Investing or making pension decisions without professional help can be daunting, but few of us can afford ongoing financial advice or wealth management.
That’s why the Financial Conduct Authority (FCA) has introduced a new way for approved financial services providers to help their customers make key decisions, like which fund to invest in or which tax wrapper to use.
It’s called targeted support, and the FCA describes it as “a once-in-a-generation change that will help millions navigate their financial lives.”
Several banks and financial services providers have now been approved – they may proactively get in touch with you to help.
How is it different to financial advice?
With financial advice, you get personalised investing recommendations specifically for you and your circumstances, for a fee.
Targeted support offers suggestions (expected to be usually for free) for what typically works for people like you – groups of customers who share similar goals or characteristics.
It’s a step up from the financial guidance that organisations were previously limited to providing, which is completely generic and limited.
Who will offer targeted support?
One day, you might be able to get targeted support from wherever you bank, invest or hold your pension. But, so far, only seven organisations have been approved to offer it (with six more applications pending).
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Quilter is a firm that already offers wealth management and financial advice, and now also offers targeted support through its investment platform, Quilter Invest. This means that their advisers can offer an alternative to individuals who don’t yet need full advice.
The service first asks nine questions about the individual’s financial situation and investing knowledge, then recommends an appropriate account and one of four funds. It’s available to both customers and non-customers through the mobile app.
Zopa was the first bank to receive FCA approval for targeted support. The bank’s first step is to help customers who appear to be holding excess cash in savings, who might benefit from moving some to investments.
Customers will be asked a series of questions within the bank’s app to build a profile of the type of investor they might be. Based on this profile, they’ll be recommended a stocks and shares ISA or general investment account and one of two ready-made funds.
Royal London’s existing customers can now access its new Targeted Support ISA service through the mobile app.
If they apply for a stocks and shares ISA, Royal London will ask questions to check if investing is right for them, match them to an investment style, and then suggest how and where to invest their money.
Monzo’s targeted support service is available now for eligible customers through the mobile app. Target customers are those who have built up cash savings and may be ready to think about investing.
They’ll be asked about their financial situation, goals, and attitude to risk, and will receive a recommendation of one of three ready-made funds.
Vanguard will soon go live with a targeted support service designed to help first-time investors overcome the confidence barrier.
In additional to answering questions about their investment goals, customers will be offered educational tools to build knowledge and confidence. When they’re ready to get started, they’ll be directed to an investment fund that might be suitable.
Aviva will initially launch a service for pension savers this summer and is likely to integrate targeted support across other products later.
All we know right now is that customers will be offered prompts and suggestions based on what typically works for people in similar situations.
Legal & General will also be offering targeted support to pension savers and plans to embed it at every step of the retirement journey.
The firm has said that a priority will be helping people who are currently holding their pension all in cash – a risky approach that allows inflation to erode its real-term value. L&G will highlight the risks and offer alternatives.
How could targeted support help me?
So far, there are two clear use cases.
With investing, targeted support could help you get started by removing some of the fear or thought-burden of the upfront decision making.
With pensions, targeted support could identify people who could benefit from taking more risk and guide them towards that option, often resulting in a higher retirement income.
While most financial services providers have been slow off the mark to seek approval, hopefully we’ll see more offering targeted support soon.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.