FCA Unveils Major Reforms to Strengthen Investment Culture

The FCA has launched one of the most ambitious reform packages in recent years, aimed at reshaping the UK’s investment landscape. This set of proposals is designed to boost domestic investment and modernise client categorisation rules, all while ensuring that regulatory protections remain targeted where they are truly needed.

Coming ahead of the 2025 festive period, the package includes proposals to reform client classification, introduce a new Consumer Composite Investments (CCI) disclosure regime, streamline conflicts of interest rules, and seek market input on how to encourage more informed risk-taking among UK retail investors.

These reforms represent a shift in how risk, protection, and investment opportunity are calibrated across the retail–wholesale boundary.

Why the FCA Is Acting Now

Over the past five years, the UK retail investment landscape has transformed:

• Use of non-advised trading platforms more than doubled between 2020 and 2024.

• Nearly half of trading app users are aged 18–34.

• Retail interest in speculative high-risk products continues to grow.

• Simultaneously, traditional models such as peer-to-peer lending have contracted.

Consumers today have more ways than ever to invest, but also more exposure to behavioural nudges, gamified interfaces, and products that may not align with their risk appetite. The FCA sees both opportunity and risk in this shift.

As the regulator put it:

“We want to encourage more retail investment through better informed risk taking… and help consumers understand the opportunity cost of holding their investible assets in cash.”

The new package aims to strengthen investment culture, improve consumer understanding, and ensure firms can innovate, without pushing unsuitable investors into higher-risk markets.

Drawing a Clearer Line Between Retail and Professional Investors

A centrepiece of the package is CP25/36: Client Categorisation and Conflicts of Interest. The FCA proposes a significant recalibration of how firms determine whether a client qualifies as retail or professional.

Currently, the boundaries are blurred. Firms often rely on tick-box quantitative tests, such as requiring a client to have executed ten trades per quarter. The FCA notes these tests are:

• outdated,

• open to misuse,

• and poor indicators of actual sophistication.

What's Changing?

• Removal of rigid quantitative tests: The FCA proposes scrapping current prescriptive metrics and replacing them with a more flexible, outcome-based approach.

• Introduction of a £10 million “wealth opt-out” route: Individuals with £10 million+ in investable assets could opt out of retail protections, but only with informed consent. This includes opting out of the Consumer Duty, unlocking wider access to wholesale products.

• Stronger qualitative assessments for others: Firms must holistically assess investment experience, understanding of risk, financial resilience, capacity to bear losses, and client objectives. No more reliance on automated self-certification or online tick-box forms.

• Improved safeguards. including informed consent and no pressure tactics: Firms must obtain informed (not basic) consent, provide clear explanations of protections being surrendered, and avoid all incentive-based or pressurised opt-up conversations.

Why This Matters for the UK Market

Experts believe this shift could boost liquidity, strengthen IPO markets, and increase UK competitiveness by allowing sophisticated investors to access a wider range of opportunities. Jonathan Parry of White & Case comments that this would help align the UK more closely with markets like the US and Nordics, where retail participation in capital markets is far stronger.

At the same time, as Winston Ruddick notes, consumer protections remain intact for those who genuinely need them. The FCA has been clear: "This threshold will remain high and will not fall under Consumer Duty."

This ensures a better-aligned risk culture: enabling sophistication where appropriate, shielding consumers where essential.

Encouraging Better-Informed Retail Risk Taking

The FCA also released a broader discussion paper on retail investment risk, asking the industry for views on:

• How to help consumers understand long-term benefits of investing vs staying in cash

• Risks arising from fractional investing

• How to mitigate harmful digital engagement practices (DEPs) on trading apps

• How to rebalance risk in a market increasingly shaped by younger retail investors

This consultation closes 6 March 2026.

The FCA notes some app features, such as leader boards and push notifications, can blur the line between investing and gambling-like behaviours. The regulator is exploring interventions aligned with Consumer Duty’s “fair outcomes” requirements.

Introducing a New Consumer Composite Investments (CCI) Regime

Another major change is the introduction of a new UK-specific disclosure regime for packaged investments, replacing EU-derived PRIIPs and certain UCITS disclosure rules.

Starting 6 April 2026, manufacturers may choose between:

• producing a new Product Summary (under the CCI regime), or

• continuing to use existing disclosure rules during an optional transition period.

The regime comes fully into force 8 June 2027.

This is intended to make disclosures clearer, more flexible and better aligned with outcomes-focused expectations under the Consumer Duty.

EU firms used to more prescriptive templates may face challenges adjusting.

Rationalising Conflicts of Interest Rules

The FCA’s CP25/36 also includes proposals to streamline conflicts of interest rules, largely by simplifying SYSC 10 without changing underlying obligations. This aims to reduce duplication from legacy EU rules, ensure firms can navigate requirements more easily, and allow innovation without compromising consumer protection.

What Firms Need to Consider Now

These proposals represent a multi-dimensional shift with direct implications for:

1. Manufacturers: Product governance frameworks, target market definitions, disclosure design under the CCI regime and new routes for professional client categorisation.

   
   

2. Distributors and Platforms: Appropriateness and client profiling, app design and digital engagement practices, client communication and informed consent processes, and record-keeping for categorisation decisions.

3. Wealth Managers and Advice Firms: Boundary between guidance, support, and advice, classification of wealthy clients, conflicts of interest frameworks, and Consumer Duty applicability.

Compliance Angle View

The FCA is moving decisively toward a more nuanced, outcomes-focused approach, one that recognises the diversity of today’s investors and encourages firms to innovate responsibly.

For regulated firms, the message is clear:

• Consumer Duty is not fading: It’s becoming more embedded in how the FCA expects firms to assess risk, design products, and engage with clients.

• Client categorisation must be evidence-led: Firms can no longer rely on perfunctory tick-box assessments.

• Record-keeping and rationale will matter more than ever: This is especially true when opting clients out of protections.

• Investment communications must evolve: This is beyond prescriptive templates toward genuinely helpful, comprehensible materials.

At Compliance Angle, we see these reforms as a strategic opportunity for firms to modernise their frameworks, reduce operational friction, and strengthen client trust, while positioning themselves competitively.

Contact Us

Contact Compliance Angle at info@complianceangle.co.uk or call +44 7427 792594 to schedule a free consultation and ensure your firm stays aligned, efficient and ready for the next phase of UK regulatory reform.