Help, I need somebody!

Transcription

1 Help, I need somebody! December 2018

2 Consumers Key issues Inadequate financial knowledge and skills for basic money management Limited education in schools to provide core money management skills Universally recognised that consumers have low levels of savings for Rainy Day, Sunny Day and Retirement Sub-optimal decisions are resulting in consumer detriment Reliance on debt for fund day to day consumption Responsibility for retirement savings has shifted from the State and the Employer to the consumer but there has been no change in public paradigm to address this altered responsibility (albeit auto-enrolment is a positive and welcomed measure)

3 Scale of advice gap - FAMR Advice 4m received advice 2.8m ongoing, 1.2 Initial advice FCA Data Bulletin 2018 Adult population approx. 51m Guidance The advice gap: 43m to 47m Not receiving advice and in need of access to assistance Debt Advice 11.6m in need of debt support more than savings and investment MAS Market Segmentation 2016

4 Financial guidance delivery Key issues Only 8% of the adult UK population (4m) received financial advice in 2017, with 92% relying upon other sources to make financial decisions Information and guidance are key options to help support those not getting advice Post FAMR there is still considerable ambiguity regarding the boundaries of guidance Definition of financial guidance primarily limited to information, offers little in the way of personalisation and relies upon consumer ability to make informed decisions Financial services firms are reluctant to provide guidance in case they stray into advice Mistrust in financial services to deliver financial guidance in a way that ensures the best outcomes for consumers

5 Personalised guidance Consumer research points towards individuals not feeling able to make appropriate decisions regarding managing their money and typically want to be told what to do Given the cost of financial advice deters many consumers from seeking help, the provision of information alone does not provide the support that is needed to help consumers confidently decide We propose that more personalisation be built into the consumer guidance journey so that relevant comparisons can be presented to help inform the decision making process This personalisation would be applied by both regulated financial services firms as well as the SFGB, who have an equal need to facilitate an informed decision that is subsequently acted upon

6 Personalised guidance - examples TISA members consider that the current regulations for guidance, deter regulated financial services firms and result in consumer detriment Examples include: For a customer that has received robo advice on simple needs, the regulated firm that provided that advice is not allowed to contact consumers to suggest that they consider reviewing their position where products/providers have changed - advice Where a customer has used free research to make a self directed investment decision and that research is updated, the firm is not allowed to contact the customers to suggest they review their previous investment decision - advice Sample customers put through advice and were filtered out from switching from cash to investments, however self select customers with similar circumstances made decisions to switch from cash into investments which would not have happened with advice -this form of detriment is not addressed by FCA

7 Framework and rules of thumb A key challenge is to provide financial guidance in a way that suits consumers, which means delivery at their chosen point of contact and minimising disengagement TISA proposes that regulated financial services firms are permitted to provide the same type of guidance as the SFGB for specific types of support e.g. some basic savings and investment information that will support decision making by the consumer Both the SFGB and regulated financial services would adopt similar terminology, guidance paths and ideally outcomes Rules of thumb would be incorporated within the guidance where appropriate as the value of guidance is greatly reduced in isolation of relevant benchmarks Guidance would be personalised to make the information relevant to the consumer whilst avoiding any recommendations

8 SFGB Key issues TISA and its members are very supportive of SFGB and have been actively engaged with MAS and TPAS / PensionWise on several initiatives SFGB cannot realistically support financial guidance for up to 47 million consumers without a significant increase in budget and enlargement of infrastructure Guidance provided by MAS, TPAS and PensionWise is not linked back to consumer actions undertaken with financial services, so outcomes are not tracked and the true effectiveness of these services are not measured MAS, TPAS and PensionWise are typically not the first port of call for consumers that seek guidance, turning instead to financial service firms directly, for instance when exercising pension freedoms to draw down retirement funds MAS, TPAS and PensionWise engagement with financial services is conducted on a relatively limited and ad hoc basis and lacks formal structure

9 SFGB and financial services SFGB created in October and has a legislative remit to work with financial services, albeit further definition is required for what this means in practice TISA is advocating a formal agenda for the SFGB Board and Executive to engage with financial services to collective raise the tide of guidance being made available to consumers Propose SFGB create formal structures for engaging with financial services in a consistent manner across specialist areas e.g. general guidance, pensions, etc. Advocating a greater role for regulated financial services firms in the provision of guidance Advocating SFGB and regulated financial services offer similar forms of guidance, terminology and outcomes, governed by a guidance framework

10 Signposting Financial services firms currently signpost to PensionWise through wake up packs plus signpost to MAS and TPAS on a voluntary basis There are significant opportunities to enhance and increase signposting either as part of a regulated financial services firm s guidance journey for consumers or as a feature of other information that is being made available Enhanced signposting could significantly benefit the launch of the SFGB We also propose that the SFGB should be encouraged to reciprocate by signposting back to financial services in a way that consumer actions can be tracked to and reported back to the SFGB to help understand where the service is being effective and where enhancements are required

11 TISA approach Currently working with a group of firms representing banking, asset management, life companies, advice and platforms Working on the definition of a guidance framework including: Scope Degree of personalisation Channels, qualifications and regulatory standards Also working on a strawman governance structure Campaigning for guidance definition, greater access to guidance provided by industry and closer working relationships with the SFGB

12 Engagement - SFGB, FCA, DWP & HMT FCA HMT engagement on guidance rules FS engage with FCA to regarding guidance regulations FS engage with HMT on changes to guidance rules DWP and HMT support SFGB working with FS HMT FS seeks support for SFGB to work with industry DWP

13 Campaign Responded to all relevant consultations from earlier FCA and Treasury Select Committee Met with Esther McVey and Guy Opperman in July - they are supportive of TISA proposals for industry to work with SFGB and agree that more needs to be delivered by industry to achieve higher levels of public support. This has been built into the legislation for SFGB Met with FCA in August. Softening approach in that they may consider including guidance within their 2019 review of changes made in RDR and FAMR. Understand that consumers are currently making detrimental financial decisions Met with HMT in October and they support our proposals with particular interest in the sign posting Raised guidance at meeting with DWP in October in context of needed to support Pension Dashboard on launch

14 Campaign Raised guidance with Pension Select Committee in June and again in November and expect was included in a letter from Frank Field to DWP in December Have agreed with the new CEO of SFGB that we should meet with him and the Chairman early in 2019 Looking to have a round table March/April 2019 with FCA, DWP, HMT and SFGB and already have in principal support from 6 CEO / Board level executives to represent industry