The chairperson of the Treasury committee has tabled an amendment to the financial services and markets bill which will allow the government to create a new ‘personalised financial guidance’ regime in the UK.
Harriett Baldwin, who was appointed as chairperson in September, tabled the amendment in a paper published yesterday (November 24).
The amendment, if accepted, would allow guidance to be given to savers and investors which considers their personal circumstances.
Under the proposed regime, provider firms who do not recommend a specific product or course of action would not risk this guidance being deemed as regulated advice.
If it goes ahead, the amendment could give firms confidence to offer people who choose not to take advice, or cannot afford advice, with more tailored guidance without fear of straying over the advice-guidance boundary.
Tom Selby, head of retirement policy at AJ Bell, said: “While in an ideal world everyone would get regulated financial advice based on their personal circumstances, for a variety of reasons this will never be possible.
“The challenge therefore facing the government, regulators and the industry is how to ensure as many people as possible are helped to make the most of their savings and investments.”
He explained that if this amendment is enacted, it has the potential to enable substantial improvements in the way information and guidance is provided to non-advised savers.
As things stand, the point at which guidance ends and advice begins is unclear, meaning those engaging with savers and investors on a non-advised basis – including employers, government organisations and financial services firms – often take a cautious approach when communicating.
Selby said this is particularly the case where that interaction involves any consideration of someone’s personal circumstances.
“This results in the millions of people who don’t take advice receiving largely generic guidance which, while useful, has natural limitations,” he explained.
“Creating a new regime which explicitly allows for more tailored communications has the potential to spur a cultural change which would benefit millions of savers.”
This comes as earlier this year, the Financial Conduct Authority executive director Sarah Pritchard said the regulator will make sure that it does what is best for the UK, retaining market integrity and protecting consumers.
At the time, Pritchard said: “One area we are looking at transforming is the advice and guidance rules."
Selby said this new amendment should benefit advisers in the long-run, as a better-informed public will be more likely to appreciate the complexity of the financial decisions they take, particularly around retirement, encouraging many to seek professional help.
Prakash Chandramohan, strategy director at The Investing and Savings Alliance, said it was delighted that the amendment had paved the way for regulated personalised financial guidance.
"In these difficult economic times, it is crucial that consumers have access to targeted and effective support to manage their finances," he said. “Since the original Financial Advice Market Review 2015, little has been achieved for people who cannot afford financial advice.”
He added: “Now more than ever, it is important that we build the necessary foundations for people to be supported to make good financial decisions."
sonia.rach@ft.com
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