In 2023, the regulator set out plans for reforming the framework for advice, designed to tackle the advice gap - including clarification of the advice boundary, a new regulatory framework entitled "targeted support" and a "simplified advice" regime. The regulator said targeted support would help make suggestions to groups of consumers with common characteristics - such as those not saving enough for retirement.
It said in November 2024 that early feedback on the concept of targeted support included concerns about creating a new regulated form of consumer help, such as whether it was viable to introduce a new regulatory offering and whether consumers would have confidence in it. The update also noted that:
"There was interest shown towards the proposal for the FCA to further clarify the boundary between regulated financial advice and unregulated guidance but recognition that on its own it is unlikely to resolve the support gap. However, some respondents indicated that they would welcome more examples of support they can give without undertaking financial advice."
While firms will not have to offer targeted support, the regulator suggested that it could help firms meet their cross-cutting obligations under Consumer Duty rules. In practice, targeted support would mean that firms would be able to offer suggestions to groups of clients, though the suggestions could not be tailored to them individually, and firms were warned that some segments of consumers would not be eligible.
The rules would only apply to investments and pensions with support relating to other products - including mortgages and protection - being beyond the scope of the proposals.
Firms are now invited to have their say on the updated guidance via an eight week consultation, which is open now, and those wishing to offer targeted advice - which the regulator suggested would likely only be directly authorised firms - will need to apply for a Part 4A permission from next year in order to do so.
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.”
Chira Barua, CEO of Scottish Widows and CEO of insurance, pensions & investments at Lloyds Banking Group, said: “More than 90% of consumers in the UK today cannot access regulated advice and get the help they need to make informed decisions about their futures. As the UK's biggest digital bank and the only integrated bank and insurer, Lloyds is passionate about helping our 28m customers bridge the advice gap. The FCA’s work to refine the advice rules is a material stepping stone in building a more inclusive financial landscape in the UK.”
Mike Barrett, consulting director at the lang cat said:
"We welcome today's proposals that will undoubtedly help more consumers navigate the world of pensions and investments and make better informed decisions about their money. [...] While there are certainly capacity issues amongst financial planning firms in the UK, support for consumers can come via different channels. If these latest proposals mean more people benefit from better outcomes as a result of cost-effective help that positively impacts their financial futures, then this can only be good news."
James Carter, head of platform policy, Fidelity International comments: "We welcome efforts by the FCA and government to close the advice gap and are very excited by the opportunity the proposed targeted support regime offers. This will allow flexibility for providers to engage customers at relevant points in their journey, offer suggested courses of action and support both better decision making and avoiding of a wide range of harmful actions and inactions. Today's publication is an important further step to bringing this much needed support to consumers."
Yvonne Braun, ABI Director of Long-Term Savings Policy, said: “We know facing complex financial decisions can feel overwhelming, especially in retirement, which is why we’ve long championed targeted support. The FCA’s decision to press ahead with this crucial proposal is very welcome and should be a relief to millions of savers."
“We expect targeted support to be free and widely available. To ensure its success, it should be backed by a clear process for fair compensation if things go wrong. Giving firms the freedom and flexibility to roll out targeted support across a range of products and scenarios will make sure everyone can benefit. We also welcome the drive for simplified advice. While no single solution will entirely close the advice gap, this package is a major leap forward.”
Catherine Foot, director at the Standard Life Centre for the Future of Retirement, comments:
“With the consultation published today, targeted support has moved another step closer to becoming a reality. We’ve spent the last few months in discussion with people approaching retirement to gauge if and how the concept of targeted support appeals to them, and to understand the customer needs it could address.
“A recurring theme of the conversations is the need to address the anxiety and the feeling of being overwhelmed many have when it comes accessing their pensions. With regulator aiming to have the final policy statement published in December, now is the time for the industry to help shape a service that supports people with some of the most challenging and significant financial decisions they will ever make."
Nick Eatock, CEO of intelliflo comments:
“Any effort to removing barriers to advice and creating more inclusive advisory services is a step in the right direction toward empowering consumers to make more informed financial decisions and secure a better future.
“Our own research consistently shows that the advice gap persists – particularly for women and younger generations – and we welcome the regulator’s efforts to address this.
“That’s why we’ve made it our mission to support financial advisers with technology solutions that we believe can increase efficiency and, over time, help reduce the cost of delivering financial advice. If those savings are passed on to consumers, we can help narrow the advice gap even further.
“As advice firms are consulted in the coming period, we’ll work closely with our customers to support them throughout this process.”
