FCA sets out its strategy for 2025-2030

The FCA published a speech on 26 November 2024 by Emily Shepperd, FCA Chief Operating Officer, setting out the FCA's strategy for 2025 to 2030. The FCA's focus will be on economic growth and innovation, financial crime, consumer resilience, and how they can become a more efficient and effective regulator.

A more efficient, effective and proportionate regulator

This area of focus for the FCA is based on consistent feedback received from CEOs around the industry. In short, the FCA aims to be more predictable, pragmatic and proportionate in the way that it operates. One change requested by the industry is to streamline data requests. In her speech, Emily Shepperd defended the regulator's record by setting out improvements over the last four years, including that 98.5% of cases are now being assessed within the committed service deadline and most service metrics being rated green.

In terms of the next five years, the regulator is looking to simplify their retail conduct rules and guidance, especially where there are areas of complexity, duplication or over-prescription. The FCA also wants to utilise technology in order to automate elements that are rote and focus staff time on the judgements to be made. It was also confirmed that the FCA would continue to expand its presence across the UK.

Financial crime

In their current strategy, the FCA set themselves the target of slowing the growth of fraud. They have seen some positive results but are thinking about how they can go further. The FCA will seek to re-enforce partnership working and also look internationally to achieve a further step change on the prevalence of financial crime. To achieve this, they will seek partnerships to share data and use data analytics to find connections that help to identify and prosecute financial criminals. The FCA has already run a proof of concept that synthesized data analysis to assist in identifying criminal activity.

However, Emily Shepperd acknowledged concerns about the cost of financial crime controls and questioned whether this is an area where the regulator could help. She suggested the idea of digital passports as a solution but confirmed that they are open to ideas on how to tackle financial crime more efficiently and proportionately.

Consumer Resilience

The FCA wants to ensure consumers have access to, and the confidence to use, appropriate products and services and to build trust in the services that consumers rely on. At present the Consumer Duty places the onus on firms to ensure that consumers are empowered to understand products on offer and to help them make informed decisions on what is appropriate. The FCA now seeks to refine the line between advice and guidance, making the distinction clearer to help consumers understand their choices. The FCA specifically mentions pensions and investments in this regard, where they are currently working towards introducing targeted support. The regulator's view is that the best way of building trust in financial services is through greater consumer understanding.

Growth and Innovation

The financial services sector produced £278bn in economic output for the UK in 2023 which makes up 12% of the economy and £110bn in tax revenue. UK asset managers are responsible for £11trn - making the UK the world’s second largest investment manager market. The FCA argues that growth in the financial services sector is stronger and more sustainable when there is consumer confidence, the market has integrity and is supported by healthy competition between firms. Moreover, the regulator seeks to make the financial services sector a magnet for international investment.

The FCA is seeking to facilitate growth in the economy. The first way of achieving this is to ensure good value for the cost of regulation. The regulator believes that developing domestic and international partnerships will be key in achieving this. The second way is for the regulator to support innovation, facilitating a more productive and competitive sector. The FCA seeks to build upon the work they have already done with Early and High Growth Oversight, the Regulatory Sandbox and Innovation Pathways by continuing to evolve the innovation services they offer. Like almost every sector, the FCA is also looking at greater use of AI. Their AI Lab aims to help firms overcome challenges in building and implementing AI solutions, while supporting safe and responsible development. The third way is by facilitating investment in the real economy, including resolving the advice guidance boundary. The speech sets out the regulator's previous reforms in this area including changes to the FCA's listing rules and introducing greater freedom in how asset managers pay for investment research. Going forwards, the FCA plans to improve retail access to fixed income markets and to support the green finance transition.

Comment

Whilst not giving any precise details of their plans for 2025-2030, the FCA clearly seeks to leverage new partnerships - both international and domestic - and improved technology such as AI and increased automation to achieve their strategy.  Moreover, the regulator seeks to push ahead and introduce some existing proposals such as the targeted advice service.

The theme of growth and innovation is no doubt influenced by the new Labour government's policy of increasing economic growth, coming soon after Chancellor Rachael Reeve's Mansion House speech where she stated that reform is required of the UK regulatory model in order to unlock innovation, drive more investment and deliver sustainable economic growth.

The speech was published on the same day that a report by the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services found the FCA to be 'opaque, unaccountable and incompetent.' Whilst the FCA 'strongly reject' the characterisation set out in the report, the regulator faces a challenge of developing a strategy over the next five years that will improve confidence from industry, consumers and Parliament while helping to fulfil the goals of the new government.