Simplified investment advice

FCA - Simplified investment advice with targeted support

The Financial Conduct Authority (FCA) recently announced one of the biggest shake-ups in investment advice for UK investors in almost a decade. Under the proposals, millions of savers will be able to access ‘targeted support’ and ‘simplified advice’ to help them get better returns on their money. The FCA has called the move a ‘once-in-a-generation’ change, while some of the largest UK retail focused investment houses believe it will be ‘truly transformational in kick-starting a thriving retail investment culture in the UK.’

This development comes more than 10-years after the FCA’s Retail Distribution Review, the aim of which was to drive up the standards of financial advice. This created more costs and more onerous requirements for firms involved in providing a ‘personal recommendation’ to customers, including having to carry out detailed suitability assessments. The FCA acknowledges that this created an ‘advice gap’ which left many people unable to access such services.

The FCA is now looking to create a second, more targeted category of service, called ‘simplified advice,’ enabling investment firms to make financial product suggestions to customers based upon a quick review of ‘their relevant facts’, without doing a full suitability assessment. The FCA is aiming to authorise targeted support services from April 2026, though its work on simplified advice is expected to take longer.

The FCA said that more than half of British savers, that it surveyed, wanted more advice on how to invest their money and the new proposals are designed to help address this. The regulator estimates that 7 million UK adults had more than £10,000 in cash savings and no investments, adding that between 13.5m-30m people could benefit from targeted support. Whether these measures will give the UK equity market a ‘shot in the arm’ remains to be seen, but ‘every little helps.’

Meanwhile, Chancellor Rachel Reeve’s plan to mandate the UK’s biggest pension funds to invest a certain proportion of their assets in UK shares, has not found favour with everyone, particularly Andrew Bailey the Governor of the Bank of England. Whilst noting that the UK has a low level of pension fund investment in the real economy in this country, nevertheless he does not support mandating. Along with the ongoing cash ISA debate, is it back to the drawing board Rachel?              

What have we been watching?

UK inflation hit 3.6% on Wednesday, driven in part by government policies like higher National Insurance, living wage increases, and upcoming big pay rises for doctors. On Thursday, unemployment hit 4.7%, a four-year high, with claimant numbers above expectations, while wage growth remains elevated. Despite NatWest reporting strong growth for mid-market service providers in June, businesses face rising costs from higher employer National Insurance, minimum wage hikes, and related pay increases. With customers under similar pressure, raising prices is difficult, while US tariffs add further challenges. Unfortunately, bad news for the chancellor – or anyone hoping for a rate cut.

US bond markets moved sharply amid concerns over Fed independence and hawkish CPI details. On Wednesday, reports of Trump possibly firing Fed Chair Powell briefly pushed September rate cut odds from 57% to 80%, before dropping back. By Friday, odds rose to 64% after Fed Governor Waller, a potential Powell replacement, supported a 25bps cut in July. US PPI was below expectations, despite tariffs pushing goods prices up, softer services eased overall inflation worries. Strong retail sales and lower jobless claims highlighted US economic strength. It feels like inflation is bubbling under the surface. That is Powell’s view. Regardless, US stocks hit new highs: the S&P 500 rose 0.6%, NASDAQ gained 1.5%, and the Mag-7 climbed 1.7%, led by Nvidia’s 4.5% jump after eased AI chip export restrictions to China, with the company passing the $4tn market cap for the first time – larger than the GDP of the UK!

 

A quieter one for Europe this week, as far as data is concerned, with Ukraine/Russia back in focus as Trump threatened 100% “secondary tariffs” on Russian trade if no Ukraine ceasefire is reached within 50 days. While details were vague, the move could target buyers like China and India, though enforcement remains uncertain. Oil prices ended the week flat around $68, having initially risen on the geopolitical tension before easing as markets digested the 50-day timeline. Earnings are due from the region’s largest company, SAP tomorrow. Three others from the top 10 by market cap — LVMH, Roche, and Nestlé — also report, along with several European banks, where investors will be closely watching for signs of weakness amidst uncertainty for multinational names, especially those with global supply chains and export-heavy business models.

 

Japan is in focus this morning, as the ruling coalition falls short of a majority in the upper house, winning 47 of the 125 seats up for grabs—three shy of what they needed to hold power outright. While better than expected, it’s the first time since the LDP’s founding in 1955 that they’re in a minority in both chambers. PM Shigeru Ishiba says he’ll stay on, but history suggests that won’t be easy, especially with support shifting toward populist challengers.

 

We saw a big data release from China who’s Q2 GDP rose +5.2% on the year, slightly above expectations but a subtle slowdown from Q1. Growth was driven by exports despite US tariffs, while retail sales underperformed and real estate prices fell sharply, down 11.2%. Producer deflation continued for the 33rd consecutive month, marking the steepest drop since July 2023. While the resilience of exports post US tariffs is impressive, the hoped-for boost in consumer spending has yet to materialise. Youth unemployment remains high, and despite significant stimulus efforts, deflation persists. The ambitious 30-point plan announced in March 2025 now stands as a key credibility test for the Politburo.

The £ v $ is pretty much where it was at the start of the week.

We’re now less than two weeks away from the August 1st trade deadline, which complicates things further. While it appears we have passed peak uncertainty, the macro environment remains much tougher than it was prior to Liberation Day. Meanwhile, markets have made a big speculative move up, with cracks in earnings starting to show — a potential hangover from pull-forward demand ahead of tariffs?

Finally, Britain has a reputation for the cost of big infrastructure projects such as HS2 spiralling out of control. However, it looks as if our politicians are more than capable of wasting taxpayer money on smaller projects as well. A former spending watchdog has been asked to investigate after a new front door was installed at the House of Lords that cost nearly £10m and does not work. Wow, £10m for a new front door, have they not heard of Everest, Anglian, Wickes or B&Q?

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