MANSION HOUSE AND BEYOND

In the run-up to last month’s Mansion House speech, there was a lot of focus on what might happen to the cash ISA. However, the government backed away from announcing any immediate changes, but it seems likely that we can expect reform in the future as part of a wider review of the ISA landscape and the government’s broader agenda to increase consumer investment.

One of the main pillars of the “Leeds Reforms,” announced the day before, is a programme of change focused on increasing the exposure of retail investments to capital markets and encouraging long-term investment to improve prosperity. In the government’s sights are the 7 million adults identified in the FCA’s Financial Lives Survey who currently hold £10,000 or more of investable assets as cash. The plan is to encourage these consumers to reduce their exposure to potentially poor-value savings products in favour of more productive investments. The measures include campaigns to educate the public, along with changes to the way in which risk warnings are communicated. It’s not clear yet what this will entail, but we can expect a greater focus on communicating the rewards of long-term investing, with reduced emphasis on the downside risks.

Naturally, we are supportive of any measures that seek to improve consumer understanding of the benefits of investing, given the higher expected returns of long-term investment in equity markets compared with bonds and cash. Of course, the key is ensuring that investors commit to the long-term and don’t bail out when markets fall and the press is full of negative headlines. Under these conditions, clients with financial advisers have a clear advantage, as the adviser can help quell their nerves and prevent clients acting against their long-term interests.

Other key proposals include plans to change the current boundaries between the provision of guidance and that of regulated advice. This includes the introduction of “targeted support” and clarification of the guidance and expectations around “simplified advice.” Along with “holistic advice” the advice provided by these services will constitute a personal recommendation.

Targeted support will be a specific permitted activity aimed at banks, insurers, and pension providers. Firms will be able to create client segments based on customers who share characteristics and circumstances. Once defined, these segments can be provided with a “tailored” recommendation. By way of example, the FCA consultation paper (CP25/17) details situations where pension providers might suggest higher pension contribution rates for clients under-saving for retirement or make suggestions for decumulation strategies that might be appropriate for a particular group of consumers. Investment providers might suggest funds appropriate for a client segment or direct them to a more cost-effective investment solution.

Simplified advice will also constitute a personal recommendation, requiring the existing permissions for “advising on investments.” However, it can be provided based on a narrower view of the customer’s circumstances than holistic financial advice. The FCA’s expectations are that by providing a narrower focus for the advice, based on specific client needs, the advice process can be simplified and therefore delivered at a lower price point than holistic advice. While this approach has already been outlined in previous FCA guidance, firms have reported that a lack of clarity in this area was a barrier to its provision. Whether greater regulatory certainty will increase uptake remains unclear, given that adopting a narrower approach could lead to an increased risk of client detriment.

Of course, we welcome any changes that lead to clients receiving all the support they need, when they need it. As an advised platform, we are keen to see how these changes will work in practice but believe that when it comes to providing personal recommendations, clients are best served by speaking to a regulated financial adviser.

Finally, while there were no announcements in relation to cash ISAs, Stocks and Shares ISAs were handed a boost with proposals to extend the list of permissible investments to include long-term asset funds (LTAFs – currently only available in innovative finance ISAs). For the uninitiated, LTAFs provide investors with access to a variety of private and alternative asset classes (mainly long-term illiquid assets) through an open-ended investment structure. Originally designed for institutional investors, successive regulatory changes have gradually widened the pool of potential investors, and this latest change will include stocks and shares ISAs from April 2026. Being a relatively new product, there is no meaningful past performance, but they are not cheap. Ongoing charges of more than 3% are not uncommon, along with additional redemption costs. They also have a minimum redemption period of 3 months – although 12 months is more common. So, are they appropriate for a stocks and shares ISA? As an advised platform, we are very supportive of the efforts to encourage long-term investing. However, even setting aside the costs of these investments, the extended redemption periods that apply to LTAFs heighten the risk of a mismatch between investors’ liquidity requirements and those of their investments. They also come with additional administrative challenges. For example, portfolios managed by templates/models need to exclude illiquid investments due to the problems these create where regular rebalancing is required. These problems can be further exacerbated if clients are taking regular withdrawals. As with so much of what has been announced, we will be paying attention to how demand for LTAFs develops and will take action where necessary to ensure that we continue to provide advisers and clients with the services they need.

All information is based on our understanding and interpretation of applicable law and regulation.

 

1. Introduction
2. Transact Online (TOL) –  Recent enhancements 
3. Latest news on integrations
4. Removal of purchase related fees
5. Listen out for the Transact podcast
6. Transact – BlackRock MPS update 
7. IHT and pensions – further clarity and procedural changes.
8.Flexibility and ISAs: current rules and planning opportunities.
9. Mansion House and beyond
10. Interest on cash
11. Transact events 2025