Key Takeaways
- The Financial Conduct Authority is pushing “targeted support” as a way of bridging the “advice gap” and getting more individuals to access professional advice.
- Investment providers will have wider scope to present information on funds in a more compelling way.
- Advisors are preparing for changes to the ISA regime that fully kick in next financial year.
The start of the new tax year brings a wave of changes for UK savers and investors, but also a new set of challenges for financial advisors as they get to grips with the latest moves from the UK regulator.
A key development from the Financial Conduct Authority this financial year is designed to enable many more consumers to access a level of professional financial support. With the FCA estimating that around 23 million adults are currently “underserved” by the markets for financial advice and guidance, “targeted support” aims to create a middle ground by enabling firms to offer meaningful, action‑oriented suggestions without triggering the full regulatory compliance needs that come with providing full personalized advice.
“Targeted support is a once in a generation change that will help millions navigate their financial lives,” the regulator says.
Under the new framework, targeted support allows authorized firms to make recommendations to groups of consumers with common characteristics, using limited information rather than conducting a full individual assessment. For example, firms will be able to suggest alternative pension contribution rates for those who aren’t saving enough for retirement or propose suitable drawdown approaches for customers approaching retirement.
“Targeted support will help fill the gap between generic guidance and individualized advice and help consumers access the support they need, at a cost they can afford, when they need it, so that they can make informed financial decisions,” the regulator adds.
Changes to the Way Investors Receive Information
The second key change this month sees a new Consumer Composite Investments, or CCI, regime take effect. Designed to better support informed decision-making by retail investors, one of the most visible changes will be a new consumer‑friendly product summary in place of the Key Investor Information and Key Information Documents that many products produce today. These “KIIDs” offer a standard, two-page document to explain key characteristics for UCITS funds.
Product providers, including fund managers, insurance companies and structured product issuers, will gain greater latitude to produce the summaries in formats that they consider best convey information in an engaging way to potential investors while still adhering to minimum standards that ensure comparability on key data such as costs, risk, return and past performance.
Product providers will also be able to supplement the summaries with innovative online functionality for investors who want to dig deeper and must also make a set of core information available electronically to assist distributors in supporting their clients with good, easily consumable information.
The CCI rules allow for a transition period that runs through to June 2027 and from our conversations with firms we expect most of the new product summaries to appear in the early part of 2027.
It Comes Back to the FCA’s Consumer Duty
These regulatory changes align with the core principle of the FCA’s overarching Consumer Duty, which came into force in the summer of 2023. This requires firms to deliver good outcomes for retail customers across the four areas of products and services, price and value, consumer understanding and consumer support.
Taken together, the availability of a lower-cost alternative to full financial advice, coupled with clearer and easier to understand product information, should both remove some of the barriers faced by those contemplating the transition from being a saver to an investor and improve the support available to existing investors.
All Eyes on ISAs
As well as the above changes, the new tax year sees the alignment of a couple of key regulatory changes that will pave the way in preparing investors for government policy change which will follow in April 2027.
As part of its quest to encourage more people to invest some of their money rather than leaving it predominantly in savings accounts, the government is changing the ISA rules in 2027. While the £20,000 annual ISA allowance will remain, the maximum proportion of it that can be used to fund a cash ISA will be reduced to £12,000.
Further changes are coming to the ISA range in the form of yet-to-be-announced changes to the lifetime ISA, and crypto exchange-traded product accessibility being moved within innovative finance ISAs as well.
