The Financial Conduct Authority’s (FCA’s) consultation on ‘targeted support’ could offer valuable opportunities for the UK’s mutuals and friendly society sector, according to Broadstone.
Under the proposals, firms would be able to apply for permission to offer targeted support to groups of customers sharing common characteristics.
For example, those who are not saving enough for retirement, unsure how to access their pension savings or holding significant cash balances despite being able to invest.
While the FCA’s work has largely focused on banks, investment firms and insurers – who typically have access to extensive customer data – the proposals could also strengthen the offering of smaller mutuals and friendly societies.
Mutuals, which often combine savings, investment and with-profits products, could use targeted support to guide members toward long-term value.
For example, a well-managed with-profits fund can smooth investment returns and offer a compelling alternative to cash for members wary of short-term market volatility.
This could help to deliver potentially stronger long-term outcomes for cautious savers.
However, by their very nature, mutuals and friendly societies have a smaller range of products and funds, so it is less clear the extent to which they can benefit from these proposals.
Their customer groups are typically defined by location of an affinity group.
Rob Kerry, actuarial director at Broadstone, said: “The FCA’s targeted support proposals represent an important step in improving financial confidence and engagement among consumers who fall between guidance and full advice.
“Mutuals and Friendly Societies are uniquely placed to benefit from this evolution. Their member-focused model already promotes appropriate saving and investment behaviours, and targeted support could help them do even more to encourage the savings habit and improve long-term outcomes.”
Kerry added: “However, it’s vital that the final rules are proportionate and take account of the smaller scale and simpler product sets of Mutuals.
“The regulator must ensure that well-intentioned rules do not inadvertently restrict the clear, practical guidance these organisations already provide to their members.”
One of the key hurdles will be regulatory clarity. Despite joint guidance from the FCA and ICO last year confirming that reminders about unused ISA allowances or maturing fixed-term bonds may fall outside the scope of direct marketing, uncertainty remains over whether recommending a “ready-made solution” would trigger those rules.
This ambiguity risks stifling communication between mutuals and their members which is at odds with the FCA’s stated aim of increasing consumer engagement.
Clearer alignment between the FCA and ICO on what constitutes advice, guidance and marketing would empower mutuals to communicate confidently about savings options and encourage stronger member participation.
With the FCA expected to publish its policy statement by the end of this year, it is vital that in finalising the framework, the regulator recognises the unique operating models of smaller Mutuals and Friendly Societies.
Kerry added: “Rather than inadvertently restricting the helpful guidance these organisations already provide, the new regime should make it easier for them to encourage the savings habit and improve financial resilience among their members.
“If implemented proportionately, targeted support could become a powerful tool for the Mutual sector. It has the power to help more consumers make confident, informed decisions about their financial future while staying true to the mutual model of long-term member benefit.”
