New rules that will allow employers to direct workers towards financial products they think would be suitable for them could stall, experts warn.
As the Financial Conduct Authority (FCA) prepares to finalise its targeted support framework, industry groups have called for clearer rules.
The targeted support framework, which is set to allow authorised firms to provide “ready-made suggestions” to people, is intended to bridge the advice gap by giving individuals accessible guidance on complex financial choices.
Both the Association of British Insurers (ABI) and the Society of Pension Professionals (SPP) have welcomed the initiative. However, they have also raised concerns that regulatory uncertainty could limit its impact in supporting people to make better pension and investment decisions.
‘Major leap forward’
The ABI emphasised that targeted support will be “a major leap forward” in giving people the tools to make more informed decisions, but added that unclear rules could deter firms from offering the service at scale.
George Ritchie, long-term savings policy manager at the ABI, said: “We support the FCA’s continued exploration of the financial advice and guidance landscape and the regulator’s focus on supporting more people with complex financial decisions. While no single solution will entirely close the advice gap, targeted support is a major leap forward.
“But to ensure that targeted support becomes the mass-market intervention envisaged by the FCA, changes are needed to tackle remaining regulatory uncertainty around ongoing monitoring of outcomes, treatment of additional customer information, and customer segmentation. Clarity is key to give firms the necessary confidence to start offering this novel form of support to customers.”
Sharpening the rules
The ABI urged the FCA to keep targeted support as a one-off service rather than an ongoing advice relationship, clarify how firms can group customers into segments, and amend the language used in its rules to focus on putting people in a “better position” rather than promising a “better outcome”. It also supports allowing firms to signpost to annuity brokerages as part of ready-made suggestions, giving people access to a wider range of retirement income options.
The SPP also backs the initiative of targeted support, noting that it could improve alignment of savings decisions, reduce charges and build people’s financial confidence. However, its members warned that aspects of the FCA’s proposals could inadvertently restrict support and damage outcomes for consumers.
In its consultation response, the SPP argued that trustees often lack the resources to deliver targeted support directly, meaning partnerships with third parties will be essential. It also warned against excluding pension consolidation from targeted support journeys, pointing out that “consolidation may be an integral piece of any suggestion to achieve a better outcome” and that restrictions risk undermining wider policy objectives to promote ensure for money.
Potential to deter delivery
The SPP highlighted the role of the Financial Ombudsman Service and its jurisdiction, saying that the its members were concerned that the FOS had made decisions that seemed “arbitrary and unpredictable” in the past. “If these concerns are not addressed, it could result in firms deciding not to offer targeted support, when they otherwise would have,” its response said.
Both organisations also highlighted the need for clarity around data protection and direct marketing rules. The SPP in particular called for ICO and FCA guidance to make clear that targeted support communications should be treated as regulatory, not marketing, messages.
The FCA is expected to publish its final policy statement in December, with a further consultation on simplified advice due in the New Year.
Ritchie added: “As we build up to the final policy statement expected in December, we’ll continue to work closely with FCA, The Treasury, FOS, MAPS and consumer groups to help shape final rules.”
