The Financial Conduct Authority (FCA) has published a package of consultations and rules aimed at improving investment culture in the UK, covering retail and professional investors, and wholesale markets.

Included in the package were a consultation on client categorisation and conflicts of interest, a discussion paper on expanding consumer access to investments, the FCA’s final rules on consumer composite investments (CCI), and a statement on Consumer Duty expectations.

The professional/retail boundary

In its consultation on client categorisation, the FCA has proposed setting a clearer boundary between retail and professional investors to enable firms to be more confident in engaging with professional investors outside of retail regulations.

The FCA said this would free up firms to innovate and offer a more diverse range of products to professional investors.

To qualify as a professional investor, the threshold will remain high so only those with the experience, advice, or ability to bear risk are removed from retail protections, such as Consumer Duty.

The regulator stated that high standards in classification meant that wholesale regulation remained proportionate and firms were not restricted by unnecessary rules.

It also proposed removing some arbitrary tests and adding a new way for high net worth and experienced individuals to opt out of retail protections, streamlining how firms access professional investors.

Quilter interim proposition director, Barry Cook, said the FCA’s recognition that professional investors and high net worth clients required different protections than retail investors was “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,” he continued.

“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.”

Retail investment disclosures

The FCA also published a discussion paper on expanding consumer access to investments, proposing a shift away from ‘prescriptive and complex’ templates in retail investment disclosures.

It argued that this would give firms more freedom to put the consumer first, innovate, and help their customers understand the potential returns, costs, and risks.

The paper also sought views on how longer-term regulation could keep pace with the evolving retail investment landscape and help reshape risk appetite, aiming to give consumers greater confidence in accessing appropriate investments.

“For too long providers have issued lengthy, jargon-heavy documents that discourage engagement with key investment information. This creates friction in the customer journey,” said Cook.

“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.”

In the paper, the FCA also noted the regulatory differences between model portfolio services (MPS) and fund of funds, with Quilter investment director lead, Andy Miller, stating the regulator was right to recognise that, to most customers, investing in an MPS was akin to investing in a fund of funds or unitised offering.

To a retail investor, both offer access to a diversified portfolio and come with the same risks and opportunities.

“However, the processes and regulation that underpin both are vastly different and as such it is good to see the FCA recognise the need to tighten this area of regulation up,” Miller continued.

“Model portfolios are relatively easy to launch and this can be done at pace. However, the required disclosure and process requirements are currently not as large a burden as they are for fund of funds.

"With various distribution agreements thrown into the mix too, customers can find it hard to accurately compare the two structures. It would thus be a natural development to align the regulatory regime for both structures.

“The reference in today’s policy announcements from the FCA highlights where the regulator may be looking when it comes to its wider review of the industry.”

CCIs and Consumer Duty policy statement

In the raft of measures, the FCA outlined its final rules for providing information on CCIs.

The rules replace EU-derived packaged retail investment products (PRIIPs) and Undertakings for Collective Investment in Transferable Securities (UCITS) disclosure requirements for packaged investment products.

The regulator said the new rules represented a more flexible regime for the UK built on the Consumer Duty.

The optional transition period for the CCI regime will begin when the legislation comes into force on 6 April 2026, and CCI manufacturers will be able to choose between producing a product summary or following the disclosure requirements that apply to them.

This transition period is open to all manufacturers, including those of Overseas Funds Regime schemes, with the final rules coming into effect after the transition period ends on 8 June 2027.

“This is a victory for common sense,” commented Association of Investment Companies chief executive, Richard Stone.

“The FCA has recognised the unique characteristics of investment companies. It’s excellent news for investment companies, their shareholders and consumers.

“We particularly welcome the FCA’s decision not to require other funds to pull through the costs of investment companies when investing in them. It’s particularly helpful for fund of funds managers whose products were made to look artificially expensive under the PRIIPs rules.

“Bringing an end to the double counting, recognising that investors’ returns are based on the share price and acknowledging the unique characteristics of the sector are all to be welcomed.

“The FCA has also confirmed that the costs of gearing and maintaining real assets will not be included in the ongoing charge, making investment companies’ headline cost disclosures more useful for investors."

Finally, the FCA published a statement on Consumer Duty expectations for firms that are collaborating to manufacture products or services.

The statement did not set any new requirements or standards but intended to give firms clarity on the FCA’s expectations.

However, the FCA announced it would review the rules covering firms working together to manufacture products or services and launch a consultation on them next year.

“Today’s measures support investment risk culture right along the spectrum,” said FCA executive director of markets, Simon Walls.

“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.”

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