Building A Stronger UK Investment Culture

Safe access and simpler communications

Key to our ambition for the consumer investments market is to ensure people can access a wide range of investments safely. For most people simple, diversified products will be the most appropriate option.

But for those consumers who want to take more risk with some of their portfolio in search of higher returns, there should be safe, regulated avenues to find alternative options. 

To facilitate this, we’ve launched the Public Offer Platform, which will help growing companies raise capital. We are also seeing more interest in the Long Term Asset Fund, which gives individual investors a regulated way to access private assets. Together, these shifts give consumers more choice and firms more ways to meet different needs.

And as we open up choices for consumers, we are considering what more needs to be done so consumers can safely find products that meet their needs. We’re listening to feedback that our marketing rules need to clearly and consistently delineate between investments of different risk profiles.  

We have also recently warned consumers about the risks of mini-bonds and loan notes issued by unregulated companies. These products can sit outside the protections people may expect from regulated investments, and the harm can be serious. That is why we continue to urge the Government to review the legislative exemptions that can allow some high-risk investments to be promoted outside our regulation. Consumers should be able to trust that the investment advertising they see is fair, clear and honest.

And the work does not stop there. If we want more people to invest with confidence, the information they receive has to help them make good decisions. It needs to explain the potential rewards, the risks and the protections in a way people can understand and use.

That is the thinking behind our new Consumer Composite Investments regime. We have moved away from prescriptive templates that too often leave people disengaged. Firms will have more freedom to design product information around their customers’ needs. We want firms to use that freedom well and help take some of the mystery out of investing.

Our recent review of pre-sale disclosure documents showed why this matters. We found that only 6% were written in plain English, using a widely recognised tool that shows how easy text is to read (the Flesch-Kincaid method). 

The message for the new rules is straightforward: communications should be clear, practical and free from technical jargon that can put people off. We plan to look at this again next year, so we can see what progress has been made. But firms do not need to wait for that review. 

The real test is whether the information they give people is clear, useful and helps them understand what they are buying, what the risks are and what decisions they need to make. That is what the Consumer Duty’s consumer understanding outcome is really about.

We know there is more to do. Over the summer, we consulted on simplifying the other disclosures investors receive when they use an investment service. We also looked at how firms explain the interest consumers will receive on their cash holdings. We are considering the responses now and expect to make final rules by the end of the year.

We have also been pleased to see the industry playing its part. Risk disclosures should not be a box-ticking exercise. They should help people understand what they are taking on, so they can make informed choices. Done well, clear and balanced information about risk can build confidence and help more people see investing as relevant to them.

The Investment Association’s work has been valuable in challenging standard risk warnings and helping firms think about clearer, more engaging ways to communicate. We have supported that work and welcome the move into implementation.

We are also looking at what more we can do to help firms on this journey. That includes reviewing our rules and guidance on financial promotions, to make sure they don’t encourage unnecessary risk disclaimers and help firms communicate in ways that make financial decisions easier for consumers to navigate.