The FCA has published a new strategy to give consumers the confidence to invest and to tackle investment harm. By 2025, the FCA aims to:
- reduce by 20% the number of consumers who could benefit from investment earnings but are missing out. There are nearly 8.6m consumers holding more than £10,000 of investible assets in cash;
- halve the number of consumers who are investing in higher risk products that are not aligned to their needs. 6% of consumers increased their holdings of higher risk investments during the pandemic, with 45% of self-directed investors saying they did not realise the risks;
- reduce the money consumers lose to investment scams perpetrated or facilitated by regulated firms. Consumers lost nearly £570m to investment fraud in 2020/21 – this has tripled since 2018; and
- stabilise the £833m compensation bill for the FSCS, and target a year-on-year reduction in the Life Distribution and Investment Intermediation (LDII) and investment provision funding classes from 2025 to 2030.
To achieve this, the FCA has set out a package of measures including:
- exploring regulatory changes to make it easier for firms to provide more help to consumers who want to invest in relatively straightforward products;
- launching a new £11m investment harm campaign, to help consumers make better-informed investment decisions and to reduce the number of people investing in inappropriate high-risk investments;
- being more assertive and agile in how the FCA detects, disrupts and takes action against scammers, thereby reducing investment scams;
- strengthening the Appointed Representatives regime, with a consultation to be launched later this year, which aims to raise the quality of financial advice;
- strengthening the financial promotions regime in 3 areas; the classification of high-risk investments, further segmenting the high-risk market and strengthening the requirements on firms when they approve financial promotions; and
- reviewing the compensation framework to ensure that it remains proportionate and appropriate, particularly where firms fail leaving behind compensation liabilities for the FSCS to address. This will reduce the cost and impact of poor advice.