Across the UK and EU, policymakers are trying to answer the same question: how do we move household savings back into productive investment without repeating past episodes of retail harm?
The narrative is familiar, including a whole thematic discussion framed around this point at a recent funds congress. Large pools of cash sit on the sidelines while governments want deeper capital markets, better retirement outcomes and more funding for growth assets. Industry commentary often frames this as a distribution or marketing challenge, but the actual problem is nothing to do with product availability, but about retail investor confidence in markets.
And confidence is built, or lost, through appropriate governance controls.
At the same time as the growth agenda has accelerated, regulatory expectations have hardened. The FCA’s Consumer Duty, the EU’s Retail Investment Strategy and PRIIPs reforms, and structural changes under AIFMD II and UCITS are all moving in the same direction: stronger product design discipline, clearer evidence of value, and earlier intervention in the product lifecycle.
The “£600bn” headline – and why it’s not deployable capital
In September 2025, the Financial Times published (and it has since been widely cited) that UK households hold hundreds of billions in cash deposits that could be invested more productively. The number is directionally useful, but strategically misleading. This is not a pot of idle money waiting to be “converted” into investment. It is also emergency savings, short-term spending buffers, and a rational response to volatility and mistrust.
For firms, the real question is not how to capture these flows faster but how to earn the right to handle them at all. For firms, this becomes fundamentally a conduct and governance problem, not a distribution problem.
Regulatory direction of travel: access with accountability
Despite the viewpoint of divergence, the UK and EU are aligned on outcomes.
In the UK, the Consumer Duty has shifted the burden of proof. Disclosure alone is insufficient. Firms must evidence good outcomes across product design, price and value, communications, and consumer support. Suitability, fair value and target market definitions are expected to stand up to data and real-world behaviour.
Alongside this, initiatives such as the Long-Term Asset Fund and targeted support under the Advice Guidance Boundary Review are expanding access. But they also increase conduct complexity, particularly where the line between guidance and advice is blurred.
In the EU, the Retail Investment Strategy and PRIIPs reforms focus heavily on value for money, conflicts, inducements and disclosures that are genuinely comprehensible. AIFMD II and related UCITS changes tighten expectations around liquidity management, reporting and substance, which directly affect how semi-liquid and private market products can be sold to less sophisticated investors.
Across both regimes, regulators are intervening earlier: design, pricing, distribution and monitoring, rather than post-sale remediation.
Retail capital flows through wrappers
Retail investors do not allocate to “private credit” or “public equities”. They top up a pension, open an ISA, follow a platform model portfolio, or respond to a nudge from their bank. Capital therefore flows through wrappers and distribution channels with each wrapper with its own risk profile and governance burden:
- UCITS, ETFs and model portfolios: scalable, but highly exposed to appropriateness, communications and fair value scrutiny.
- Structured and packaged products: can manage outcomes, but concentrate complexity, layering of costs and conflicts.
- Semi-liquid private markets (LTAFs, ELTIF 2.0): promise diversification but introduce valuation uncertainty, liquidity mismatch and gating risk.
- Tax-advantaged vehicles such as VCTs and EIS: inherently higher risk and therefore heavily dependent on disciplined marketing and genuine client understanding.
Two products investing in similar assets can generate completely different consumer outcomes purely because of structure and distribution. This is why product governance is imperative to “unlocking retail capital” through appropriate product architecture and governance challenge.
What compliance and risk teams should pay attention to
Retail harm doesn’t have to stem from one dramatic failure but can be the result of small, individually defensible compromises compounding over time.
Common patterns can look like:
- Offering periodic liquidity against fundamentally illiquid assets.
- Layering fees until expected returns are structurally impaired.
- Widening target markets to meet sales targets (caution on this with the new client categorisation proposals under CP25/36 [read full insights here])
- Simplifying communications to the point of misrepresentation.
- Designing “support” journeys that function like advice but are governed like marketing.
Regulators increasingly expect these risks to be addressed before launch, not after complaints data emerges.
An institutional operating model cannot simply be extended to retail.
Serving retail investors requires repeatable, industrialised controls:
- Segmentation based on risk capacity, not just appetite.
- Suitability and appropriateness processes that actually filter, not rubber-stamp.
- Communications tested for comprehension, not readability scores.
- Onboarding and KYC that works at volume.
- Vulnerability and complaints frameworks that hold up under stress.
- Credible liquidity monitoring and stress testing.
- Auditable data and decision-quality management information.
Technology helps, but only if the underlying controls are sound. Automation simply scales whatever weaknesses already exist.
What good product governance looks like now
For compliance and risk leaders, the role can be a strategic enabler to growth more so now than ever, by designing growth journeys that survive scrutiny. In an environment where growth targets are closely linked to job security and financial incentives, pressure to launch and distribute quickly can easily outpace risk discipline. Robust product governance provides the counterweight: it enables innovation to move at speed while embedding clear controls around conflicts, suitability and value, reducing the likelihood that short-term commercial decisions create long-term regulatory or reputational damage.
In practice, strong product governance does three things:
- First, it makes the product honest. Clear boundaries on who it is for, who it is not for, and how it behaves in stress. Liquidity, valuation risk and drawdowns are confronted early, not softened in marketing language.
- Second, it makes value measurable. Not just fee benchmarking, but evidence that expected net outcomes justify costs, consistent with Consumer Duty and EU value-for-money expectations.
- Third, it treats distribution as part of the product. Channels, nudges, targeted support tools and platform journeys are governed like product features, with testing, monitoring and segment-level outcomes analysis.
The more sophisticated firms are also changing incentives. Success metrics extend beyond AUM to include persistence, complaints, withdrawals, and evidence of consumer understanding.
The practical takeaway for compliance and risk leaders
If retail growth is on your firm’s agenda, product governance should be designed in at the start, not layered on later. This is particularly sensitive where there is both retail, high net worth and institutional business flows and it can be easy to conflate some target markets with others.
That means being present in product strategy, challenging liquidity assumptions, interrogating pricing models, stress-testing distribution plans and insisting on outcome data from day one.
Done well, governance becomes a commercial advantage with fewer mis-sales, fewer remediation programmes, more resilient flows, and greater regulator trust.
Retail capital will not return to markets because firms build more wrappers or louder campaigns. It will return when investors believe products are fair, understandable and behave as promised.
If there’s one lesson the last decade has taught the industry, it’s that retail trust is hard won and quickly lost. It comes from products that work in practice, and from governance processes that prevents harm in the first place rather than explaining them afterwards.
