No ‘qualified advisers’ Brits canvas ‘targeted support’

While the Australian Government has upset many financial advisers by canvassing the creation of “qualified advisers” the UK Government is being far more circumspect by canvassing the provision of “targeted support” for advice consumers.

A new policy paper issued by the UK Treasury and the Financial Conduct Authority has examined closing the UK’s “advice gap” and discusses a range of scenarios about how advice can be delivered to a significant number of consumers who want advice but are unable or unwilling to pay for it.

The UK policy paper has dividend advice into two categories – fully-regulated holistic advice and information and guidance.

The paper references the use of technology and innovation among advice firms, but notes that simplified advice propositions (including automated or ‘robo’-led models), “have not yet been able to attract large numbers of consumers.

“Alongside advice, firms have said they want to offer greater support to consumers in a way that is potentially less expensive for them to deliver, but they are reluctant to do so because they fear inadvertently crossing the advice boundary,” the UK policy paper said.

“Firms have noted concerns around the risk of the Financial Ombudsman Service finding they have acted unreasonably or unfairly in the context of the level of support offered and the associated costs of remedying consumers in these circumstances”

The policy paper proposes giving firms greater certainty about the types of support they can provide to consumers without crossing regulatory boundaries, while also proposing “targeted support” under a new regulatory framework which would allow firms to suggest products or courses of action based on a target market the consumer fits into.

The paper also proposes “simplified advice” enabling firms to “support consumers with simpler needs and smaller sums to invest, and to so in a commercially viable way”.

“This proposal is aimed at enabling firms to better support those consumers who want to receive a personal recommendation when making a financial decision but for whom the more comprehensive support provided by holistic advice may not be cost-effective,” it said.

Dealing with targeted support, the paper proposes that it would operate to a different standard to simplified or holistic advice and enable firms to:

1. Use limited personal information about a customer and their circumstances to provide support to consumers to help them make an informed decision. The action suggested to the consumer would be appropriate to a person in similar circumstances (ie a target market the consumer can be identified as belonging to) and could result in the firm suggesting options to the consumer on the basis of ‘people like you’.
2. Offer targeted support without explicit charges (ie without upfront fees specifically and exclusively relating to the service provision of targeted support), but with a clear disclosure of how a consumer is paying for the service through other associated charges.

The discussion paper said it was anticipated that targeted support would be appealing to a range of firm including retail banks, life insurers and platforms who can use customer data and product knowledge to provide greater support to consumers than is currently possible under guidance.

“We will explore the different business models that might be possible when delivering this type of support and if any restrictions should be applied. For example, whether it should be limited to a product manufacturer providing support in the context of its own product suite. As it is important consumers understand targeted support is different from advice, it is not clear such a service could be provided by a financial advice firm,” it said.