The success of targeted support should be measured on its ability to complement, not cannibalise the advice market, experts have warned.
As the Financial Conduct Authority closes its consultation on targeted support (August 29), industry commentators said there were still concerns around some of the details.
Steven Cameron, pensions director at Aegon, said: “As the FCA’s targeted support consultation closes, we may be one step closer to reducing the highly persistent ‘advice gap’. But the success of targeted support mustn’t be judged by how widely it’s used but on whether it’s truly complementing, not cannibalising, the advice market.
“While targeted support could help many non-advised customers with key financial decisions, it will never replace the personalised recommendations of holistic advice. This is why alongside targeted support, every effort should be made to protect all sectors of the current advice market and grow the advised population further.”
Targeted support has been hailed by the FCA as a once-in-a-generation opportunity to help millions of people navigate their financial lives. The proposals would allow firms to offer a new form of support and suggestions to groups of consumers with common characteristics. These could include people currently drawing down on their pension unsustainably, not saving enough for retirement or who have excess cash sitting in a current account.
While the proposals have been welcomed by the advice industry as a step in the right direction, experts have said there are some remaining issues and barriers to successfully delivering it.
Cameron said there were still “significant” details outstanding, including the rules around the Privacy and Electronic Communications Regulations.
“Targeted Support will likely be a financial promotion, meaning we need relaxations or exemptions to maximise its reach,” he said.
Working together
Cameron called for the Financial Ombudsman Service to give the industry confidence that targeted support won’t be assessed against the same standards as full advice.
“The FCA could also offer firms more clarity on its expectations by setting out good and poor practice examples. These could cover areas such as how granular customer segments should be, different approaches to verifying customers fit in a particular segment, and when additional information offered by a customer may affect the process,” he elaborated.
Steven Levin, CEO of Quilter, agrees that success depends on alignment between the FOS and FCA.
“A critical enabler is the creation of a genuine safe harbour for firms delivering targeted support. Without clear and consistent alignment between the FCA and the Financial Ombudsman Service on how these journeys will be assessed, firms face the risk of hindsight regulation.”
Levin warned that this uncertainty could stifle innovation, limit access and deter firms from engaging fully.
“Safe harbour protection would give firms the confidence to innovate, make proportionate recommendations, and focus on good customer outcomes without fear of retrospective challenge. It is essential that the regulator sets out transparent assessment criteria so firms can operate with certainty from day one,” he added.
James Heal, director of public policy at St. James’s Place, said that with a few final adjustments, targeted support could give firms the confidence to innovate and consumers the confidence to act.
Heal said: “The FCA’s approach shows real progress. The challenge now is to make the framework work in practice – scalable for firms and trusted by consumers.
“As it stands, rules on how firms handle additional volunteered information risk making delivery impossible in person. A simple playback mechanism, where customers confirm they share the common characteristics the support is built on, would solve this and allow delivery across both digital and face-to-face channels.”
Heal said simplified advice must also form part of the picture.
“Today it sits too close to full advice to work at scale. A more distinct, proportionate regime could bridge the gap between targeted support and personalised advice, while opening up new pathways for future advisers.
“Ultimately, targeted support can only succeed within a wider ecosystem from financial education and guidance, through targeted support and simplified advice, to full personalised advice.”
Levin echoed the sentiment: “Targeted support cannot work in isolation. It should form part of a broader ecosystem that includes greater access to financial education and reforms to disclosure rules so they inform rather than intimidate.
He added: “The regulator should ensure that any measures are designed to encourage participation rather than create unnecessary barriers.”
Main image: eric-prouzet-7z5Fwk0U58E-unsplash
