Industry experts have welcomed the Financial Conduct Authority's (FCA) plans to allow firms to offer targeted support to help consumers with their pensions and investment decisions, with industry experts suggesting that the plans could be a "gamechanger" for many.

The FCA confirmed today (30 June) that it would be moving forward with its plans to allow firms to offer targeted support to consumers and provide suggestions to groups of consumers with common characteristics.

This news has been welcomed by those in the pensions industry, with Hargreaves Lansdown CEO, Dan Olley, suggesting that the changes will be "truly transformational in kick-starting a thriving retail investment culture in the UK over the coming years".

"We hear time and again how daunting those first steps into investing can be for many, and it is clear there are key life moments where too many people are caught in the advice gap, unable to afford financial advice, but needing more guidance than the rules allow," he continued.

"With the changes announced today, supporting people across the UK to begin their investing journey, and then being there for all the subsequent moments that matter, will be so much easier for the industry and much more effective for clients."

AJ Bell director of public policy, Tom Selby, also suggested that the proposals could be a "gamechanger" for consumers, arguing that whilst regulated advice remains the gold standard, this isn't an option for everyone.

Aviva CEO of insurance, wealth and retirement, Doug Brown, agreed, suggesting that the new rules have the potential to "transform" how the industry supports consumers with their pensions and investments, as well as potentially stimulating UK growth by enhancing consumer access to financial products, encouraging innovation, and reducing regulatory barriers for firms.

Brown also highlighted recent research as evidence of the need for these changes, with analysis from Aviva and Age UK revealing that less than half (48 per cent) of mid-retirees aged 65-75 who do not pay for financial advice are confident they are on track to make their pension savings last for life.

“It’s great to see the Financial Conduct Authority (FCA) and HMT working together with the Financial Ombudsman Service (FOS) to deliver these important reforms and we look forward to supporting them," he said.

Lloyds Banking Group CEO of insurance, pensions and investments, Chira Barua, also highlighted the FCA’s work to refine the advice rules as a "material stepping stone in building a more inclusive financial landscape in the UK", noting that more than 90 per cent of consumers in the UK today cannot access regulated advice and get the help they need.

This was echoed by Aegon pensions director, Steven Cameron, who said that, for many, targeted support could be a "valuable stepping stone" towards seeking full holistic advice at a later life-stage.

"Time will tell if targeted support delivers a ‘giant leap’, but it certainly has the potential to be far more than ‘one small step’ for the non-advised," he stated.

Cameron suggested that, with increases in auto-enrolment minimum contribution rates not expected anytime soon, targeted support could also play a key role in helping people understand what ‘adequacy’ means for people like them, potentially leading to voluntary increases in pension contributions.

However, Cameron acknowledged that there are still outstanding issues that will need to be addressed to make targeted support doesn’t fall at the last hurdle.

"Some aspects such as the rules on defining customer segments or monitoring improved outcomes for customer groups, are within the FCA’s full control," he explained, continuing:
"While consumers must have adequate protection, unnecessarily onerous regulations could limit supply and there’s detail to study here.

“We’re also pleased the FCA is looking to address barriers which sit outside its remit. It’s essential that the FOS doesn’t assess targeted support against the same standards as full advice.

"Furthermore, if the Privacy and Electronic Communications Regulations (PECR) class targeted support as direct marketing without any special provisions, the reach of targeted support, particularly for auto-enrolees, will be much restricted.

“We look forward to responding to this latest consultation and welcome the FCA’s ambition to open the authorisation gateway for firms from next March.”

Selby also warned that when it comes to reforming simplified advice, the big challenge will be creating a regime that genuinely allows advisers to provide a stripped-back service to clients at a lower cost.

"Part of the success of both targeted support and simplified advice will come down to the regulatory requirements, but part of this will also rest on the approach the FOS takes," he stated.

"If both organisations are flexible and pragmatic, with a clear focus on delivering good outcomes for investors, these reforms should be a genuine game-changer," he stated.

And broader changes may also be needed, as Just Group group communications director, Stephen Lowe, argued that Pension Wise deployment also needs to change.

"It’s a brilliant service that’s wasted by being signposted much too late in savers’ lives," he stated.

"There remains a big opportunity to bring people to Pension Wise as the initial step, with contact with targeted support or advice coming later.”

---