FCA and Government support for ‘people like you’ is welcome – and more can be done to close the advice gap
- The FCA and the Government have published a policy paper considering how to help people access support with financial decisions, and are calling for views by 28 February.
- The FCA hopes to:
- Clarify when firms can support people without giving them regulated financial advice.
- Explore approaches allowing firms to support tailored groups of people in similar circumstances (people like you).
- Identify a new form of advice, offering affordable personal recommendations to people with straightforward needs and less to invest.
The policy paper is available here: DP23/5: Advice Guidance Boundary Review – proposals for closing the advice gap | FCA
Richard Caldicott, Financial Advice and Guidance Director, Hargreaves Lansdown:
“Hargreaves Lansdown has long campaigned to close the advice gap with better personalised guidance. Too many people are left out in the cold with a bewildering array of options, when we could narrow down options based on their needs. The proposals around ‘people like you’ communications will definitely help with this.
We now need to pick up the pace to make these reforms a reality. Crucially space needs to be left for innovation and responding to consumer concerns. As more information comes on stream from the Pensions Dashboard and Open Finance, people will look to financial services firms to help them make choices with their finances.
Opportunities to nudge people to become more engaged with their money will make a real difference. As will clearer guidance as people start out on their investing journey. Driving better outcomes for savers and investors is at the heart of these reforms.
There remains a strong role for full financial advice and we will examine the proposals on simplified advice to see if they would assist a wider group of consumers.
It’s a positive sign that Tulip Siddiq, shadow City Minister, has been supportive of a regime for regulated personalised guidance. Cross-party support is incredibly important, so that any potential change in the political landscape in the coming years is less likely to send this reform off course.”
FCA research findings
- 8% of people took financial advice in 2022.
- 37% of those with over £250,000 to invest had advice in the previous 12 months, compared to just 17% of those with at least £10,000 and 2% of those with less than £10,000.
- In the 12 months to May 2022, 24% of people had used information or guidance to help make financial decisions.
- In 2022, 14% of adults had low financial capability.
Examples of what might be allowed under ‘targeted support’
Firms could describe the options to people accessing their pensions for the first time, and after asking a few questions they may be able to identify a product designed for the needs of their target market – or ‘people like you’.
If someone has a large cash balance in their bank account, they could warn them that inflation could erode its spending power, describe the value of investing, and suggest products based on an understanding of their target market – or ‘people like you’.
Examples of what might be allowed under ‘simplified advice’
Simplified advice might be given to someone wanting to invest a one-off lump sum. They could have a suitability assessment and a personal recommendation – without considering their broader financial position.
It could also be given to someone who wants a review of their investments because their attitude to risk has changed.
