The FCA wants asset managers, platforms and advisers to view risk as a driver of innovation, growth and investment access, rather than something to simply minimise.
Speaking at the Investment Association Annual Conference on Tuesday (25 November), FCA chair Ashley Alder said advisers will need to help clients understand and manage new forms of risk as retail access to private markets, tokenised funds, AI and personalised guidance models expands.
“Risk is essential for fostering investment and innovation. It is not just something to be avoided,” he said, referring to the regulator’s focus on “rebalancing risk” in its 2025 to 2030 strategy.
Alder said retail interest in private equity, private credit and illiquid assets is growing fast as workplace pensions and advised clients look for diversification and long-term returns.
But he warned that confidence in the market depends on stronger standards in valuation, risk management and conflicts oversight.
The FCA has launched a multi-firm review into conflicts arising when firms operate multiple business lines or co-investment structures.
Tokenisation and digital innovation
Alder said the FCA’s fund tokenisation consultation aims to position the UK as a leader in innovation. Regulation should act “as a stabiliser, not a brake” for new models such as tokenised funds, data-driven advice tools and Direct2Fund structures.
He said Consumer Duty, combined with a more principles-based approach, gives firms greater flexibility to innovate, provided clients receive clarity, support and fair value.
The FCA is also encouraging clearer investor communications through initiatives such as Consumer Composite Investments.
Alder described the Advice Guidance Boundary Review as a “once-in-a-generation opportunity” to widen access to financial help.
The reform could allow advisers and platforms to offer personalised nudges, prompts and guidance without crossing into full regulated advice, so long as it supports better client outcomes under Consumer Duty.
He said advisers will increasingly play a key role in helping clients understand managed risk, assess illiquidity and navigate emerging product structures including tokenised funds and hybrid guidance models.
“Helping investors understand and manage risk, rather than eliminating it, will shape the future of the UK’s investment landscape,” he said.
