What the "once in a generation" advice changes mean for you is revealed by FCA

After the regulator's proposed changes, consumers will have free access to financial advice-style assistance for investments and pensions

With the new Financial Conduct Authority (FCA) reforms, millions of investors and savers could receive financial management assistance without having to pay for regulated counselling.

These changes are part of the City watchdog's efforts to bridge the gap in financial advice and assist individuals in making better financial decisions, including pension withdrawals and retirement.

The plans would allow regulated businesses to recommend products to groups of customers who share certain traits and provide a new kind of assistance known as targeted support.

These might include those who have extra money in their current account, are not saving enough for retirement, or are currently taking unsustainable withdrawals from their pension.

The FCA's deputy chief executive, Sarah Pritchard, stated: "We want to assist consumers in managing their finances and making long-term plans. How to invest, save, and get ready for a comfortable retirement are some of the most challenging financial decisions we have to make.

"These once-in-a-generation reforms will boost people's confidence to invest and help them manage their financial lives. Businesses and consumers alike benefit from this.

What gap in advice exists?

The FCA is worried that even though people may own financial products, they may not always use them to their full potential.

Just 9% of adults reported receiving financial advice regarding their investments or pensions in the previous 12 months, according to the FCA's most recent Financial Lives survey.

Of those without financial advice who have at least £10,000 in cash savings, 24% said they don't invest because they don't know enough about it, 12% said they feel overwhelmed by the variety of options, and 8% said they would need more help before making an investment.

According to the FCA, approximately 7 million adults in the UK who have cash savings of at least £10,000 might be losing out on the advantages of investing over the course of their lives.

What reforms are suggested by the FCA?

If someone feels they don't need or can't afford financial advice, the FCA is suggesting establishing a new targeted support regime that would allow more individualized help to be given for free.

Tom Selby, AJ Bell's director of public policy, stated: "Building financial resilience in the UK requires making sure people can get the support and assistance they require, whether through regulated advice or guidance.

Because of the current regulatory environment, it is challenging for businesses to provide non-advised clients with more than rudimentary information without running the risk of crossing the line from advice to guidance.

This implies that millions of people who choose not to follow regulated advice are effectively left to make difficult retirement decisions alone, without the assistance they need.

In what way will targeted support operate?

A consultation on creating a standardized approach for focused assistance has been started by the FCA.

Businesses can currently alert customers that they might not be saving enough for retirement, for instance. A company may propose a different pension contribution rate with focused assistance.

In a similar vein, investment firms are currently able to notify customers about cheaper alternatives. Instead, a company could recommend a specific fund that would provide better value under targeted support.

In the event that there are worries that a customer may be taking an unsustainable withdrawal from their pension, the change may also allow pension firms to recommend an alternative drawdown rate.

Although he praised the changes, Quilter's Steve Levin stated that it's critical to distinguish between focused assistance and comprehensive financial guidance.

He stated: "The new framework should concentrate on assisting those who would otherwise find it difficult to obtain guidance, as those who are currently receiving continuous advice do not require targeted support.