The Financial Conduct Authority (FCA) has announced plans to cut back regulatory hurdles for high-net-worth individuals, potentially widening the pool of investors able to access alternative assets and making it easier for firms to design new products.
In a consultation paper released this week, the UK regulator proposed clearer boundaries between retail and professional investors. Among the headline changes is a move allowing wealthy, experienced individuals with at least £10m in investable assets to opt out of retail protections, streamlining how firms classify professional clients.
The FCA said the change would allow sophisticated investors access to products and services that better “meet their needs and objectives, where it is in their best interests to do so”. It would also give firms more room to innovate and reduce costs when creating products for “truly professional clients”.
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The reforms could expand access to alternative investments such as private credit funds for high-net-worth individuals who meet the professional criteria. “This will free up firms to innovate and offer a more diverse range of products to truly experienced clients with the resources to bear more of the risks,” the FCA said.
These proposed reforms are part of a suite of measures announced by the UK regulator to help build a stronger investment culture in the country.
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“Today’s measures support investment risk culture right along the spectrum,” added Simon Walls, the FCA’s executive director of markets. “They also draw a brighter line for professional markets, defined by contracting parties, informed consent, and regulation that is proportionate to that.”
The consultation also highlighted industry feedback calling for greater differentiation between retail-oriented funds, such as pension schemes, and non-retail vehicles like alternative investment funds. Some respondents argued that the latter should be treated as eligible counterparties (ECPs).
If implemented, such a shift could further benefit alternative funds by allowing them to operate under a lighter regulatory framework, giving managers more flexibility in deal structuring and investor arrangements.
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