Compliance Matters: Week ending 16th January 2026

Here is a digest of regulatory issues that have come into my inbox this week.  I have provided high-level summaries and hyperlinks to documents that give further detail.

• FCA highlights good practice and risks in complex ETPs for retail investors

• Tax and disability in the UK: review of trusts and other savings options

• FCA publishes webpages on the new crypto regulation regime

• Should income protection become a cornerstone of financial planning?

FCA highlights good practice and risks in complex ETPs for retail investors

The FCA has published a review of how firms advise on complex exchange traded products (ETPs) to retail consumers.  They found that some firms demonstrated detailed processes for:

• Defining target markets.

• Assessing customer knowledge.

• Monitoring outcomes.

Others had weaker controls or limited assessments of a client’s investment experience and knowledge.  It also saw unclear disclosures, making it harder for consumers to understand risks.

The FCA published this news story under the heading of Consumer Duty.  The message continues.  It wants firms to put consumers first by making sure products and services meet their needs, and communications are clear to support understanding.

The message is clear and applies to all our advice.  We should ensure that our clients understand what we are recommending; the benefits, risks, and costs, tailored in a way that takes into account their knowledge and experience of the products and the underlying assets.  All jargon in explained and the explanations repeated in suitability reports.

Tax and disability in the UK: review of trusts and other savings options

A discussion paper published by the Institute for Fiscal Studies (IFS) makes the case for a simpler way to save on behalf of a disabled person.  Currently, other than having an informal arrangement with a family member, the only option at the moment is opening a disability trust. 

The nature of many people’s disability may lead to profound concerns over their future financial provision.  There is a well-established disability trust regime in the UK for putting aside savings in respect of eligible disabled people.  Disability trust regimes also operate in a number of other countries.

The UK disability trust regime offers a number of benefits - including tax treatments which tax a trust’s income and gains as if these were those of the disabled person, rather than at higher trust rates.  The paper recommends that this regime continues with some modifications – and, to help contain costs, the publication by HMRC of an approved “model trust deed” and guidance which can be used as a basis for drafting. 

The FCA publishes webpages on the new crypto regulation regime

The FCA has launched its website pages in advance of the new regime for cryptoasset regulation.  The regime is expected to come into force in October 2027.

The pages provide guidance on:

• How the gateway will operate 

• The regulated activities 

• Authorisation, supervision, and enforcement 

• FCA standards 

• 
  

  The transitional provisions for existing crypto firms  – the FCA proposes a transitional provision to provide existing cryptoasset firms that are unsuccessful in securing authorisation with an exemption, to allow them to run-off their UK business in an orderly way and exit the market.  The exemption would only cover the new cryptoasset regulated activities and within this only to the extent necessary for the performance of a pre-existing contract entered into before the firm entered the transitional provision.

Cryptoassets are moving further towards the mainstream and will be treated like any other asset class by the end of the decade.  We need to be prepared to consider them for clients and be mindful of the regulatory regime as it develops.

Should income protection become a cornerstone of financial planning?

I have long been an advocate of protection business.  With the focus on wealth management and older clients, protection has become a forgotten string to the financial planning bow.

In a financial environment where household budgets are stretched and many people are one or two paydays from arrears with a mortgage or other bills, income protection can provide a valuable lifeline should someone be unable to work due to illness or injury.

In the past, the product was overshadowed by critical illness cover, and life assurance.  But now, with more people realising the importance of protecting their income in times of instability, income protection is stepping into the limelight, providing more people with valuable peace of mind.

In a time where every spare penny counts, income protection has quietly surged in popularity.  Income protection sales across the industry increased by 18 per cent during 2024 compared to the previous year.  UK workers are looking for a financial safety net, and it is clear that income protection is a growing consideration.

Awareness of income protection is on the up, marking a shift from the years when it was perhaps seen as less important.  However, a general lack of education continues to hold its widespread adoption.  Many UK workers overestimate the support they would receive if they could not work due to illness or injury.

For those of your client who are employed, at the next review, check their employee benefits and recommend that any gap is filled.  When you advise your business owner clients, check to see if they have capacity to add income protection to their employee benefits.  The benefit may be more valuable in the eyes of the employee than the cost to the company.