the proposed regime can successfully engage consumers."

The regulator plans to consult on its proposals in early 2022, with the intention of implementing these regulatory changes at the start of 2023. 

Hinting at more long-term changes, the FCA added: “We will then consider how to allow firms to do more to support wider investment customers (such as existing investors) to make effective future investment decisions.”

The regulator said it was “not proposing kite-marking Financial Ombudsman Service and FSCS protections”. 

"The combination of this regime and our changes to the financial promotion regime set out in our chapter on higher risk investments should help further segment the high-risk market" it explained.

In January 2021, the financial watchdog extended and made permanent a ban on the mass marketing of speculative illiquid securities. 

It has also stopped applications for authorisation from 267 consumer investments firms and individuals between April 2020 and March 2021.

Phil Jeynes, director of corporate strategy at protection adviser Reassured, told FTAdviser: “There’s definitely a risk with people feeling they’ve got advice when they haven’t by regulatory standards.

“What backs up the definition [of advice] is having recourse with somebody. In financial services, a guarantee does sit there 10 years later.”

Heather Owen, financial planning expert at Quilter, said: “The answer to improving both the access to investments and how they are used is to reach more with advice and improve access to financial guidance.”

She cited the UK’s advice gap, which “has led to consumers making choices that are unsuitable for their needs or disengaging from their finances and making no choices at all”.

According to the FCA’s Financial Lives survey, 45 per cent of those who had invested without advice did not understand that they could lose money.

Owen said this "perfectly illustrates" the need for more accessible advice.