FCA criticises investment firms for unintelligible disclosure documents

FCA says disclosures are too complex

The Financial Conduct Authority has criticised investment firms for producing disclosure documents it says are too difficult for consumers to understand, adding fresh pressure on the way cost, risk and performance information is presented to retail investors.

In a review of 132 presale disclosure documents, only 6% were written in plain English, according to the regulator. A wider check of 172 documents found none met the level of clarity the FCA said it would expect from GCSE-level reading.

The FCA said the main problems were word complexity, industry jargon, technical phrases, drafting choices and complicated language. It argued that these features make it harder for consumers to compare products and understand what they are buying.

The findings sit within a broader FCA push to simplify disclosure rules for investment products and reduce the duplication that has built up in the UK regime over time.

Ban on 'double-dipping'

Alongside the disclosure criticism, the regulator said it will ban investment firms from charging fees on customers' cash balances while also keeping the interest earned on that cash.

The FCA said it found 18 of 42 investment firms were using that approach in a 2023 review. The regulator described the practice as double-dipping and said the change is meant to stop firms taking both a fee and the interest from the same cash holdings.

The move matters because cash balances can be easy for consumers to overlook, especially when the fee structure is buried in long documents. The FCA's intervention is aimed at making those charges more visible and less open to confusion.

Pressure on older pension products

The regulator also warned it may take supervisory or regulatory action if providers of older products in the roughly £500bn unit-linked pension market do not improve value for customers.

That warning adds a wider consumer-protection edge to the disclosure overhaul. It suggests the FCA is not only focused on the wording of documents, but also on whether legacy product charges and returns remain fair to customers.

The package is intended to replace existing MiFID and non-MiFID disclosure rules and cut operational complexity for firms. In practice, that points to a future regime with shorter, simpler and more standardised explanations of fees, risks and performance.

What happens next

The FCA has not yet published the full rule changes in this report, but the direction of travel is clear: firms will be expected to simplify their disclosures and review how they charge for holding customer cash.

Investment platforms, wealth managers and financial advisers are likely to come under renewed scrutiny as the regulator turns its criticism into formal rule changes and, potentially, enforcement action.

For consumers, the immediate implication is that more readable disclosures may be on the way, along with fewer opportunities for fees to be hidden in dense product literature.