Following a review, which found that retail investors are struggling to understand their investment costs, the U.K.’s Financial Conduct Authority (FCA) is proposing reforms to simplify and enhance cost reporting.
On Thursday, the FCA launched a consultation that seeks to improve investors’ understanding of cost disclosures by simplifying how discount brokers, advisory firms and wealth managers communicate costs — and encourages more plain language disclosure.
The proposals follow a review that found investors are still struggling to understand the costs of investing and the impact of these costs on their investment returns.
Among other things, that review found that only 6% of pre-sale investment disclosures were written in plain language — and, that disclosures from both product manufacturers and distributors were overly complex and hard to understand, as they relied heavily on industry jargon and used technical phrases that hampered investors’ understanding.
To improve the situation, the FCA is now consulting on proposals that would simplify the rules for how firms communicate with clients on the full slate of costs that accompany investing — including product, distribution and advice costs — in an effort to align these disclosures with recent reforms to investment product disclosures that will take effect in June 2027.
At the same time, the regulator said its proposals will “allow firms to innovate, test and compete to inform and engage retail investors” — with a view to avoiding jargon and providing information in more engaging ways.
“This will also help consumers compare products more easily and invest with greater confidence, supporting a stronger investment culture,” the FCA said.
“We want more consumers to feel confident investing by getting clearer information in plain English on products and charges,” said Lucy Castledine, the FCA’s director of consumer investments, in a release.
“The changes will give firms more freedom to innovate and communicate in ways that build trust and support informed decisions to help consumers navigate their financial lives,” she added.
The consultation on the latest proposed reforms is now open until Aug. 21.