FCA DP25/3: Expanding Consumer Access to Investments – Key Takeaways

Introduction

The Financial Conduct Authority (the FCA) has published Discussion Paper, "Expanding Consumer Access to Investments" DP25/3, seeking industry and stakeholder views on the future of the UK's retail investment regulatory framework. The paper reflects on significant market changes, regulatory reforms, and the evolving needs of retail investors, with a particular focus on balancing innovation, consumer protection, and informed risk-taking. This article summarises the key points of the paper and highlights practical implications for firms.

Executive summary of DP25/3

• The FCA's five-year strategy is designed to help consumers navigate their financial lives by supporting them in understanding the risks and benefits of investing, and by building their confidence to take on appropriate levels of investment risk. See our article on that here.

• The retail investment landscape has undergone significant transformation, driven by technological advancements, new forms of asset ownership, and changing consumer needs, particularly as individuals take on greater responsibility for their lifetime savings in an ageing population.

• The FCA is now reviewing its regulatory framework to ensure it continues to support innovation, provides consistent protections, and enables consumers to make informed decisions. At the same time, the FCA is seeking to address persistent consumer harm arising from scams and high-risk investments.

• The discussion paper invites feedback on whether the current framework remains fit for purpose and how it might be improved to reflect ongoing market developments and consumer behaviour.

Key themes and proposals

1. Rebalancing risk in the retail investments sector

The FCA has identified a 'persistent mismatch' between consumers' stated risk appetites and their actual investment choices. The regulator's ambition is to support continued innovation in investment products and distribution, while ensuring that consumers have access to consistent rights and protections for similar products. 

• The FCA aims to:

  • To shape access to high-risk investments and prevent inappropriate retail access.

  • To regulate firm communications to enable informed consumer decisions.

  • Introduce "positive frictions" (e.g., financial promotion rules, appropriateness testing) to encourage considered decision-making.

The FCA recognises the importance of striking the right balance across these interventions, as consumer harm from scams and high-risk investments remains significant. Improving the regulatory framework is seen as essential to building trust and giving consumers the confidence to invest, while also ensuring that rules are updated to reflect the way markets now operate.

2. Changes to the retail investing landscape

• Trading apps and digital engagement practices (DEPs):

The FCA notes that the use of non-advised platforms and trading apps has increased, particularly among younger consumers. While these innovations have made investing more accessible, they have also introduced concerns about gamification and behavioural nudges that may encourage high-risk or gambling-like behaviours. The FCA is actively considering how the Consumer Duty and other rules can mitigate these risks while supporting positive engagement.

• Fractional investments:

Fractional investments are becoming more common, making investing more accessible by allowing consumers to purchase fractions of assets. However, the risks associated with fractional investments depend on their structure. For example, direct property rights in a fraction of a share may carry similar risks to the underlying asset, whereas exposure through derivatives introduces additional counterparty risk.

The FCA is seeking views on whether rules should be applied consistently to fractional investments and underlying assets, or whether tailored protections are needed.

• Model portfolio services (MPS):

Model portfolio services (MPS) are also highlighted as an area of growing importance. MPS offer pre-set diversified portfolios and are increasingly popular on direct-to-consumer platforms and trading apps. However, there is currently no formal regulatory definition of 'model portfolio'. MPS are generally subject to MiFID rules, such as disclosure requirements under COBS 6.1ZA, but the regulatory treatment of MPS varies depending on their structure. Disclosures for MPS are inconsistent compared to those required for authorised funds, which can make it difficult for consumers to compare products and understand the risks involved.

The FCA is considering whether to standardise disclosures to make the making regulatory treatment of MPS more consistent with managed products and to potentially introduce outcomes-based rules (e.g., on investment powers, liquidity, fair treatment of client orders) for MPS to improve comparability and consumer understanding.

• Speculative products and peer-to-peer lending:

The paper discusses the inconsistent regulation of speculative products with similar risk profiles, such as contracts for difference (CFDs), leveraged exchange-traded products (ETPs), margin lending, structured capital at risk products (SCARPs), and cryptoasset proxies.

The FCA is considering whether a more risk- and return-centred, product-agnostic approach to regulation would be more effective.

3. Regulatory framework and consumer journey

The FCA is undertaking a review of the Conduct of Business Sourcebook (COBS) rules, with a particular focus on financial promotions, distribution, and appropriateness testing. The objective is to simplify, clarify, and future-proof the rules to support informed risk-taking and ensure that consumer protections are clear and consistent. The Consumer Duty underpins these efforts, requiring firms to deliver good outcomes, act in good faith, and support consumers in making informed decisions.

Practical implications for firms:

• Firms offering MPS should prepare for potential changes to disclosure requirements and product governance standards.

• Enhanced comparability may require system and process changes to align risk labelling and disclosure formats with those used for authorised funds.

• Firms should review their consumer journeys and communications to ensure clarity, transparency, and compliance with the Consumer Duty.

• Early engagement with the FCA's consultation process is recommended to help shape future regulatory expectations.

Conclusion and next steps

The FCA is inviting written feedback on DP25/3 by 6 March 2026. Firms should review their current practices in light of the discussion paper, particularly with regard to product disclosures, consumer communications, and the treatment of innovative investment products. Ongoing regulatory reform is likely, with a focus on consistency, clarity, and consumer protection in the retail investment market.