PIMFA has responded to the Financial Conduct Authority’s (FCA’s) consultation on Targeted Support, saying the proposals could help close the support gap in the UK, but more clarity is needed for both consumers and firms.
Simon Harrington, head of public affairs at PIMFA, said: “Targeted support has the potential to be one of the most important reforms in a generation.
“There is a clear support gap which currently exists in the UK with 25 million people never having received professional advice or guidance.
“Targeted support can go some way to bridging that gap. Whilst we believe that this gap manifests itself across retail investment and pensions, because of the nature in which consumers tend to engage with their personal finances, we still believe that it will be most impactful for consumers making retirement decisions.”
Harrington added: “We strongly support the FCA’s ambition to close the UK’s support gap, but to make this work for consumers and firms alike, we think these proposals would benefit from more clarity in a few key areas – specifically around data collection, and the way in which suggestions are communicated to consumers.
“The distinction between targeted support and regulated advice must be made crystal clear – consumers should understand that suggestions are options, not instructions.
“Ultimately, targeted support should be used to help consumers understand what they could do in certain situations, rather than tell them what they should.”
He said: “Where consumers do want more assertive direction, we believe that simplified advice remains an option the FCA should consider.
“Provided that it is accompanied with clear rules, focuses on servicing specific transactions and, crucially, is accompanied with a review of the qualification requirements, simplified advice can play a role in helping firms provide much needed certainty to consumers with clear needs at a cost which is affordable to them and to the firm.”
PIMFA raised several points in its response.
It said firms would face challenges with consumer segmentation and data collection, and called on the FCA to give guidance on what data to collect and how to segment consumers, but not to make this prescriptive.
PIMFA supported the FCA’s focus on “better outcomes” but wanted clearer rules to show that targeted support should only be used if it is likely to give a better outcome than doing nothing.
The trade body agreed with limiting targeted support to pensions and ISAs, and opposed including general investment accounts or high-risk products, saying that could undermine the policy.
PIMFA also supported excluding specific annuity sales from targeted support but said the proposed two-week delay between suggestion and purchase would be unhelpful and might confuse or put off consumers.
For consumer protections, PIMFA called for more transparency, asking firms to disclose the assumptions behind segmentation and suggestions.
It also asked for joint FCA and Financial Ombudsman Service guidance and case studies to avoid disputes about whether advice has been given, and supported FSCS protection for targeted support.
On appointed representatives, PIMFA said the FCA should let ARs in consumer investment and retirement markets deliver targeted support if they have proper controls, rather than banning them outright.
PIMFA also supported making targeted support free at the point of use, with no extra record-keeping, and a robust but not rushed authorisation process.
Additionally, it warned that a free model might create commercial incentives and could favour vertically integrated firms.
Harrington said: “The FCA deserves credit for its collaborative approach and ambition.
“These proposals represent a major step forward in giving people the tools they need to make better choices and should have a positive impact in helping non-advised consumers make complex investment decisions.
“With some adjustments, the targeted support regime, combined with simplified advice and holistic financial planning, can create a continuum of support that helps consumers at every stage of their financial lives.”
