NEW rules to let banks help you make decisions about what to do with your cash “risk becoming a ‘mis-selling charter’ if not tightly monitored”, financial experts have warned.
One financial adviser said “the risks are that we could see poor standards creep in” without proper policing by the regulator. Another expert said consumers risk being pushed into products.
From April of next year, banks and other regulated financial institutions will be able to give ‘targeted support’.
This will allow them to give consumers suggestions about pensions and investments based on what groups of people who are similar could do with their money,
Targeted support isn’t full and specific advice tailored to the individual. But the Financial Conduct Authority (FCA) has said over the next decade at least 18 million people could be helped under the new rules.
Game changing
Sarah Pritchard, deputy chief executive of the FCA, said: “Targeted support will be game changing. It means millions of people can get extra help to make better financial decisions.
“We also hope it will build greater confidence to invest. While investing will not be right for everyone, we know people in the UK invest less compared to the EU or US. People in the UK could be missing out on the potential benefits of investing in the medium to long term.”
However financial experts have weighed in to say the new rules risk creating a repeat of past mis-selling scandals unless properly policed.
Scott Gallacher, Director at Leicester-based Rowley Turton, a financial advice firm, said: “Targeted support will undoubtedly provide some help to people who would never pay for full financial advice, but it also walks a very fine line.
“By allowing firms to make broad-brush recommendations to groups of consumers, it risks becoming a ‘miss-selling charter’ if not tightly monitored.”
Bridging the gap
Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, broadly welcomed the move but cautioned it is “not a perfect solution”.
He said: “I suspect on balance that it will help lots of people. If this helps bridge that gap and get people started, then it’s no bad thing.
“It’s not a perfect solution and won’t be nearly as comprehensive as regulated advice but it has a place. The risks are that we could see poor standards creep in but that’s up to the regulator to police.”
Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, said there are unanswered questions about how targeted support will work for people in the real world and that consumers risk being pushed into products instead of being guided into a personally crafted strategy.
“If the FCA hands banks and chosen firms a hall pass to shape how millions handle their money, we need to know on what basis, to whom and with what safeguards in place. Without that, this could be a mis‑selling scandal waiting in the wings”, she said.
Fallout
McGirr continued: “I’ve seen the fallout of bad advice from well‑qualified people, damage that goes beyond money to homes, families and futures. The handover here is undefined. Who decides when nudges stop and advice begins?
“The role of impartial advice from a qualified professional must remain central to this. The pathway matters as much as the product and in spite of innovation, the FCA must maintain its primary focus on consumer protection and the sanctity of proper guidance.”
