Why the FCA’s CCI overhaul will fundamentally reshape disclosure

This article by Helen Slater, Regulatory Manager at FE fundinfo, was published in Portfolio Adviser in January 2025.

The FCA’s proposed overhaul of consumer-facing product documentation for Consumer Composite Investments (CCIs) will fundamentally reshape how investment information is presented to retail investors.

Announced in its December 2024 consultation paper, the new rules seek to replace the prescriptive and often criticised UK PRIIPs Key Information Documents (KIDs) and UK UCITS Key Investor Information Documents (KIIDs) with a more flexible Product Summary.

For distributors, this shift carries significant implications. The FCA is pushing for a consumer-first, digital-led approach that allows firms greater flexibility in format while ensuring transparency around costs, risks, and performance.

The key challenge for distributors will be ensuring that their documentation remains compliant while effectively communicating complex investment details to retail investors.

What’s changing?

The proposed Product Summary will replace rigid templates with a freer format, allowing firms to design their own disclosures. The intention is to simplify the presentation and provide greater flexibility, particularly for products where existing regulations have forced a one-size-fits-all approach.

However, while design restrictions are being lifted, distributors must still ensure that all critical investment information is conveyed clearly. Some of the headline changes include:

Format: While the Summary Document is still required, the prescribed three-page document is being scrapped. Instead, firms will have control over presentation but must ensure information is delivered early in the consumer journey.

Costs: The Reduction in Yield (RIY) measure will be replaced by a clearer breakdown of costs over a 12-month period. Distributors will need to provide clear, understandable cost explanations using real-world examples.

Risk: The risk scale will move from a 1-7 model to a 1-10 scale, allowing greater nuance, particularly for high-risk investments. Importantly, the regulator is allowing firms to adjust indicators based on specific product risks, rather than relying solely on standardised calculations.

Performance: A 10-year past performance chart will become mandatory for funds with sufficient data, ensuring investors see a long-term view rather than projections.

What distributors need to do now

With the consultation open until March 2025, and a transition period of up to 18 months after final rules are published, distributors have a limited but critical window to prepare.

Distributors must now take a proactive approach in reviewing and redesigning investor-facing documentation. With the removal of rigid templates, firms have greater flexibility to tailor disclosures to their audience.

However, this also introduces compliance risks, making it essential for distributors to collaborate closely with product manufacturers to ensure that costs, risks, and performance metrics are communicated clearly and consistently.

A digital-first approach will be central to the new regime. The FCA is encouraging firms to prioritise the digital delivery of Product Summaries, which means distributors should consider structuring information in layers, using interactive disclosures such as hover text and pop-ups.

Additionally, underlying data should be made available in machine-readable formats to facilitate integration with digital tools, improving accessibility and usability for investors.

The shift from Reduction in Yield (RIY) to annual cost summaries will also require distributors to overhaul how they present cost data. Investment trusts, for example, will no longer need to disclose ongoing costs linked to real asset maintenance or gearing in the same way as before.

However, firms must still provide clear explanations of how these costs impact investment risk and returns, ensuring investors can easily understand their implications.

Product Summaries will not be static documents – they must be updated every 12 months, with distributors responsible for ensuring that investors receive the latest version. This means firms will need robust processes to monitor changes from manufacturers and integrate updates efficiently into their distribution platforms.

Keeping disclosures accurate and up to date will be critical in maintaining compliance under the new framework.

Distributors must carefully assess the implications of the revised risk categorisation, particularly for high-risk investments. Certain products, such as CFDs, derivatives, and highly leveraged investments, will automatically be classified at the upper end of the new risk scale.

Ensuring that existing risk disclosures align with these changes will be vital, as will flagging high-risk products appropriately to help investors make informed decisions.

Shifting from compliance to consumer understanding

The FCA’s reforms signal a broader shift in financial regulation—from rigid compliance checkboxes to a more outcome-based approach. For distributors, this presents both a challenge and an opportunity.

On one hand, it requires greater diligence in ensuring investment documentation remains clear, accurate, and legally compliant. On the other hand, it provides an opportunity to improve investor engagement by presenting information in a more digestible, transparent way.

By acting now to align with the proposed Product Summary requirements, distributors can ensure that they are not only meeting regulatory expectations but also enhancing the investor experience, fostering greater trust and ultimately stabilising confidence in their financial products.