Advisers warn FCA targeted support proposals fall short

Financial advisers have broadly welcomed the FCA’s new proposals for targeted support for pension savers but have warned more clarity is needed if they are to succeed. The FCA has published new proposals to provide ‘targeted’ support to millions of pension savers to help them avoid costly mistakes. One concern that has previously been shared by advisers on individual pension guidance is whether providers would seek to use targeted support as a sales channel for their own solutions. Under its targeted support proposals, the FCA states that firms need to apply the threshold of having reasonable grounds for believing that the delivery of targeted support suggestions would deliver a better outcome for their customers than if targeted support was not provided. Simon Harrington, head of public affairs at wealth management trade body PIMFA, said that direct selling from providers was still a very real risk under the latest proposals. He said: "Whilst it has been clear to us for some time that the addition of more personalisation to help guide people to better outcomes is necessary, it remains a point of concern that the FCA is still considering proposals which may provide for the direct sale of product solutions to consumers based on limited information. "There remains a fundamental difference between a firm telling a consumer that people with similar characteristics would likely buy a drawdown product, as opposed to telling that person that they could buy a specific drawdown product. There are clear conflict of interest issues that arise from the latter approach, which the FCA highlights in the paper." Rachael Griffin, Financial Planning expert at Quilter, warned that the Government needed to clarify its tax map if the FCA’s proposed targeted support for pension savers were to be successful. She said: “The FCA’s proposals for targeted support come at a time when potential changes to the inheritance tax efficiency of pensions is causing concern among savers. The mere suggestion of reforms often leads to reactive behaviours, with individuals making hasty financial decisions that may not align with their long-term goals. For instance, the prospect of pensions becoming part of the taxable estate has already spurred some customers to think about depleting their pensions more quickly so to leave less left upon death. “These types of behaviours show that for targeted support to be truly effective, it must be accompanied by a clear roadmap of future tax changes. This would help savers and providers alike to plan with confidence, reducing the likelihood of knee jerk decisions and ensuring that targeted support delivers the best possible outcomes in a stable policy environment.” Other questions Ms Griffin said still need to be answered if targeted support is to succeed are if the data available is robust enough to allow providers to offer meaningful and accurate targeted support, and will data protection rules limit the ability to tailor communications sufficiently. Ian MacKenzie, chief operations and technology officer at St James’s Place, said that consumer understanding was key to the success of the new proposals and that more work needed to be done to ensure this. He said: “There is a lot of detail to consider in this latest consultation. Key to the success of these proposals will be whether consumers fully understand what they have received and what they haven’t (ie that it isn’t advice).”

Advisers warn FCA targeted support proposals fall short

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