Landmark IA Review calls for overhaul of investment risk warnings

On 9 April 2026 the Investment Association (IA) published its long-awaited Risk Warnings Review (the Review), ‘Supporting a New Retail Investment Culture’. The Review, commissioned by the Chancellor as part of the Leeds Reforms (see our article on that here), sets out a new direction for how investment risk is communicated to consumers, with the aim of fostering greater retail participation in capital markets and supporting better long-term financial outcomes for UK households.

Below, we summarise the Review’s key findings, explain the practical implications for firms, and outline recommended next steps.

Key findings of the Risk Warnings Review

The Review is a response to the UK’s persistently low rates of personal investment, currently the lowest in the G7, and the widespread tendency for households to hold long-term savings in cash. The IA’s report is clear: the current regime of standardised, loss-focused risk warnings, such as the ubiquitous ‘capital at risk’, is not fit for purpose.

Drawing on extensive consumer research, including new studies by The Wisdom Council and Boring Money, the Review identified six key findings:

1. There is a lack of consistency in the regulatory framework for risk communications

The Review finds that investment risk communication extends across the whole customer journey – from advertising and education through to onboarding, product selection and ongoing communications – but there is no single framework to ensure a coherent, consistent approach. Fragmented regulatory requirements across multiple FCA sourcebooks (such as COBS, COLL, FUND and DISC) and other regimes like the ASA lead to duplication and inconsistencies, making it hard for firms to design journey wide communications. This is compounded by standardised, repeatedly deployed risk warnings (such as the ubiquitous “capital at risk”) and compliance driven practices, which can reduce engagement and trust by presenting investing as inherently dangerous, while the Consumer Duty’s outcomes focus is undermined by uncertainty about how it applies to risk warnings, encouraging defensive behaviour and limiting innovation.

2. Perception of risk is a significant barrier to retail investing

Research undertaken as part of the Review shows that many retail consumers, especially new and low-confidence savers, see investing as “risky” in a binary way, often equating it with gambling, fraud or losing everything, while viewing cash savings as inherently “safe”. Standard risk warnings tend to reinforce these fears rather than explain normal variability of returns over time, leading consumers to overestimate the downside risks of investing and underestimate the long-term risks of holding cash. Overall, the Review found that current approaches to risk communication contribute to participation gaps and discourage appropriate long-term investing.

3. Standardised risk warnings are counterproductive

The Review finds that the widespread use of standardised, loss-focused risk warnings is widely misunderstood by savers - often interpreted as implying a high probability of losing everything - and frequently ignored by seasoned investors. These warnings have become a compliance default, rather than a tool for genuine consumer understanding. The result of this ‘loss-dominated framing’ is a culture of risk aversion that deters retail participation in capital markets, without improving overall understanding.

4. Balanced, contextual explanations are more effective

Simple, accessible explanations of risk and reward – including how investments can rise and fall - presented alongside relevant potential benefits, clear comparisons (for example, with cash savings) and explicit, realistic time horizons, are more likely to be read, understood, and trusted. The Review’s consumer testing found that short, balanced, plain-English statements (e.g., ‘Historically, money invested for more than five years grows more than cash savings. Your investments can also fall, so you might not get all of your money back’) are more effective than generic, boilerplate warnings.

5. Standalone compliance drives defensive behaviour

The Review finds that the current regulatory framework – in particular the FCA’s Conduct of Business Sourcebook (COBS 4) rules and the principle that each financial promotion must be compliant on a standalone basis - has entrenched reliance on defensive, formulaic risk language. While firms are keen to improve how they explain risk, they lack confidence to depart from standard wording because of regulatory uncertainty and fear of retrospective scrutiny. The Review therefore calls for these rules, and their supervisory application, to be revisited to enable proportionate, journey-wide risk communication that is anchored in consumer understanding and better supports outcomes-based regulation (i.e. the Consumer Duty).

6. Firms need more clarity to have the confidence to innovate

The Review concludes that the current approach to risk communication is not sustainable and calls for a rebalancing of risk communication practices to support confident participation in capital markets, while maintaining high standards of consumer protection.

Guiding principles for risk communication

The Review is not just a critique; it is a call to action. The Review sets out four principles to underpin both immediate improvements and longer-term reform, as follows:

1. Contextualised and balanced disclosure: Risk information should not be presented in isolation or in a way that exaggerates either the upside or the downside.

2. Clear and accessible language: Communications must be understandable to all, not just financially literate investors.

3. Proportionate, credible, and effective statements: Avoid overloading consumers with statistics or caveats; focus on clarity and trust.

