Millions more people could get help navigating their financial lives with support on pensions and investments, under proposals announced today by the Financial Conduct Authority (FCA).
The FCA’s proposals would allow firms to offer a new type of help called ‘targeted support’ and make suggestions to groups of consumers with common characteristics.
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.
The changes, which have inbuilt protections for consumers, also support growth by enabling increased investment and innovation.
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.”
These reforms should set the framework for the next 20 to 30 years, to support consumers now as well as future generations.
The FCA said it wants to see a thriving and trusted market for full financial advice, simplified advice, targeted support and guidance.
Alongside today’s proposals for targeted support, the FCA has set out plans to reform the framework for simplified advice.
Consumer access to a choice of guidance, targeted support, simplified advice and full financial advice should help reduce the so-called “advice gap”.
This supports the authority’s ambition that consumers should have access to the help and guidance that they need, at a cost they can afford, when they need it, to make informed decisions about their financial lives.
Just 9% of adults received financial advice about their pensions or investments in the previous 12 months, according to the FCA’s latest Financial Lives survey (FLS 2024).
Of those who did not receive financial advice, but hold £10,000 or more in cash savings, 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.
To combat this, the FCA ran its very first 6 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.
Detailed consumer testing has also been completed, published alongside the consultation.
The aim of this detailed sprint, and consumer testing, has been to help then accelerate the period for consultation, which is now open for eight weeks.
The FCA is also working with the Government to help resolve issues that might prevent firms communicating with consumers, with issues having been identified early through the policy sprint.
These reforms are among almost 50 initiatives the FCA set out in a letter to the Prime Minister in January 2025, which the FCA is delivering against this year.
Reaction:
Ian McKenna, founder of Financial Technology Research Centre and AdviserSoftware.com:
“The FCA’s work on creating wider ways for consumers to benefit from financial advice is potentially welcome, however, to be properly seen in context it is crucial to recognise why previous attempts to do the same have failed.
“Over the last 38 years a regulated financial advice environment has undoubtedly made it cheaper and safer for the wealthiest in society to get financial advice which they can easily afford.
“The report acknowledges that at best this amounts for about 9% or the population so the majority of consumers have been badly let down by the regulatory process.
“This is not the fault of advisers. Successive regulators have applied higher and higher standards of knowledge and professionalism.
“Advisers and highly qualified people deserve to be well paid. Unfortunately, this has driven financial advice beyond the affordability of most consumers and arguably those that would benefit from it most.
“This initiative can only work if it is accompanied by a substantial revision to the remit of the financial ombudsman service.
“Therefore, the recent announcement of a review of FOS is crucial. There have been many attempts by the FCA and their predecessors to provide simpler advice services but historically these have always failed because FOS refused to cooperate. In this contact the service has almost certainly done far more to consumers than it has ever delivered benefit.
“Hopefully a more practical and realistic mandate can be provided to the Ombudsman that works well for consumers.
“This is particularly relevant in the context of technology-driven services as – while inevitably humans make mistakes – it is possible to estimate the level of such errors. Frequently, advice firms factor human errors into their advice, accounting for 4% for the advice given.
“With a digital solution there is a risk that if one solution is deemed wrong, you could risk a 100% error rate. Nothing is ever perfect so hopefully the new regime will recognise the importance not letting the desire for a perfect result getting the way of delivering good outcomes”.
Simon Harrington, head of public affairs at PIMFA, said:
“The FCA and Government deserve enormous credit for the proposals they have put forward, which we believe can be transformational to the way in which UK consumers interact and engage with their finances, and pension savings in particular.
“We want to ensure that all consumers across the spectrum are able to make better investment decisions throughout all stages of their lives. The introduction of targeted support will, in our view, be fundamental to ensuring that consumers have access to high quality support at the stages in their lives when they need it most.
“Although we strongly believe that regulated financial advice and planning is what delivers the very best outcomes for consumers, we also recognise that nearly 25 million people in the UK have never received any form of financial advice or guidance. This needs to change, and the proposals outlined today will help bring about that change.
“Whilst we are enthusiastic about the FCA’s proposals, targeted support should not be seen as a silver bullet in delivering better engagement and better outcomes. Financial services – and pensions in particular – have long struggled with overcoming consumer inertia. These proposals, welcome as they are, will help support consumers when they are ready to engage – but should not be seen as a tool to deliver engagement in and of itself.
“Furthermore, whilst these proposals will be able to deliver a personalised recommendation, a critical point to note is that this recommendation will be based on what would be appropriate for consumers with similar characteristics. Going forward, it is vital that consumers understand the nature of the service they are receiving and that ultimately, the responsibility of the decisions they take will sit with them and them alone – a key differentiator from financial advice.
“The spectrum of support available to consumers by the end of this year will be stronger than it has ever been, with access to guidance, financial education, targeted support, simplified advice, and holistic financial planning. Not all options will be right for all people, but it is vital that consumers are able to move between these forms of support when and if needed to give them the support that they need when they need it most.”
Tom Kimche, head of advice at Netwealth:
“These proposals are a timely and necessary response to the persistent advice gap in the UK. Too many people still struggle to access clear, affordable guidance around critical financial decisions – from retirement planning to investing excess savings.
“Introducing more flexible models like targeted and simplified advice could help empower individuals to take action with greater confidence. This is especially important in an industry where fees are often opaque and disproportionately high for the level of support provided.
“As we approach the two-year anniversary of the Consumer Duty, this feels like the next step in driving better outcomes, ensuring more people can access the help they need, when they need it, and at a cost that’s fair.”
James Carter, head of platform policy at Fidelity International:
“Recent research from Fidelity revealed how UK investors are seeking financial information today – with many turning to internet searches, financial influencers – ‘finfluencers’ – and AI tools like ChatGPT for investment advice.
“According to the study, two-fifths (40%) of UK investors have used social media to inform their financial decisions over the past two years and one in eight have used top results from internet searches (11%) and finfluencers (12%).
“In the absence of advice, people are turning to other channels, some reliable, but many unregulated and unverified. From influencers to AI and social media, the risk of relying on non-authorised sources is real and could result in poor financial decisions.
“I’m beginning to hear more and stories of people using ChatGPT to make conclusive decisions about their financial futures.
“That’s why 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.
“We believe support should reach those who need it most, even when current marketing rules make that difficult. We welcome the FCA’s commitment to engage with other Government agencies to ensure targeted support can reach those most needing it.”
