The City regulator is inviting feedback on how to improve the consumer investment market, which it believes is suffering from too many scams and scandals.
The Financial Conduct Authority (FCA) said that the market is not working as well as it should and too often consumers receive lower returns they should because of being offered unsuitable products with high fees.
The watchdog wants to ensure investors understand the risks they are taking and make sure when consumers lose money because of an act or omission of a regulated firm, they are appropriately compensated.
It identified reducing harm in the consumer investments market as a priority in its 2020/21 business plan.
“The consumer investment market is not working as well as it should,” said Christopher Woolard, interim chief executive of the FCA.
“There have been too many scams and scandals and too often consumers are offered unsuitable products or advice. As a result, many consumers lack confidence in the investment market.
“This call for input (CFI) is aiming to help shape the future of consumer investments, including regulation, to ensure consumers can have faith in the market.
“We’ll be considering all contributions carefully as we open this debate on the future of the consumer investment market.”
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Nathan Long, interim head of policy at Hargreaves Lansdown, said the FCA is trying to ensure people can better navigate financial services to invest for the future by getting the help that’s right for them.
“For some people that’s personalised guidance to narrow down options, for others it is advice, but it’s clear that being locked into on-going advice when it’s not needed isn’t top of the FCA wish list right now,” he said.
“There’s a notable shift in focus from the FCA to ‘just in time information’, a recognition that to help people save and invest their behavioural biases needed to be harnessed.
“Current rules mean providers instead force would-be-investors to trawl through huge levels of information, many simply then give up on their goal of investing and remain in cash.
“The FCA’s right to flag that it can’t stop all scams. If the level of guidance and just in time information improves, people’s own resilience to scams will grow as their ability to spot when something is simply too good to be true.”
The CFI follows recent action by the FCA in this market, such as imposing a temporary ban on the mass marketing of speculative mini-bonds, which the regulator then made permanent.