Millions more to get financial advice as part of FCA red tape shake-up
More than 18m savers will benefit from more detailed advice on their investments and pension in the next decade as part of a radical shake-up of financial red tape that the City watchdog has hailed as “game-changing”.
The Financial Conduct Authority’s ‘targeted support programme’ will give financial services firms the ability to give tailored suggestions to customers in a bid to improve investment decision-making and boost investment in productive parts of the economy.
Under the new rules, consumers will be able to ask financial platforms or pension providers for advice that does not need to be based on a holistic assessment of their individual needs.
The shake-up, after which firms will still need to prove the advice they provide is suitable and likely to improve a customer’s financial position, could be introduced as soon as April. Providers like major investment platforms, pension funds or wealth management companies will be able to apply for a licence in March.
“Targeted support will be game changing,” said Sarah Pritchard, deputy chief executive of the FCA. “It means millions of people can get extra help to make better financial decisions.
“We also hope it will build greater confidence to invest. While investing will not be right for everyone, we know people in the UK invest less compared to the EU or US. People in the UK could be missing out on the potential benefits of investing in the medium to long term.”
FCA dials up response to growth push
According to the watchdog’s own data, roughly 7m Brits with more than £10,000 in cash savings have over 75 per cent of their nest eggs in cash. The UK’s comparatively low investment appetite has provoked fears savers’ investments are particularly vulnerable to the effects of inflation and are not being put to use investing in growth-enhancing companies and funds.
Currently, most financial services platforms are unable to give retail investors even broad steers on how to allocate their savings or where to put their pension unless it comes from a qualified financial adviser. But official financial advice can be prohibitively expensive or complicated to arrange, leaving many savers exposed to what the FCA has called the “advice gap”.
Jessica Reed, financial services and funds partner at law firm Farrer & Co said the overhaul should give firms “more leeway to provide product suggestions” safe from the risk they are “straying into financial advice for which they would have to take a full assessment of the customers’ financial position”.
“Consumers should also have more confidence to take decisions about their finances,” she told Morning Wire.
The overhaul is the latest in a string of pro-growth measures announced by the watchdog. It has already announced plans to loosen the way it polices the mutual sector and relax its rules on the way financial firms can communicate to customers in the last week.