Investment Planning; Help to Buy ISAs and more

 Contents:

• Help to Buy ISAs - quarterly statistics released
• Consumer investment market: update on the FCA review

Help to Buy ISAs - quarterly statistics released
(FA5)

HMRC’s latest quarterly statistics on Help to Buy ISAs have been released. These cover the period from 1 December 2015 to 31 December 2020.

The statistics show that since the launch of the Help to Buy ISA, 386,728 property completions have been supported by the scheme and 508,492 bonuses have been paid through the scheme with an average bonus value of £1,051.

The table below shows the number of property completions supported by the scheme broken down by property value:

The figures also show:

• The mean value of a property purchased through the scheme is £174,531 compared to an average first-time buyer house price of £210,727 and a national average house price of £251,500.
• The median age of a first-time buyer in the scheme is 28 compared to a national first-time buyer median age of 30.
• The highest number of property completions with the support of the scheme is in the North West, Yorkshire and The Humber.
• The lowest number of property completions is in the North East and Northern Ireland.

 
Consumer investment market: update on the FCA review
(AF4, FA7, LP2, RO2)

Last September, the Financial Conduct Authority (FCA) launched a Call for Input to help shape its work on improving the consumer investment market. It has now set out its proposals to strengthen its financial promotion rules for high-risk investments. This seems to be partly a reaction to the London Capital & Finance (LCF) saga, with the FCA acknowledging that although it has already taken action by banning the mass-marketing of speculative mini-bonds, it recognises that “…more needs to be done”.

The discussion paper focusses on three areas:

• The classification of high-risk investments: The FCA’s classification of investments determines the level of marketing restrictions that applies to that investment. The FCA is seeking views on whether more types of investments should be subject to marketing restrictions and what marketing restrictions should apply, for example for equity shares and Peer-to-Peer agreements.

• Further segmenting the high-risk investments market: The FCA is concerned that despite its existing marketing restrictions, too many consumers are still investing in inappropriate high-risk investments which do not meet their needs. Therefore, the FCA plans to strengthen its rules to further segment high-risk investments from other investments and is seeking views on how best to achieve this. The FCA is considering what improvements could be made to risk warnings, which, it says, are often perceived as white noise to many investors and often do not convey the genuine possibility of an investment loss. Other suggestions in the paper include requiring consumers to watch educational videos or to pass an online test to demonstrate sufficient knowledge about financial products. The FCA believes this could help prevent consumers from simply clicking through and accessing high-risk investments that they do not understand.

• The approval of financial promotions: The FCA is seeking views on whether there should be more requirements for firms which approve financial promotions for unauthorised persons to monitor a financial promotion on an ongoing basis, after approval, to ensure it remains clear, fair and not misleading.

The feedback to this discussion paper will help shape the rules the FCA plans to consult on later in the year, ensure they are feasible for firms to implement and that they have the intended impact.

Recent research the FCA commissioned on self-directed investors identified a growing trend of retail investors choosing to invest in inappropriate high-risk investments that do not meet their savings goals and investment needs. The research found that over 4 in 10 (45%) did not view ‘losing some money’ as a potential risk of investing.

The FCA is inviting feedback on its discussion paper by 1 July 2021. It will consider the feedback received alongside further analysis and testing, and intends to consult on rule changes later this year.

The FCA will also publish a full response to its Call for Input on consumer investments, alongside the next steps on its wider consumer investments strategy, later in the year.

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