“Once-in-a-generation” proposals to help more people navigate tricky financial decisions and boost confidence when getting to grips with investments and pensions have been set out by the City regulator.
The proposals would enable firms to offer a new type of help called “targeted support” and make suggestions to groups of consumers with common characteristics.
The Financial Conduct Authority (FCA) is aiming to reduce the “advice gap” – so that people have timely access to the help they need, at a cost they can afford, to make informed decisions about their financial lives.
The FCA said 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, could potentially be helped.
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.”
The reforms should set the framework for the next 20 to 30 years, the regulator said.
The FCA said that as well as targeted support, it wants to see a thriving and trusted market for full financial advice, simplified advice and guidance.
It said the advice gap is “stark”. 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 2024.
Of those who did not receive financial advice, but hold £10,000 or more in cash savings, 24% said they do not invest because they do not 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.
The FCA said there are around seven million adults in the UK with £10,000 or more in cash savings who may be missing out on the benefits of investing throughout their lives.
Its consultation is open for eight weeks.
The regulator said it is also working with the Government to help resolve issues that might prevent firms communicating with consumers.
Dan Olley, chief executive at Hargreaves Lansdown, said the changes “will be truly transformational in kick-starting a thriving retail investment culture in the UK over the coming years”.
He continued: “For the first time, we will be able to provide targeted support that is much more relevant for each of our clients.
“We will be able to tailor conversations and the digital experience to where they are in their investing journey, helping them see the potential of certain choices, which could have large positive impacts on their financial outcomes over the long term.”
Tom Selby, director of public policy at AJ Bell, said: “Ensuring people can access the help and support they need, either through regulated advice or guidance, is critical to building financial resilience in the UK. The existing regulatory framework makes it difficult for firms to offer anything beyond relatively basic information to non-advised customers without risking straying over the boundary from guidance to advice.
“This means millions of people who don’t take regulated advice are essentially left to make often complex retirement decisions on an island, without receiving the help they require.”
Claire Exley, head of financial advice and guidance at JP Morgan-owned wealth manager, Nutmeg said: “Targeted support is a much needed and welcomed first step in closing the advice gap.
“We know clients are looking for guidance that is relevant to them, their situation at the time it’s right for them. ‘People like you’ scenarios will hopefully help consumers to build confidence in their own decision making – we’re aware that often people are looking for reassurance that they’ve arrived at the ‘right’ decision – rather than being told what the decision should be.”
James Heal, director of public policy at St James’s Place, said: “We are moving closer to a new form of support that will help consumers make better investment decisions.”
Yvonne Braun, director of long-term savings policy at the Association of British Insurers (ABI) said: “We know facing complex financial decisions can feel overwhelming, especially in retirement, which is why we’ve long championed targeted support. The FCA’s decision to press ahead with this crucial proposal is very welcome and should be a relief to millions of savers.
“We expect targeted support to be free and widely available. To ensure its success, it should be backed by a clear process for fair compensation if things go wrong. Giving firms the freedom and flexibility to roll out targeted support across a range of products and scenarios will make sure everyone can benefit. We also welcome the drive for simplified advice. While no single solution will entirely close the advice gap, this package is a major leap forward.”
Chancellor Rachel Reeves said: “Too many people are missing out on the support they need build a more secure financial future for themselves and their families.
“Today’s reforms will make a real difference to help working people make better long-term financial decisions, ultimately putting more money in their pockets as part of our plan for change.”
