FCA To Allow Targeted Support by Steering Consumers to Products Next Year

In recent estimates for the UK,

• Only 9% of consumers take regular financial advice.
• 7 million adults with savings on £10,000 or more do not take financial advice.
• 58% of UK adults do not have a Will.
• 21% of adults have less than £1,000 saved – that’s a staggering 1 in 5.
• 33% of adults have less than £10,000 in a pension pot – that’s a third of the population.

A third of the population has less than £10,000 saved for retirement!  Yes, that’s right, a financial bomb is waiting to blow up in the UK.  The picture is just a bad in the USA with 56% of adults not even having $1,000 saved.

Source:  AI search.

The Advice Gap

For years, many politicians and financial services professionals have been trying to find a solution to the advice gap, to encourage more people to be active with financial decisions and to seek advice and guidance where needed.  The problem has always been costs.  Financial advice is not cheap given the lifetime liability that financial advisers have, so many people cannot afford it.

The Solution to the Advice Gap

We have long said that education is key and financial planning should be part of the curriculum.  We have even offered successive governments our help to organise our content and videos into a learning facility fit for the curriculum.

The other building block is ‘signposting’ consumers to what they need without incurring an advice liability.  We raised this with the FCA some 10 years ago and have been working on a ‘robo/Ai’ solution since then.

Targeted Support Launch

The FCA confirmed in the summer that a new Targeted Support option would be permitted with draft rules published.

Today, the FCA has widened its stance to allow annuities to be included within Targeted Support.

What is Targeted Support?

Financial firms will be allowed to ‘signpost’ you towards products and services, provided it is done generically and allow firms to make suggestions to groups of consumers with common characteristics based on “reasonable assumptions”.

A phrase you will likely see more often is “people like you might benefit” from X,Y or Z.

This does not mean advice, it is targeted support and regulated firms will be required to:

• Disclose any fees or commissions or incentives received for ‘signposting’ you.
• Firms must ensure no bias.
• Firms must ensure a level of understanding by the consumer in addition to making sure consumers understand that the Targeted Support is guidance for particular types of people rather than tailored to the individual.
• Targeted support can only be for pensions and investments and now annuities.
• Insurance and mortgages are currently not within the Targeted Support remit (perhaps the FCA believes the consumer has enough understanding and there is less risk of financial mistakes in these areas).

Comment

At last, we can finally push on to launch our own Ai/Robo Adviser (sorry Targeted Support) next year.

We are surprised that insurance has not been included.  How many young families have no life insurance that could provide valuable family financial protection from as little as £5pm or be directed to make a simple will to appoint guardians for their children with a simple will?