IA outlines aim to boost financial resilience and growth in response to Labour’s FS Strategy

Responding to the Government's consultation on Financial Services Growth and Competitiveness Strategy, the Investment Association (IA) representing the UK investment management industry, has outlined ambitious plans for future growth to support the UK economy and improve individuals’ financial resilience.  

Over the next ten years, in partnership with government and regulators, the industry will aim to increase the number of people holding an investment product from just over 20% of the UK population to 75% - matching the number who hold a cash savings account today. Achieving this will deliver a new culture of inclusive investment empowering ordinary people to access capital markets and improve their financial resilience. 

Ensuring that the UK has a fully inclusive investment environment which enables the broadest range of people possible to confidently invest to grow their long-term financial security should be an additional objective in the Strategy. This includes more effective financial education, and ensuring the advice and guidance market continues to evolve so that more people can receive professional support to invest productively and secure their financial futures. 

The industry will also aim to increase its export earnings by nearly 50% from £11.7 billion to £15 billion a year, over the next decade. This will build on the current success of the industry, which is the second largest global hub for investment management after the US, responsible for 6.7% of the total export of services from the UK, as well as a key investor in UK companies and infrastructure.  

Chris Cummings, CEO of the Investment Association, said: “A new partnership between Government, regulators and industry, as part of the modern industrial strategy, is urgently needed to help deliver a more dynamic economic environment. The shift towards a more risk-on, growth mindset is the first step in achieving this, but we must be ambitious if we’re to deliver real sustainable growth and greater financial resilience for UK households. That’s why we have outlined two clear aims, to significantly boost the number of people investing, so that the benefits of investment can be felt across the economy, and to grow our industry’s export earnings.”  

Notes to Editors

Appendix of policy recommendations: 

Question 3.1: Do you agree with the proposed objectives set out in paragraph 3.6?  

•  Ensuring that the UK has a fully inclusive investment environment which enables the broadest range of people possible to confidently invest to grow their long-term financial security should be an additional objective in the Financial Services Competitive and Growth Strategy. This should include: 

• Consideration of the potential for a ‘financial resilience score’ 

• More effective financial education

• Enabling the advice and guidance market to continue to evolve

• Ensuring that regulatory decisions consider the differing financial literacy levels, and existing attitudes towards participating in investing, which different groups of consumers have. For example, in crafting disclosures and risk warning; and 

• Gaps in financial literacy should be considered when regulating all financial products, including cash products and cryptocurrencies, to ensure consumers are fully informed in a balanced and useful way. 

Question 3.3: What do you consider to be the most important trends or changes likely to affect the financial services industry over the next 10 years?  

•  Ensure that pensions saving and retirement incomes are adequate through:  

• Bringing the self-employed into the Automatic Enrolment system  

• Increasing contribution rates from the current 8%, when appropriate; and 

• Fostering the creation of new decumulation and in-retirement financial products

Question 4.1: Do you agree with the list of policy pillars that the government intends to focus on? Are there other areas that should be included?  

• Include ‘the tax environment’ as part of the regulatory environment pillar with a focus on the predictability; stability; simplicity and competitiveness factors which feed into business decisions on where to locate and grow.   

 Question 4.9: How can we capitalise on synergies between different regional financial services hubs to support growth?   

•  Support the Scottish investment management cluster to develop its technology, data, and boutique expertise.  

• Support regional growth by encouraging the UK to become the domicile of choice for funds by reforming the UK’s internationally-anomalous and uncompetitive VAT regime.  

Question 5.8: Are there any barriers to growth in capital markets that are not being targeted by existing government reforms? How can private and public markets be grown so that they best support UK growth?  

• Continue to champion “Modernising Capital Markets” including ongoing work such as the reform of the UK listing rules, the development of a UK consolidated tape for all asset classes, the transition to T+1, the review of the UK research market, the development of PISCES and creating optionality for payments for investment research.  

• Support the buy-side community’s work towards the automation of IPOs, making the UK listing process more efficient.  

• Support the wider digitisation of the market, including policy and regulatory work on tokenisation.  

• Consider the abolition or phased reduction of stamp taxes on shares of UK-listed equities, which is an international outlier, to re-invigorate interest in UK markets. 

• Encourage changes to the policies governing corporate defined benefit (DB) pensions schemes to push further capital market growth. These include new guidance for trustees, an increase in protection offered by the Pension Protection Fund (PPF), and mechanisms to support surplus sharing. 

• Commission a study on the role of AIM, echoing recent work on junior markets across Europe, to ensure that it continues to be attractive in light of changes (particularly IHT) which may have has a negative impact on perceptions of it.  

• Commission a study on the potential for regional municipal bonds, which could help to power the UK’s regions, and the infrastructure needed within them.  

 Question 4.6: What is your assessment of the UK’s current regulatory environment?    

• Ensure that the support shown by the FCA and PRA’s leadership for competitiveness and growth is echoed throughout all levels of the regulators’ work.  

• Regulatory attitudes which support competitiveness and growth should echoed not just in policy setting, but in the way that regulators work with the financial services industry and in the interaction between regulators including the work of the FOS. 

