The FCA has set out its proposals to give consumers more targeted support when making decisions about pensions and investments. It is an important move, and another welcome piece of outcome-focused regulation.
But what is targeted support?
It’s a proposed new way for firms to encourage positive pensions and investment behaviour by groups of customers. Pre-prepared advice, that sits between tailored advice to an individual and much more generalised information, will be targeted at different ‘segments’ - groups of people with common needs or issues. For example, encouraging people who don’t invest enough in their pension to do so.
As always with setting new rules, the detail matters.
At Amplified Global we have welcomed the FCA’s aims, while urging them to make sure support is not just made available but genuinely useful.
Let’s be honest. For years, financial disclosures have met the letter of the rules but failed to speak to real people. Too often, consumers have been left with documents that feel impenetrable, technically correct but of little help when trying to make a big decision. We’re fortunately now moving away from tick-box disclosure. But, without stronger expectations for clarity and understanding, targeted support could end up repeating the same mistakes.
That is why we are calling for support to be measured by how well consumers actually understand and act on it, not just whether it’s technically compliant.
There is a danger that by bringing together segments of people with common financial characteristics or needs into targeted advice segments, firms believe that one approach to communicating the advice will be understood by all. While their financial needs may converge, their abilities to engage with and understand often complex advice can vary hugely.
We are therefore supportive of the FCA’s effort to align this work with the Consumer Duty. We believe that firms should be required to evidence the steps they have taken to design, test, and refine their communications. They also need to show how they have tailored the advice, not to a single segment profile, but to the varying abilities of the consumers who make up the segment. Good support should reflect those differences.
For outcome-focused, less prescriptive regulation, strong oversight is essential too. Reporting requirements, outcome data, and case studies would help the FCA spot where targeted support is working and where it is falling short. While FCA will expect firms to report consumer duty and targeted support outcomes to their Board, we believe that data should be reported to FCA as standard.
Firms that do not generate good understanding and financial outcomes should face FCA scrutiny. At present too many are flying under the radar with only minimal efforts to ensure their customers genuinely understand the information they send them.
Consumer protection must sit at the core of all this. Vulnerable customers in particular need communications that are designed with them in mind and tested to ensure they can understand and act on them.
Guidance with practical examples of what good looks like would make a real difference too.
Our recommendations are simple:
The FCA’s proposals are a positive step forward. If the regulator and industry can move beyond tick-box compliance and towards true comprehension, targeted support could transform the way people engage with their pensions and investments. That is the outcome we should all be working towards.