Once-in-a-generation advice changes to help millions navigate their financial lives

That was the title of the news article published by the FCA on 30 June when it launched its consultation paper of Targeted Support.

A bold claim indeed. The new regime will allow what would have previously been a ‘personal recommendation’, as set out in Article 53 of the Regulated Activities Order (RAO), to be made to millions of people based on them falling into a cohort that their bank or pension provider defines.

The FCA defines that the cohort (Situation) and the ready-made suggestions should be determined as follows:

So while the ready-made suggestions are across where the advice boundary is currently defined they are not intended to be individualised advice.

The FCA defines a requirement for “Sufficiently granular consumer segments”. That is consumer segments should not be too broad, such that a firm cannot define a suitable ready-made suggestion for the segment. Firms should also not build segments that are overly individualised, to avoid misleading consumers into believing that they have received individualised advice.

So if Targeted Support cannot provide individualised advice, how does it address the advice gap?

Why we are excited about what the FCA published

The FCAs way of looking at the continuum of advice is set out in the beginning of the consultation paper as follows;

This is revolutionary in a world that since RDR has seen information and guidance move further back from the personal recommendation boundary and the only alternative is comprehensive holistic advice.

Targeted Support cannot provide individualised advice and FCA testing has confirmed that users understand this. In this testing it was also seen that the strongest perceived reason for getting the suggestion was “To make the provider money”.

So how does this close the advice gap?

As we have explored in previous blogs, consumers don’t think of advice in the same way that legislation has previously defined a personal recommendation. Good advice is deeply human in its context and deeply personal in its nature. It is about robust, sustainable, trusted and engaging frameworks that answer questions that are on our mind. It motivates us to explore our tradeoffs and to make important long-term choices and decisions with confidence. It is about simplicity, the other side of complexity. It is not about “last mile” compliance journeys designed to flog financial products.

So Targeted Support can take on the “last mile” compliance journeys designed to flog financial products for the 91% of people not currently receiving holistic advice. That may be all the push some consumers need to take the plunge and start investing or draw down on their pension and that may well achieve good financial outcomes for them.

For everyone else they will move left, right or down on the above diagram. Either left into a financial planning journey where they set and model their goals and aspirations, either by themselves or with the guidance of a coach. Or they may move into a simplified or holistic advice journey that they now know is the best solution for them.

Whatever journey the end consumer moves into, the Envizage advice engine can be used to drive powerful, intuitive and engaging consumer experiences.

The commercial opportunity for the provider is to capture all of these routes and seamlessly guide the consumer down the one that they prefer. Moving from a disenchanted consumer who thinks you just want to sell them stuff to a vocal advocate for the brand.

Here at Envizage we’ve built a holistic advice engine that can help millions of people around the world understand their choices and tradeoffs so they can make better decisions for their future.

Our single engine powers;

• Advice that does not constitute a personal recommendation (financial planning, or what an end consumer might call ‘personalised guidance’)
• Targeted support (to determine cohorts suitable for ready-made suggestions)
• Simplified advice and
• Holistic advice

If this sounds relevant to you and your organisation, let’s talk: contact-us@envizage.me