FCA discussion paper on expanding consumer access to investments

On 8 December 2025, the FCA published a discussion paper (DP25/3) on expanding consumer access to investments, seeking views on its overall regulatory framework for retail investors and how it can better support informed risk-taking whilst protecting consumers from inappropriate investment opportunities. It forms part of a package of measures published by the FCA on the same day "to empower retail investment, reinforce wholesale markets and maintain the UK's position as a world-leading financial centre," which we referred to in our article here.

Background

The FCA has recognised that its existing regulatory framework for retail investors could be adapted to rebalance risk and support investors on informed investing and risk-taking, after identifying that many consumers are not confident in investing and financial literacy is low. The FCA is using the discussion paper as an opportunity to how it can:

support continued innovation by firms
ensure that comparable products have similar rights and protections
regulate access to high-risk investments to ensure retail consumers cannot easily access inappropriate investment opportunities
manage how firms communicate and promote to consumers to enable them to make informed decisions
introduce positive frictions to enable more considered decision-making.

The FCA has categorised its discussion into two key perspectives: the retail investing landscape and the regulatory framework review.

Retail investing landscape

Trading apps and digital engagement practices

Whilst trading apps have made investing more accessible to consumers, the design features employed by some platforms can greatly influence consumer behaviour, crouching into territory which arguably seems more like gambling-like conduct. These platforms appeal to younger demographics and can encourage progressively riskier behaviours, particularly in relation to cryptoassets and CFDs. Although firms are obliged to act in good faith under the Consumer Duty, the FCA is seeking feedback on whether current regulations adequately mitigate app-related risks and if there are any blind spots in the consumer's journey which the regulations do not sufficiently identify and address.

Fractionalisation

The FCA is seeing firms dividing ownership of whole assets so divisions are available at a proportion of the cost, which can make investing more accessible and create opportunities for retail consumers to gain diversified exposure. However, depending on how fractional investments are structured, consumers could be exposed to increased risk. The FCA is looking for views on the opportunities and risks of such fractional investments.

Model portfolio services

Model portfolio services have grown in popularity on direct-to-consumer investment platforms and trading apps, enabling consumers to access pre-constructed diversified portfolios aligned with their financial objectives and risk tolerance.

However, the FCA has highlighted that retail consumers are likely to perceive model portfolios as single managed funds, and unlike authorised funds with which they share similar risk profiles, model portfolios are not subject to comparable regulatory requirements. As such, the FCA are enquiring whether it should look to standardise disclosures between regulated funds and model portfolios.

Speculative products

The FCA notes that many speculative products (such as CFDs and ETPs) have risk profiles that include leverage and heightened volatility, but are regulated inconsistently in terms of the risk information that is applied and its accessibility to different groups of retail consumers. In light of this, the FCA is enquiring whether a more consistent regulatory approach is needed which focuses on the nature of the risk rather than the product label.

Peer-to-peer lending (P2P)

The volume of investment in P2P loans has decreased substantially over the last five years, although P2P lending continues to represent a valuable source of finance for SMEs. The FCA believes the existing policy approach strikes the right balance but is consulting on whether additional interventions are required to safeguard consumers and maintain appropriate access to P2P products.

Regulatory framework review

Financial promotion and distribution rules

The FCA's rules on financial promotion and distribution are crucial to supporting informed risk-taking, with financial promotions constituting an important form of communication and often representing the first stage of the consumer journey. In 2022, the FCA implemented new rules to rationalise and strengthen its existing framework for high-risk investment promotions (PS22/10), creating distinct investment categories that determine when retail mass-marketing is permissible and whether additional requirements apply. COBS 4 sets out the restrictions and frictions applicable to Restricted Mass Market Investments and Non-Mass Market Investments. The FCA now seeks stakeholder input on these rules in light of developments in the retail investment landscape.

The appropriateness test

The appropriateness test, as set out in in COBS 10, COBS 10A and COBS 4.12A, requires firms to assess a client's knowledge and experience before facilitating an order for a non-advised sale. However, the FCA has acknowledged the rules have been adapted over a long period of time and may be outdated. It is now looking for views on whether the scope and application of the appropriateness test rules under COBS are effective.

Consumer Duty

The FCA is currently conducting the Duty requirements review to streamline its rules more widely and reduce complexity for firms. In conjunction with this existing initiative, it is seeking to clarify the way the rules (in particular, the financial promotion and distribution rules) interact with the Duty.

Financial Promotion Order exemptions

The FCA has expressed concern about the Financial Promotion Order (FPO) exemptions, identified how it is increasingly inconsistent with other investor categorisations and how it may present a gap in consumer protection.

FPO exemptions permit promotions to certified high-net-worth or self-certified sophisticated investors to operate outside FCA rules, including the requirement to be fair, clear and not misleading. As these exemptions are set out in legislation, the FCA cannot alter them or exercise supervisory or enforcement powers where the exemptions are engaged.

The FCA continues to be concerned that the qualifying thresholds for consumers to access an exemption are too low and that consumers may be inappropriately foregoing protections. At present, to be deemed high-net-worth, a consumer must have an annual income of £100,000 or above, or net assets exceeding £250,000 excluding their principal residence and pension assets. These thresholds have not been revised since July 2001, have not kept pace with inflation and the UK has been noted for standing out for its unusually low thresholds, in comparison to other jurisdictions. The FCA aims to reduce the number of consumers being inappropriately excluded from retail protections and is seeking input from stakeholders as to what steps it can take to mitigate harm, which are in its remit.