There is absolutely value in guiding consumers towards a suite of product suggestions – without it we think consumers will be left with more questions than answers – but we also have to be mindful of the risks of doing so.
I have written previously in these pages about the potential risks of product churn and signposting towards inappropriate solutions that this review could produce and, to an extent, these risks still exist within some of the models of targeted support set out within the paper.
Realistically we think these proposals will benefit investors who are already somewhat engaged and will guide them towards better outcomes. In the case of disengaged consumers decumulating we also think they may be beneficial – the overwhelming power of inertia notwithstanding.
If the purpose of the proposals outlined in the paper is to turn more savers into investors, we believe that the simplified advice proposals may be of more value.
Research conducted by Pimfa suggests non-investors are more likely to begin investing with the help of a personalised recommendation and the ability for them to receive one – at a lower standard and a lower cost – is welcome.
These proposals build significantly on the previous core investment advice proposals and feedback suggests that there is significantly more interest in offering this, however some questions remain.
To make simplified advice attractive to firms, they need to understand the risk of giving it. For this reason, we believe the process should be as prescriptive as possible in order to manage liability and ensure that only relevant information is captured.
This means simplified advice will be a transactional activity rather than one that gives any real consideration to planning.
In line with our belief that the focus should be transactional, we continue to believe that the sale of decumulation products should be in scope.
A simplified advice process – like a targeted support process – should not be able to tell you how to decumulate, but it should be able to recommend what you should decumulate with once a decision has been made.
Finally, the presence of a monetary cap remains entirely arbitrary and serves little to no purpose, even if its intent is to distinguish simplified advice from full holistic advice.
There is some correlation between the amount of money you have and the complexity of your needs, but this is not always the case and there are people with savings of well over £100,000 who would certainly benefit from a simplified advice process.
