The UK’s Financial Conduct Authority (FCA) has issued a new strategy that is designed to improve the confidence consumers have to invest, with more regulations likely.
Its goal for 2025 includes lowering the amount of consumers missing out from investing by 20%, with it estimating around 8.6 million consumers holding over £10,000 of investible assets in cash.
The regulator also hopes to half the number of consumers that are investing in higher risk products that do not align with their needs. It claims 6% of consumers increased their holdings of high-risk investments during the pandemic, with 45% of self-directed investors claiming they were unaware of the risks.
Another part of its strategy includes decreasing the amount of money consumers can lose to investment scams perpetrated or facilitated by regulated firms. Consumers lost nearly £570m to investment fraud in 2020/21, a figure that has tripled since 2018, the FCA claims.
Finally, the regulator is looking to stabilise the £833m compensation bill for the Financial Services Compensation Scheme and target a year-on-year reduction in the Life Distribution and Investment Intermediation and investment provision funding classes from 2025 and 2030.
To meet its goals, the FCA has outlined a list of new measures. The first of which involves exploring regulatory changes to make it easier for firms to provide more help to consumers that wish to invest in relatively straightforward products.
The FCA will also launch a £11m investment harm campaign. This is aimed at helping consumers make better informed investment decisions and lower the amount of people backing high-risk investments.
Other proposed measures include being more assertive and agile when taking action against scammers, strengthening its Appointed Representatives (AR) regime that improves financial advice, and reviewing its compensation framework to ensure it is proportionate and appropriate.
Finally, the regulator will bolster its financial promotions regime around the classification of high-risk investments, further segmenting the high-risk market and strengthening the requirements on firms when they approve financial promotions
FCA executive director of markets Sarah Pritchard said, “Investors have never had more freedom – technology has democratised the market, new products have become available, and people have better access to their life savings than before. But that freedom comes with risk.
“We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk. The package of measures we have announced today are intended to support that – we want people to have greater confidence to invest. We also want to be able to adapt more rapidly to the changing market and be assertive where we see poor conduct and consumer harm.”
Action has already been taken by the regulator, with it banning the mass-marketing of speculative mini-bonds and working to stop firm activities that cause harm.
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