FCA consumer investment strategy: implications for distributors
The FCA's consumer investment strategy, published in 2021 and updated since, sets out the regulator's approach to reducing harm in the consumer investment market. The strategy has four objectives: reducing the number of consumers who hold high-risk investments without understanding the risks; reducing the harm caused by unsuitable advice; addressing the advice gap by enabling more people to access help when making investment decisions; and ensuring that the regulatory framework is fit for purpose. For distributors and platforms operating in the retail investment market, the strategy translates into a continuing programme of supervisory attention and regulatory change that shows no sign of slowing.
The advice guidance boundary review — conducted jointly by HM Treasury and the FCA — published its final report in late 2024, proposing significant changes to clarify what activities constitute regulated advice and what can be provided as unregulated guidance. The central proposal is the introduction of 'targeted support' — a new regulatory framework enabling firms to provide more tailored and useful guidance to customers without crossing into regulated advice. This would allow, for example, a platform to tell a customer that their pension contributions may be insufficient for their stated retirement goal, or to suggest a more appropriate default investment option, without this communication constituting a personal recommendation. The commercial and compliance implications of targeted support for platforms, workplace pension providers, and advised firms are significant and should be evaluated now, ahead of any implementing legislation.
The FCA's self-directed investor work has focused on customers who invest without taking advice, particularly those investing in high-risk products through non-advised platforms. The FCA has found that many self-directed investors overestimate their investment knowledge, underestimate the risks of specific products, and do not adequately diversify. The regulatory response — through the high-risk investment rules (discussed in our financial promotions guidance), appropriateness assessments for complex products, and Consumer Duty obligations on platforms — places increasing responsibility on firms to act as a meaningful check on inappropriate investment decisions, even in a non-advised context.
For IFAs and restricted advisers, the ongoing advice quality agenda requires firms to review their processes for ensuring that recommendations genuinely reflect client needs — not merely that they are technically compliant with COBS 9A suitability rules. The FCA's Thematic Review TR23/3 on retirement income advice found that a significant proportion of advice cases reviewed did not adequately address the client's drawdown strategy and that charges and tax implications were frequently not given adequate weight. Firms providing retirement income advice should review their processes against the TR23/3 findings as a matter of priority.
Platform and aggregator responsibilities
Platforms and investment aggregators have significant compliance responsibilities under the Consumer Duty that go beyond facilitating transactions. The consumer understanding outcome requires platforms to assess whether their design supports informed decision-making by self-directed investors. The consumer support outcome requires platforms to ensure that customers can get appropriate assistance. Platforms that have not reviewed their consumer duty compliance since the July 2023 implementation date should conduct a structured gap assessment before the next annual board report cycle.