4. Fit messages to the consumer journey: Place risk explanations where they are most meaningful and helpful.

Structural changes and regulatory reform

A central recommendation of the Review is that the FCA should revisit the financial promotions regime, particularly COBS 4, to ‘support clearer, more contextual explanations of how investment risk works in practice’ and to move away from reliance on quasi-prescribed phrases. We expect the FCA to be receptive to this. In December 2025, the FCA published a clarification of its risk warnings rules and is expected to launch a review of its financial promotions rules in CONC 3.5 later this year. In the foreword to the Review, Sarah Pritchard from the FCA said, ‘we welcome the feedback and are actively considering what more we do to support firms to provide clear information to support consumers’.

Additionally, the Review recommends reforming the principle of standalone compliance. At present, each financial promotion must be compliant with the financial promotions rules in isolation, which encourages firms to repeat risk warnings at every customer touchpoint, regardless of context. The Review suggests that compliance should instead be assessed across the consumer journey, allowing for plain-language explanations of risk and reward that are tailored to different stages, rather than relying on repetitive, standardised warnings.

Practical implications for firms: Immediate actions under the current Rulebook

The Review is clear: firms do not need to wait for regulatory change to improve risk communication. Alongside the Final Report, the IA has published detailed Practical Guidance for Firms, which provides a Consumer Duty-led interpretation of the existing financial promotion rules and sets out immediate steps firms can take. Key actions include:

• Prioritising consumer understanding: Communications should be designed to meet consumers’ information needs and support effective, timely, and properly informed decisions.
• Moving beyond boilerplate warnings: Firms should replace jargon-heavy or abstract phrases with plain language explanations of what investment risk means in practice, using consumer testing as a reference point.
• Integrating risk explanations: Risk information should be embedded within the natural flow of communications, alongside benefits and product features, rather than presented in isolation.
• Tailoring to the consumer journey: The timing and prominence of risk communication should be matched to the stage of the consumer journey, recognising that different information is most helpful at different decision points.
• Evidencing effectiveness: Firms should use consumer testing, behavioural insight, and monitoring as part of Consumer Duty compliance to demonstrate that risk communication supports informed decisions rather than deterring suitable consumers.

The Guidance also introduces a “risk explanation ladder” with a RAG rating scale to help firms assess when and how risk information should be provided, with practical examples of effective and poor practice. For example, a push notification that states “Last chance to use your £20,000 ISA allowance before the tax year ends” would not require a risk warning, because there is no inducement to put capital at risk. By contrast, stating “Come and talk to an adviser about how to maximise your pension” would require a risk warning, because the word ‘maximise’ could imply capital at risk later in the investment journey. Interestingly, “How to use your pension to plan for a perfect retirement” would not require a risk warning as no capital at risk is implied.

Next steps

• Review and consider updating risk communications: Firms should review their current risk warnings and consider adopting the Review’s guidance and consumer-tested alternatives.
• Engage with the Implementation Forum: The Review proposes the creation of an Implementation Forum (including the FCA) to address practical challenges/questions and share best practice.
• Monitor regulatory developments: Firms should stay alert to forthcoming changes to the FCA’s rules and supervisory expectations around financial promotions, as further reforms are anticipated. The Steering and Technical Expert Group will also be reconvened in six months to review progress and take stock of other relevant developments such as CCI implementation and progress in the Retail Investment Campaign.

The review is generally seen as positive as it supports a more consumer-focused and outcome-based approach to investment communications, encouraging firms to move away from overly formulaic, legalistic warnings toward clearer and more balanced explanations of risk and reward that better support informed decision-making under Consumer Duty. This direction closely aligns with the FCA’s new Consumer Composite Investments regime under PS25/20, which replaces the PRIIPs and UCITS disclosure framework with a more flexible UK regime built around consumer understanding, clearer product summaries and less prescriptive disclosure. However, the challenge for firms is that both the Risk Warnings Review and the rules in PS25/20 place greater reliance on firms exercising judgement rather than following rigid templates or safe-harbour wording, creating uncertainty about how far firms can safely move away from established disclosures without increasing regulatory, litigation or FOS risk.

It might be that in practice, firms should avoid both extremes – neither ignoring the direction of travel nor radically abandoning existing compliant protections – and instead begin taking measured steps now by reviewing financial promotion and disclosure frameworks, testing communications for genuine consumer understanding, strengthening governance and evidencing Consumer Duty rationale, while gradually evolving disclosures and distribution journeys in preparation for the broader flexibility and accountability that will apply such as that under the new CCI regime.

For further information or to discuss how your firm should implement these changes, please contact our Financial Services Regulation team.