Banks Gain Authority to Suggest Enhanced Earnings Strategies for Depositors - However, Such Suggestions Should Not Be Regarded as Professional Financial Guidance
The Financial Conduct Authority (FCA) has announced a new regime called "targeted support" that will enable banks and investment companies to provide more accessible and affordable assistance to savers with their pensions and investments. This move aims to help consumers who may not be able to afford full financial advice by enabling firms to make non-personalized, group-based suggestions appropriate to consumers with similar characteristics or circumstances[1][3][5].
### Key features of the targeted support regime:
Under this new regime, firms can offer generic suggestions to groups of consumers based on shared traits, rather than personalized advice tailored to an individual’s full financial situation. Unlike regulated financial advice, targeted support avoids the need for a detailed and costly suitability assessment[3][5].
This initiative is part of a broader effort within the government’s workplace pension roadmap and aims to give savers greater confidence to invest and make informed decisions while bridging the gap for those underserved by traditional financial advice[1][3][5].
### How targeted support differs from regulated financial advice:
| Aspect | Targeted Support | Regulated Financial Advice | |-----------------------------|------------------------------------------------------------|------------------------------------------------------------| | **Personalization** | Generic suggestions to groups of consumers with similar characteristics | Personalized advice based on detailed individual assessment | | **Suitability assessment** | Not required | Mandatory before recommendations can be made | | **Cost and accessibility** | More affordable and accessible, intended for those who cannot pay for full advice | Often costly and may be less accessible | | **Regulatory boundary** | New statutory rules are being introduced to clearly define and enable targeted support | Covered under existing Financial Services and Markets Act regulations and FCA rules |
The FCA found that 7 million people hold more than £10,000 in cash which could be making better returns[7]. Among 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[8]. Targeted support will not replace regulated financial advice but aims to help millions of savers who do not, or cannot afford, to receive financial advice[1][3][5].
Steven Levin, chief executive of investment platform Quilter, stated that targeted support could become a vital stepping stone on the path to comprehensive financial planning[2]. Firms such as Hargreaves Lansdown and Vanguard are preparing to offer such services[3]. Sarah Pritchard, deputy chief executive of the FCA, stated that these reforms will help people navigate their financial lives and give them greater confidence to invest[6].
To participate in targeted support, firms must obtain a 'Part 4A' permission from the FCA[4]. The suggestions will be based on what other customers with similar circumstances are doing with their money[3]. These suggestions will not be personal recommendations, but rather behavioral nudges[1].
This regime is a win-win for consumers and firms alike, as it allows firms to offer more assistance to their customers while keeping the regulatory burden to a minimum[1][3][5].
[1] Financial Times (2021). Firms to offer targeted support to savers. [Online]. Available: https://www.ft.com/content/e3c95e2c-030b-4e98-9b2e-d5504e34f85c [2] Citywire (2021). Quilter boss Levin: Targeted support could be a stepping stone to financial planning. [Online]. Available: https://www.citywire.co.uk/news-and-comment/news/industry-news/a3548204/quilter-boss-levin-targeted-support-could-be-a-stepping-stone-to-financial-planning [3] The Telegraph (2021). Firms prepare to offer targeted support to savers. [Online]. Available: https://www.telegraph.co.uk/money/consumer-affairs/firms-prepare-offer-targeted-support-savers/ [4] Financial Times (2021). Firms to offer targeted support to savers. [Online]. Available: https://www.ft.com/content/e3c95e2c-030b-4e98-9b2e-d5504e34f85c [5] The Guardian (2021). FCA to allow firms to offer targeted support to savers. [Online]. Available: https://www.theguardian.com/money/2021/apr/27/fca-to-allow-firms-to-offer-targeted-support-to-savers [6] The Times (2021). FCA to allow firms to offer targeted support to savers. [Online]. Available: https://www.thetimes.co.uk/article/fca-to-allow-firms-to-offer-targeted-support-to-savers-2lq7gwjn2 [7] FCA (2021). FCA launches new rules to allow targeted support. [Online]. Available: https://www.fca.org.uk/news/press-releases/fca-launches-new-rules-allow-targeted-support [8] FCA (2021). FCA finds 24% of savers with over £10,000 in cash don't invest because they don't know enough. [Online]. Available: https://www.fca.org.uk/news/press-releases/fca-finds-24-of-savers-with-over-10000-in-cash-dont-invest-because-they-dont-know-enough
- The new targeted support regime from the Financial Conduct Authority (FCA) allows investment companies and banks to offer group-based, generic financial suggestions to those saving for pensions and investments.
- This initiative aims to help consumers make informed decisions about their savings and investing by providing more accessible and affordable assistance, especially for those who can't afford full financial advice.
- Unlike personalized financial advice, targeted support does not require a detailed and costly suitability assessment, making it more accessible and affordable for a larger number of consumers.
- This move is part of a broader effort in personal-finance, aiming to increase confidence and bridge the gap for underserved consumers in the realm of finance and investments.
