EVENT SUMMARY: Advice and guidance – fix or fudge?

Alex Sword


The Financial Services Forum

Our recent event focused on the FCA’s review of the advice-guidance boundary and its implications for the pensions industry.

Due to prohibitively high fees, financial advice tends to be the preserve of wealthier people, leading to a large advice gap.

With the FCA working to review the advice-guidance boundary, there is a hope that the category of guidance can help to serve more customers with tailored advice.

The FSF brought together a panel of experts to discuss the advice-guidance boundary – here are some of the key themes.


Definitions and distractions

One participant highlighted the industry’s tendency to focus on debating definitions rather than taking action to help customers. They suggested that the definitions can be used as an excuse not to move forward and said that the industry should just “get it done”.

They emphasised the need for the industry to establish a clear set of goals and develop interventions that would engage individuals who are currently not actively involved in financial services.

In particular, they highlighted the concept of a “midlife MOT” which would assess people financial standings.

The participant also mentioned the importance of addressing the misconception that people do not want to interact with financial services and urged the industry to explore ways to bring them to the discussion table.


A rude awakening

Another participant discussed the issue of financial resilience and provided insights into the financial situations of individuals.

They mentioned that many people mistakenly believe they are doing the right thing by contributing heavily to their pensions but fail to build short-term savings. A greater focus on holistic financial resilience is required.

In addition, with only 40% of households currently saving enough to have a moderate income in retirement, much of the population is in for a “rude awakening”. This is especially true considering the figure is only 70% for people with higher incomes of up to £80k.

The participant stressed the need to help individuals build overall financial resilience and engage them in their pension planning to ensure a moderate and comfortable retirement income.


How tech can help in the wait for legislation

Another speaker emphasized the efforts being made to make financial advice more accessible and engaging for individuals. They mentioned the use of health checks and budget calculators as starting points to assess individuals’ financial well-being.

Additionally, they discussed the development of algorithms that provide personalised guidance and the importance of encouraging individuals to actively participate in their pension planning.

While algorithms are already extensively used by advisors, there is potential to use this sort of automation to provide guidance. Rather than going to an advisor for a scripted interaction, customers could go through codified interactions to quickly get access to their cash.

The participant said that legislative change that will completely clarify the boundaries may be some time away but in the meantime providers can use tech to push personalised guidance right now.


The role of the workplace

With many employees getting their pensions through their workplace, another participant highlighted the potential role for employers in providing advice.

One person argued that there has been a fixation amongst workplaces on products when choosing pension providers as opposed to tapping into their advice resources.

For example, when employees retired, they could potentially be offered some free advice. This could also be done earlier

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