One in five firms prevented from entering the consumer investments market

One in five applications from firms wanting to join the consumer investment market in 2021/22 were not approved or were withdrawn, according to the City regulator.

The Financial Conduct Authority (FCA) said it wants to help people to invest with confidence, while seeking to reduce the number of people who are persuaded to invest in products that are too risky for their needs.

It also wants to curb the growth in investment scams.

The regulator said it will also consult later this year on a “more proportionate” advice regime for investing in stocks and shares Isas. Following that, it intends to review the boundary between advice and guidance.

Sarah Pritchard, executive director of markets at the FCA, said: “We want to see a consumer investment market where consumers can invest with confidence, understanding the level of risk they are taking and where assertive action is taken when harm is identified.

“We know that it will take time to see the full impact of all our interventions, particularly given the worsening economic environment, but have committed to update each year on the progress that is being made.

“In the last year we have maintained our focus on acting assertively and innovatively to tackle harm – we prevented one in five firms from entering the consumer investments market and we have taken action against unauthorised firms with a 40% increase in the number of consumer alerts issued.

“Setting high standards and acting quickly to crack down on problem firms will help ensure market and consumer confidence, supporting the integrity and growth of UK financial services.”

The FCA published over 1,800 consumer alerts about unauthorised firms or individuals last year, 40% more than the previous year.

It is also stepping up its ScamSmart and InvestSmart campaigns to reach millions of consumers.

AJ Bell’s head of retirement policy Tom Selby said: “Full-fat advice remains the gold standard and we need to encourage as many people as possible to take this route.

“But we know lots of people cannot afford such advice, or simply choose not to take it. If a simplified advice model can boost the number of people taking regulated advice, that would be a good thing, although many are still likely to be unwilling to pay a fee, even if it is set at a relatively low level.

“Focus therefore needs to be trained on ensuring firms communicating with customers are able to help people make better decisions.

“This isn’t about pushing back the advice/guidance boundary, but instead being clearer about exactly where that boundary sits. At the moment, non-advised platforms, employers and others are held back by a fear of straying into advice.”

Published: 18/10/2022 by Radio NewsHub