PIMFA advocates for a refresh of the UK’s retail investment market

PIMFA advocates for a refresh of the UK's retail investment market

PIMFA, a significant voice in the WealthTech industry, is urging the UK Government to leverage a ‘generational’ opportunity to invigorate the UK retail investment market. This call to action comes six months after the introduction of the significant Edinburgh Reforms.

In the past six months, PIMFA has been heartened by the Government and the Regulator’s willingness to solicit industry perspectives on the existing regulatory landscape. This combined effort showcases a shared goal of identifying the strengths and weaknesses of the UK’s financial services sector and discerning where reform is required.

However, despite shared enthusiasm for financial services reform post-Brexit, PIMFA expresses concern over the eagerness for comprehensive changes. In certain areas, where the member firms see no clear justification for reform, they argue for a more nuanced and surgical approach rather than a blanket overhaul of the regulatory landscape.

In the eyes of PIMFA, one arena ripe for considerable reform is the delivery of financial information to consumers. They argue for a drastic simplification, positing it as a once-in-a-generation chance to cultivate a culture of savings and investments within the UK through transparency in financial information disclosure.

The current disclosure regime has demonstrated significant failings, notably the past Packaged Retail and Insurance-based Investment Products (PRIIPs) regime. The convoluted nature of Key Information Documents (KID), which compares a myriad of products through a single document, has often led to confusion and potentially harmful misinformation for consumers. PIMFA contends that such complexities and the language used within KIDs have deterred retail investors from purchasing certain investment products, particularly retail bonds.

To this end, PIMFA has proposed six amendments to the current disclosure regime that could dramatically alter the retail investment landscape in the UK and significantly encourage investing and saving. They appeal to the Government and the Financial Conduct Authority (FCA) to take the following actions:

  1. Acknowledge low consumer engagement and financial literacy levels and cease the use of disclosure information as a regulatory instrument.
  2. Prioritise disclosure information on mass market products, such as funds, and exclude retail bonds.
  3. Excuse advised businesses from future disclosure regimes, allowing them to depend on suitability letters that cater to individual client needs and circumstances.
  4. Create “headline” disclosures that utilise simple language, are concise, and concentrate on the crucial information consumers need before purchasing a product.
  5. Initiate a comprehensive review of all retail disclosure rules, including those under the Markets in Financial Instruments Directive, Insurance Distribution Directive (IDD), and Distance Marketing Directive (DMD).
  6. Establish a central retail disclosure sourcebook in the FCA Handbook, facilitating easier compliance with rules regarding information provision for firms.

Simon Harrington, Head of Public Affairs at PIMFA, further elaborated, “We are really encouraged by, and indeed share, the Government’s desire to reform financial services in the UK to make the regulatory regime better suited to how firms work on behalf of their clients.”

He continued to warn about the potential pitfalls of hasty, wholesale reform and highlighted the need for careful, surgical modifications, especially given the resources and time firms have already committed to implementing regulations.

Harrington ended his remarks by stressing that the provision of financial information to consumers presents a genuine opportunity to encourage more people to save and invest, empowering them to seize control of their financial futures. He expressed PIMFA’s readiness to collaborate with the Government and the FCA to nurture a culture of saving and investing.

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