• Reconsider the FSCS ‘look through’ rule, which currently means that investment managers account for around 20% of the total levy despite the sector never having been the cause of a claim. 

Question 4.7: How can regulation support responsible and informed risk-taking?  

•  Ensure that regulation considers positive outcomes, in addition to harm prevention. By way of example, this should include reforming regulatory disclosures by:  

• reforming the disclosures on investment products so they inform not just warn consumers; and  

• providing consistent risk information across all financial products, including cash products. 

• Ensure regulation takes into account the difference between wholesale and retail financial services and does not apply unnecessary burdens on wholesale services which are designed to address specific retail circumstances.   

Question 3.2: [For Financial Services Organisations] For firms operating in more than one jurisdiction, what are the main drivers affecting your decisions on where to invest?    

• Take a tripartite approach to promoting UK financial services which draws together government, industry, and regulator – an approach successfully adopt by other jurisdictions competing with the UK.   

Question 4.13: What opportunities should the government seek to advance through its international financial services relationships?      

• Support a closer relationship between the UK and the EU, our single largest market for investment management products, on financial services. Specifically, government should preserve the UK's position as a major global portfolio management centre. 

• Provide greater certainty on settlement, trading, and clearing activities for market participants based in the UK and EU.   

• Strengthen government support for the Joint Forum on Regulatory Cooperation, including possible industry participation, scheduled for its third meeting in early 2025.  

• Support the concept of “deference” which was identified by the G20 Leaders as a tool that authorities may use to help make reforms across jurisdictions interact better and facilitate the meeting of the objectives of those reforms. 

• Work with industry on future trade agreements (as well as current dialogues) to ensure that UK-based managers have the routes to access markets throughout the world and the world is able to invest in the UK.  

• Achieve mutual recognition, or “substituted compliance” for the U.S., to encourage cross-border establishment of firms. 

• Redouble support for the industry-financed, Global Investment Management Summit in 2025. This could reach even more of the world’s asset owners and reinforce the UK's status as a leading global investment management destination if given firm Cabinet-level support.   

Question 4.4: What is your assessment of how effectively the UK supports innovation and the adoption of new technology? What could be improved in the financial services sector?    

• Reconvene the Asset Management Taskforce, with the objective of establishing the UK as the world’s leading digital centre for investment management. This can also ensure the implementation of the previous recommendations made by the taskforce, including on tokenisation and AI.   

Question 5.5: In the UK’s sustainable finance framework, as set out in the Chancellor’s Mansion House package, do you see barriers or gaps that would support the growth and competitiveness of the UK sustainable finance market?     

• Ensure there is no impact on the competitiveness of the UK sustainable finance market due to lag between announcements and implementation.  

• Develop the UK sustainable finance market around the emerging and established asset classes which will be essential to financing sustainable transitions, including carbon markets within the Paris Agreement framework, the wider adoption and issuance of green bonds (and potentially green dGilts), and how the National Wealth Fund can support the growth of green infrastructure investment in the UK.   

Question 5.6: What do you think should be the UK’s priority when engaging with the global sustainable finance agenda, both bilaterally and at a multilateral level?  

•  Achieve, to the greatest extent possible, international adoption of sustainability standards which are compatible with UK sustainability standards.  

• Prioritise growth and competitiveness as the UK completes the process of consultation on its sustainable finance framework and concludes the endorsement process for UK SRS. The UK Government should then seek the adoption of similar standards internationally.  

• Whilst there is currently limited interoperability between the UK’s Sustainability Disclosure Requirements (SDR) and investment labels regime and other prominent regimes (e.g. the Sustainable Finance Disclosure Regulation (SFDR) in the EU), the UK needs to ensure its regime is as compatible with other initiatives internationally as far as possible and where it is in the best interest of the investor.   

Question 5.7: What are the opportunities and barriers for the financial services sector in developing the products and/or services necessary to facilitate investment into the net zero transition?  

• Provide a clear roadmap of supply and demand-side policies against which the transition plans of market participants can be judged, and which can give investors the confidence to identify and back innovation. 

 Question 4.10: What is your assessment of the UK’s ability to attract global talent to the financial services sector?  

• Champion accessible immigration policies that encourage global leaders to move to the UK and enable them to continue to work in the UK, including through bringing dependents and family members.  

• Develop a tax system that appeals to global talent to attract skilled professionals with international experience through competitive tax rates and stable, predictable tax.  

• Offer favourable post-education working visas that allow employers to attract entry-level candidates with diverse skill sets to address skills shortages. Facilitate a smooth transition from the graduate visa to the skilled worker visa. 

Question 4.11: What is your assessment of the UK’s ability to effectively upskill and reskill domestic workers for roles in the financial services sector?  

•  Allow flexibility in the new Skills and Growth Levy to fund short courses at all levels, enabling UK investment managers to upskill and reskill domestic talent in business-critical areas. Employers should have responsibility for defining priority skills and there must be recognition that these will change as industry needs change. 

• Support the extension of existing industry-led initiatives which provides jobs and connects future talent to the sector, such as Investment20/20 which takes a sector-wide approach to accessing future talent pools and providing new entry points.