The Financial Conduct Authority has unveiled ‘once-in-a-generation’ advice changes to support millions of people in navigating their financial lives.
Under proposals announced by the watchdog on Monday, firms would be allowed to offer ‘targeted support’ and make suggestions to groups of consumers with common characteristics in a bid to close the advice gap.
These could include people who may be currently drawing down on their pension unsustainably, not saving enough for retirement or who have excess cash sitting in a current account.
Sarah Pritchard, deputy chief executive of the FCA, said: “We want to help consumers navigate their financial lives and plan for the long term. Some of the most difficult financial decisions we face are how to save, invest and prepare for a comfortable retirement.
“These once-in-a-generation reforms will help people navigate their financial lives and give them greater confidence to invest. This is a win-win for consumers and firms alike.”
The regulator said the reforms should set the framework for the next 20-30 years to support consumers now as well as future generations.
Alongside the proposals for targeted support, the FCA has set out plans to reform the framework for simplified advice.
It said consumer access to a choice of guidance, targeted support, simplified advice and full-financial advice should help reduce the advice gap. According to the FCA’s latest Financial Lives Survey, just 9% of adults received financial advice about their pensions or investments in the previous 12 months.
Of those who did not receive financial advice, but hold £10,000 or more in cash savings, a quarter (24%) said they don’t invest because they don’t know enough about it, 12% because they feel overwhelmed by the number of options available and 8% said they would need more support before they invest.
It is estimated that there are about seven million adults in the UK with £10,000 or more in cash savings who may be missing out on the benefits of investing throughout their lives.
The FCA said it has run its first six-week policy sprint, where firms designed consumer journeys to help design the rules in the consultation, with support from consumer representatives and other members of the regulatory family. Consumer testing has also been completed. The aim was to help accelerate the period for consultation, which is now open for eight weeks.
The reforms were widely welcomed by the industry.
Dean Proctor, CEO of 7IM, said: “Today’s proposals represent a major step forward, both for our sector but more importantly for consumers, where we know too few benefit from professional financial advice and the impact this can have on their financial health.
“Any initiatives that drive greater understanding and more informed decision making must be welcomed, especially where the focus is on better outcomes for consumers. We know the rewards that investing can bring to people’s finances and the more who can benefit from this the better.”
Steven Cameron, pensions director at Aegon, said: “Time will tell if targeted support delivers a ‘giant leap’, but it certainly has the potential to be far more than ‘one small step’ for the non-advised.
“Targeted support will never offer the personalised recommendations of holistic advice, and every effort should be made to grow the advised population including further consideration around simplified advice. But alongside this, targeted support has a pivotal role to play in offering a more personalised form of guidance for those who can’t or won’t seek financial advice. For many, it could be a valuable stepping stone towards seeking full holistic advice at a later life-stage.”
Stephen Lowe, group communications director at Just Group, shared a similar sentiment.
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