A thriving financial services industry relies on being able to provide consumers with choice. And it is vital that consumers are able or feel confident enough to exercise this choice.
Across various retail markets this has not been the case, and it is for this reason that we have been vocal supporters of the Advice Guidance Boundary Review, which has been progressing over the course of the past year.
We have, of course, been here before. This is not the first time the UK’s advice gap has been addressed, but there is a very real feeling across industry that this time could be different.
The outcome of this review should not be that ‘the advice gap’ as traditionally understood is closed – by that I mean it is unrealistic to expect everyone to receive financial advice.
Instead, we should focus on ensuring that people have access to the right type of support at key points across their financial journey when they need it most.
In this respect, I have always found it more useful to consider the ‘advice gap’ as more of a ‘support gap’.
Were I to be critical of the proposals put forward in the discussion paper, it does appear – to me at least – that ‘support’ is viewed primarily through the lens of supporting people to transact, as if the UK’s advice gap is seen primarily as the absence of support to get UK consumers to buy better products.
Good advice often does not result in the purchase of a product at all; it is about reassurance and creating the confidence to navigate complexity.
This should also be the case for targeted support – one of the proposed regulatory interventions of the paper.
We see two models of targeted support outlined within the paper: one that allows firms to proactively intervene when consumers are making decisions with the provision of targeted, personal information; the other resembles more of a guided process, which ends with the consumer making a decision about the purchase of a new product.
The first model builds on what we think the Financial Conduct Authority would like firms to do within the current regime. It is common sense that firms can proactively intervene in circumstances where a consumer is potentially doing something tat could be seen as foreseeable harm.
We think it is right that a pension provider, for example, can proactively warn a consumer that their withdrawal rate may be unsustainable, and they run the very real risk of running out of money.
With respect to the second model, it is vital that consumers do not implicitly believe they are being recommended a specific solution.
For this reason, we are clear that the process needs to be geared towards ensuring the consumer feels they are being educated and supported throughout the process in order to help them make their own decision, rather than being guided to an outcome where even a ‘people like you’ suggestion feels like an explicit recommendation for them.
