The ABI calls on the Financial Conduct Authority (FCA) to provide clarity on incoming targeted support rules to ensure firms can successfully provide the service to customers.
Targeted support will be a pivotal development in helping customers to make better financial decisions when navigating complex pension and investment choices. Under the new rules, authorised financial services companies will be allowed to share “ready-made suggestions” with customers to help them manage their money.
We support the FCA's decision to give firms the freedom and flexibility to roll out targeted support across a range of products and scenarios, backed by a clear process for redress if they fail to meet appropriate standards.
But for maximum impact, firms need clarity on the regulator’s expectations on how targeted support will be offered, and requirements must be proportionate so it can reach a large audience.
To allow for this, we call on the regulator to:
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Keep targeted support as a one-off service: Current proposals to monitor customer outcomes of targeted support could inadvertently turn it into an ongoing advice relationship, which goes against the intended “point-in-time" nature of targeted support.
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Ensure firms feel confident to offer the service: Firms need the rules to be clear and consistent, so they are confident to provide targeted support to their customers. The FCA should use the phrase “better position” rather than “better outcome” in targeted support rules to describe its goal, be consistent with language across its rules and draft legislation, and remove rules around treatment of additional customer information which increases cost and uncertainty for firms.
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Clarify how firms can group customers: Guidance on how customers should be divided into groups (or "segments") isn’t clear enough. FCA fears about ‘overly individualised’ segments may stop firms from using more customer data even when doing so would lead to better outcomes. The industry is keen to work together with regulators and government to develop case studies that could be published as non-Handbook guidance in conjunction with final rules.
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Allow signposting to annuity brokerages within ready-made suggestions: By including annuity brokerages and bureaus in target support suggestions, customers will be able to access more options to get the best annuity rate for their needs.
Clear communication and data sharing will also be important for targeted support to work. The Information Commissioner’s Office (ICO) guidance on direct marketing, and the Privacy and Electronic Communications Regulations, will need to be updated. These changes should make it clear that sending ready-made suggestions or approaching consumers with a view to delivering targeted support through electronic messages (like emails or messages inside an app) shouldn’t be treated as direct marketing.
We emphasised the need for clearer rules and guidance to support firms in our response to the FCA’s targeted support consultation paper. The regulator is expected to launch a full consultation on simplified advice in the New Year, as it continues its goal of finding more ways to help consumers access regulated advice through accessible and affordable channels.
George Ritchie, Long-Term Savings Policy Manager at the ABI commented: “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.
“As we build up to the final policy statement expected in December, we’ll continue to work closely with FCA, HMT, FOS, MaPS and consumer groups to help shape final rules.”