FCA consults on simplifying investment disclosure regime

The FCA is consulting on simplifying the rules for how firms communicate the costs involved in investing to bring investment cost disclosures in line with previous reforms.

The regulator said the changes will create a more consistent framework for platforms, advisers and wealth managers to give customers clearer, more useful information.

By ditching the jargon and providing information in an engaging format, consumers will be able to compare products more easily and invest with greater confidence, supporting a stronger investment culture, the FCA said.

According to the watchdog, 30% of non-advised platform users said they did not know how much they are charged for investing.

Under the proposals, distributors would present their own costs alongside product costs consistent with the Consumer Composite Investments (CCI) format when selling products, and account regularly for the total cost of investing.

The CII rules – which were finalised last year – take effect in June next year and will replace Packaged Retail and Insurance-based Investment Products (PRIIPs) and Undertakings for Collective Investment in Transferable Securities (UCITS) disclosure documents.

The latest proposals aim to align cost disclosure requirements derived from the Markets in Financial Instruments Directive (MiFID) with CCI, as the FCA seeks to simplify and consolidate the disclosure requirements for MiFID, Insurance Distribution Directive (IDD), and non-MiFID investments business.

Lucy Castledine, the FCA’s director of consumer investments, said: “We want more consumers to feel confident investing by getting clearer information in plain English on products and charges.

“The changes will give firms more freedom to innovate and communicate in ways that build trust and support informed decisions to help consumers navigate their financial lives.”

The consultation – Simplifying Consumer Investment Disclosures – closes on 21 August.

PIMFA Senior Policy Advisor Julia Sage-Bell welcomed the proposals and predicted a marked change in firms’ approaches to consumer understanding but warned the new rules may not be prescriptive enough.

“These proposals mark an important step in supporting firms’ transition to the new Consumer Composite Investments (CCI) regime and helping them meet Consumer Duty requirements around consumer understanding,” she said.

“Delivering effective consumer journeys under the new regime will require careful design, testing and ongoing refinement. As firms gain experience and regulatory expectations become clearer, we expect approaches to evolve significantly, ultimately helping to improve consumer engagement and understanding.”

She added: “While the consultation rightly seeks to give firms greater flexibility in how information is communicated, the proposed disclosures still place significant responsibility on firms to ensure consumers understand a complex and varied set of information.

“The relatively limited prescription around presentation may prove challenging for firms and could make it harder for consumers to compare and assimilate information across different products or from different providers.”

Sage-Bell also questioned the FCA’s confirmation that firms will not be allowed to retain interest on retail clients’ cash while also charging fees on these holdings.

“Given the broader flexibility proposed elsewhere in the consultation, we are also surprised by the explicit prohibition on charges being taken through cash interest and fees on cash. This appears inconsistent with an outcomes-based approach and suggests a reluctance to rely fully on the principle of fair value.”