The Financial Conduct Authority (FCA) has said it is making a decisive shift away from “prescriptive and complex templates” for retail investments that consumers don’t find useful.

The UK watchdog says that this will give firms more freedom to put the consumer first, innovate, and help their customers understand potential returns as well as costs and risks.

The move forms part of a set of wider measures from the regulator designed to “empower” retail investment, reinforce wholesale markets, make investing more engaging, and support firms to innovate.

The FCA said the new proposals will set a clearer boundary between retail and professional investors to allow firms to deal with professional investors with “confidence operating outside retail regulations”, freeing them up to innovate and offer a more diverse range of products.

The regulator added that it is also seeking views on how longer-term regulation can keep up with the evolving retail investment landscape and help shift the dial on risk appetite, to give consumers confidence to access investments that meet their needs.

The threshold to qualify as a professional investor will remain high, so that only those with experience, advice or the ability to bear risk are taken out of retail protections, such as the Consumer Duty, that they don’t need.

The FCA added that the new proposals remove some arbitrary tests and give firms more responsibility to “get it right”, as well as changing how firms assess professional investors.

“Today’s measures support investment risk culture right along the spectrum,” said Simon Walls, executive director of markets at the FCA. “They ensure that firms can compete to give retail customers material that informs and engages them.

“They also draw a brighter line for professional markets, defined by contracting parties, informed consent and regulation that is proportionate to that.”

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