Retail Access to High Risk Investments Working Group

Giving retail clients safe access to the right type of investments whilst limiting access to some high-risk investments and speculative transactions

Industry challenge

TISA encourages the ability to save and invest for lifetime events, particularly for younger generations, but it is imperative that consumers do so with savings and investment products that have a suitable level of risk for their needs. Investors need to be mindful of their overall risk appetite, diversifying their investments and only investing money they can afford to lose in high-risk products.

We are concerned that some investors are being tempted – often through misleading promotion, into buying complex, higher-risk products that are very unlikely to be suitable for them, do not reflect their risk tolerance or, in some cases, are fraudulent.

Conversely, there is a wide range of products that are categorised by the FCA as ‘high-risk’. Some of these are innovative products, designed to produce a good return over a long period, such as LTAFS, albeit with a higher risk and can have a place in a well-balanced portfolio. Some such as structured products are designed to provide a capital guarantee for risk averse consumers but carry liquidity risk.

TISA believes that the current exemptions for high net worth and sophisticated investors is not fit for purpose and should be replaced by an alternative. Furthermore, work needs to be done on categorisation of products and consumer education. In addition, TISA would like to examine whether the gamification of investment has positive or negative effects.

In pursuing these policy positions, TISA does not wish to stifle innovation or damage retail client access to higher risk long term investments. Furthermore, TISA does not seek to ban speculative trading by retail investors, but consumers should be given the understanding that these products are not a long-term investment strategy, and the unpredictable nature of the markets mean that they have more in common with gambling than with investment activity.

Group purpose

The Retail Access to High Risk Investments Working Group discusses the issues described above in order to inform TISA’s discussions with the FCA and HMT, with a view to giving input to any future regulatory changes. The group also receives regular updates on other relevant TISA initiatives.

Areas of focus

  • Making recommendations to the FCA and HMT on a suitable regulatory regime that give retail clients safe access to the right type of investments whilst limiting access to some high-risk investments and speculative transactions

Participating member firms

abrdn
Baringa Partners LLP
Digital Moneybox Ltd
Fidelity International
Hargreaves Lansdown

James Sharp & Co
RBC Brewin Dolphin
River & Mercantile Asset Management LLP
SIX Financial Information

Lisa Laybourn, Head of Technical Policy and Regulation
leads on this work at TISA

If you are a TISA member, and would like to get involved with this work, please get in touch

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