Britain’s investment industry is being offered a rare bargain: fewer prescribed documents in exchange for greater responsibility.
That is the real significance of the Financial Conduct Authority’s latest consultation on consumer investment disclosures. The regulator proposes replacing a thicket of inherited rules with a more flexible system built around whether customers actually understand costs, risks and performance.
The reform follows the arrival of the Consumer Composite Investments regime, or CCI: Britain’s replacement for the European Union’s rules on packaged retail and insurance-based investment products. CCI covers investments where the return depends on the performance of underlying or reference assets, including many funds, structured products and insurance-based investments.
The paperwork has failed its own test
The case for reform is unusually clear. In a review of 132 pre-sale disclosure documents, the FCA found that only 6 per cent were written in plain English. Some 31 per cent were rated difficult to read and 63 per cent fairly difficult.
This is not merely a stylistic failure. A document can be legally complete yet commercially useless if a customer cannot tell what they will pay, why the charge exists or how it may affect returns. The old approach too often treated disclosure as proof that a PDF had been delivered rather than evidence that information had been understood.
Under the proposals, firms would show personalised annual costs before sale in both percentage and pounds-and-pence terms. Ongoing product and service costs would appear as a headline total, while items such as transaction costs, performance fees and carried interest would be explained separately. The forward-looking “cumulative effect” illustration — built on assumed returns that may create false precision — would disappear.
After sale, firms would still report annual costs, but would also show how charges affected actual performance. The FCA is even encouraging firms to move beyond static PDFs towards layered, interactive information suited to modern digital journeys.
Cash becomes a regulatory battleground
The most commercially sensitive section concerns uninvested cash held on platforms. Firms would be allowed to charge a fee on cash only if they pass on the interest in full. Where they retain some interest instead, they would need to explain prominently how the customer’s rate is set.
When cash enters an account without an immediate investment purpose, the customer would receive a personalised indication of likely fees and interest over the first year. Platforms would also need to disclose both figures in ongoing reports and consider contacting customers who leave significant sums uninvested.
This may pressure a quiet source of platform revenue. It also reflects a broader regulatory judgement: cash treatment is part of the product’s value, not an incidental treasury matter hidden behind the investment interface.
Freedom comes with an audit trail
The FCA plans to consolidate much of the fragmented rulebook into a new chapter, COBS 6A. Firms conducting business outside the retained Markets in Financial Instruments Directive framework would face broadly similar pre- and post-sale cost obligations to mainstream investment distributors. Professional clients would receive fewer prescribed disclosures, although a high-level duty to provide transparent cost information would remain.
The attraction for firms is flexibility. The danger is that flexibility transfers risk from the template to the judgement of the manufacturer, adviser or platform. A prescribed document provides a defensive checklist. A principles-led communication requires evidence that its design, language and placement promote understanding under the Consumer Duty.
That will make testing more important. Firms may need to document not only what they disclosed, but why they chose a format, how customers responded and what changed after testing. A shorter disclosure that nobody notices will not be rescued by its brevity.
The proposed timetable is generous but not leisurely. CCI product summaries become the norm from 8 June 2027, while the wider cost-disclosure transition is expected to run until around June 2028. Cash-interest rules are intended to take effect on 8 June 2027.
The industry should resist treating that window as permission to wait. Data mapping, cash-rate methodology, product-summary production and digital journey redesign all cross operational boundaries. Firms that merely translate their existing PDFs into shorter PDFs will have complied with the mood of reform less successfully than its mechanics.
The FCA is attempting something sensible: replacing disclosure theatre with a comprehension test. Whether it succeeds will depend on supervision. If the regulator rewards clear communication and challenges technically complete obscurity, Britain may end up with a better regime. If not, the industry will simply produce a new generation of elegant documents that customers still do not read.
