By Karen Peattie

THE volume of “scams and scandals” in the investment market and the fact that “too often” consumers are offered unsuitable products or advice has diluted confidence, says the City regulator.

Issuing a “call for input” to help shape its work on improving the consumer investment market, the Financial Conduct Authority (FCA) said that too often, customers receive lower returns than they should because of unsuitable products with high fees.

The FCA is inviting feedback by December 15 on how the consumer investment market can be improved.

In a complex and diverse market with more than 5,000 advice firms and over 27,000 advisers, it is essential that consumers have confidence in the suitability of advice they receive, the FCA said.

The regulator identified “reducing harm in the consumer investments market” as a priority in its 2020/21 business plan and wants to hear views on what more it can do to “help the market offer a range of products that meet straightforward investment needs and how people can be better protected from scams”.

Christopher Woolard, the FCA’s interim chief executive, said: “The consumer investment market is not working as well as it should. There have been too many scams and scandals and too often consumers are offered unsuitable products or advice. As a result, many consumers lack confidence in the investment market.

“This call for input is aiming to help shape the future of consumer investments, including regulation, to ensure consumers can have faith in the market.

“We’ll be considering all contributions carefully as we open this debate on the future of the consumer investment market.”

The FCA is also asking how the market can better ensure that those who have the financial resources to accept the risks of higher risk investments can do so if they wish, but in a way that ensures they understand the risk they are taking.

It also asks for input on how to help the market to be competitive with “firms striving to offer better products and services”.

In addition, the regulator wants to explore what more can be done to ensure that when people lose money because of an act or omission of a regulated firm, they are appropriately compensated and that it is paid for fairly by those who cause the loss.

It also wants input on how the market can use the regulation of financial promotions to make it easier for people to understand the level of regulatory protections afforded to them when they invest.

The FCA noted: “The feedback we receive will shape the FCA’s work in the coming years to deliver a market that works well for the millions of people who rely on it.”

This wide-ranging review follows recent action by the FCA in imposing a temporary ban on the mass marketing of speculative mini-bonds. In June, the FCA announced proposals to make this ban permanent.

In 2014, the regulator launched its “ScamSmart” campaign to arm consumers with the knowledge and tools to help prevent them falling victim to investment and pension scams.

“Through our supervisory work we have taken action against pension transfer advisers where advice has been unsuitable,” it said.

It is also developing a consumer harm campaign to help consumers make better-informed investment decisions, building on the ScamSmart campaign. The new campaign will seek to address the harm caused from consumers investing in high-risk, high-return, illiquid investments that are not suitable for their needs.