Prime Highlights:
- Banks and authorised firms will provide guidance to help people make better financial decisions about investing and pensions.
- The new program aims to boost confidence in investing and encourage smarter use of cash savings.
Key Facts:
- Around seven million UK adults with £10,000 or more in savings could benefit from the new guidance.
- Firms providing recommendations must be authorised, regulated, and consider any customer vulnerabilities.
Background:
People who often turn to friends, family, or social media for financial advice will soon have new support from banks and financial firms to help them invest their money. The City regulator, the Financial Conduct Authority (FCA), has approved targeted support programs set to begin in April.
Under the new rules, banks and authorised firms can give investment and pension tips based on what similar people do with their money. While this does not replace personalised advice from authorised financial advisers, it aims to provide guidance for those unsure about investing.
Sarah Pritchard, deputy chief executive of the FCA, described the move as “game-changing,” saying it would help millions make better financial decisions and encourage confidence in investing. Currently, the UK invests less in comparison to countries like the US and the EU, and many adults keep cash savings instead of exploring investment options.
The FCA noted that around seven million UK adults with £10,000 or more in savings could benefit from investment opportunities. About 1 in 10 people have no savings, and 21% have less than £1,000 for emergencies, so investing may not be right for them.
Targeted support will provide general recommendations, such as how to spread investments to reduce risk or make cash savings work harder. Unlike detailed financial advice, these recommendations will generally be free of charge and regulated to prevent misuse.
Consumer groups have welcomed the initiative but stressed the importance of protecting customers from unsuitable recommendations. Firms taking part must be authorised and demonstrate that their suggestions put people in a better financial position while considering any vulnerabilities.
The FCA also plans to give consumers better information on pensions, and the government is supporting the initiative as part of efforts to boost economic growth. Additionally, the regulator has introduced a “firm checker” tool to help protect investors from scams.
