The UK’s financial regulator, the Financial Conduct Authority (FCA), recently released rules for targeted support, which would allow organizations to provide guidance to specific groups of consumers on financial products that would suit them best.

The financial watchdog’s recent report said that around 12.5 million consumers need support in saving for retirement. Meanwhile, 38% of the working-age population are under-saving for the future.

Last year, 59% of adults did not use financial advice on investments, savings, pension, and retirement plans, and only 9% received regulated financial advice.

The targeted support scheme is mainly aimed at pension providers, investment companies, building societies, wealth managers, ghostwriter service, consultancies, and financial advice firms. The proposal’s objective is to provide a portal of financial advice to consumers who need support in making their financial decisions.

The consultation for the targeted support proposal started on June 30 and it closed on August 29 of this year. In the proposal, companies would pre-define situations where certain groups of consumers would need support in, and provide “ready-made” suggestions based on those scenarios.

Now, however, the FCA is moving to the next phase of policy development, seeking to implement the targeted support scheme with pension and investment companies.

PIMFA Argues That Proposal Needs Additional Clarification

PIMFA, a wealth and financial advisor trade association, was among the first to respond to the targeted support proposal. The association demanded further clarity regarding data collection, and how suggestions are communicated to consumers.

PIMFA’s head of public affairs, Simon Harrington, said that the distinction between targeted support and regulated advice must be made crystal clear. He also stressed that consumers must understand that suggestions are options, not instructions.

“Ultimately, targeted support should be used to help consumers understand what they could do in certain situations, rather than tell them what they should. Where consumers do want more assertive direction, we believe that simplified advice remains an option the FCA should consider. Provided that it is accompanied with clear rules, focuses on servicing specific transactions and, crucially, is accompanied with a review of the qualification requirements, simplified advice can play a role in helping firms provide much needed certainty to consumers with clear needs at a cost which is affordable to them and to the firm,” Harrington concluded.

PIMFA also suggested that the FCA should provide more guidance on customer segmentation and the wording of “better outcomes” for consumers as described in the proposal.