Can simplified advice work?

0:12Hello and welcome to the FT Advisor podcast. This week we're diving into how the FCA's targeted support and simplified advice will work. The advice guidance boundary is a response to a growing concern that most consumers in the UK are not getting the financial help they need. Under it sits targeted support and simplified advice. Targeted support will allow firms to offer suggestions to groups of customers with common characteristics. Meanwhile, simplified advice can complement targeted support where a customer has straightforward needs and can provide a stepping stone to more holistic advice. Late last year, the FCA said it was on track to enable firms to begin applying for permission to provide targeted support from March 2026 before the new rules come into effect subject to legislation.

0:58The rules are expected to take effect from 6 April 2026. In today's podcast, we'll unpack the incoming regulatory changes, how it will impact advisors and what the take-up is expected to look like. I'm Sonia Rarch, Deputy News Editor at FT Advisor, and joining me today are Edward Grant, Board Director at the Personal Finance Society, and Clive Gordon, Consumer Investments Practice Lead at Siksik Advisory. Good morning both. Thank you for joining me today. Hello. Good morning. So I think it might be quite helpful to start with you, Clive, perhaps to kind of get your thoughts on simplified advice and whether you think it will work.

1:37Of course. So simplified advice, it's something that the FCA have tried before. And they've failed for a couple of reasons. One was that they failed to give advisors the certainty they needed in creating a regulatory regime that they were comfortable working within. and secondly it's it's still unclear whether or not there's a demand for simplified advice and i think and we'll get onto it later with the with targeted support coming along that increases the dynamics in terms of whether advisors think that there's a commercially viable and sustainable proposition that their clients will want or some of their clients or new clients might want when it comes to simplified advice.

2:24And Eddie, did you want to kind of jump in there at all with kind of your thoughts on where you think we're at at the moment? So I think, I mean, if we take the PFS conference in November, the advice gap was definitely one of the themes that we had. So there's absolutely a need to close the advice gap. That's unquestionable. There's also, I think, a new generation of potential clients who think differently to their grandparents and their parents so we need to do things differently i also think um that it's really important that we enable the simple tasks to be done simply because at the moment uh things that the consumer thinks that should be easy to do yeah is really quite hard so so i think there's there's there's definitely a need and i think as clive said the the the challenge is will it be commercial uh will there be any risks in the future for firms because of the unknown and also what's the demand?

3:24I think the demand for something is absolutely there. That's really interesting because I think I recently kind of saw an FOI that looked at the numbers of what the take-ups been like from advice firms at the moment and it was I think around 19 firms that had actually started actively considering it which on one side shows that there's sort of a little bit of hesitation with advisors kind of taking this on is this something that you're seeing from kind of your point of view with members of the pfs yeah i absolutely i from conversations that that we've had it's clear that firms are nervous about um starting something that unless there's clarity um and the 19 firms You know, you generally probably find the biggest firms who see it as an opportunity.

4:14In particular, I think what's quite important, if you think about how since consumer duty, clients who are now non-advised, that pool has grown and grown. As firms try and work out value of products, that type of thing. So I think that those firms actually do have a commercial problem. The commercial problem is a lot of their clients that they used to serve are no longer being served. So they need to find a solution that works for them as well. Yeah. And I guess kind of coming back to your point, Clive, on sort of looking at the demand on the other side. So there is this kind of massive argument of whether there will actually be enough take up from consumers.

4:54So what are your thoughts there? So I think the future for financial advice, but more broadly financial support, is obviously going to be different. And it's going to be more of a, in one way, a spectrum, but also some consumers may take a modular approach. So, you know, you'll have the full holistic advice, which people always need. Then you'll have on the other end targeted support and the freedom of information request you refer to as one that Six Six Advisory put in. and found, as you said, only 19 firms had registered for the pre-application service at the FCA and only, I think, six of those were financial advisory firms.

5:43And then you've got that sort of gap between full holistic advice and targeted support and that's where simplified advice, if it's going to work, that's where it will be and that's where you'll need to demand. But as I say, the FCA really needs to create, if you like, a safe harbour for financial advisors that has very thick walls that don't leak and advisors can be comfortable that if they do certain things, they won't be held to account 10 years down the line by the financial ombudsman or by the regulator saying, well, actually, you didn't give simplified advice, you gave holistic full-sat financial advice.

6:26So talking to advisors, you know, some do see it as a plausible proposition. For example, helping children of their current clients who are just in that early phase of needing financial advice. They may just need, you know, some support, if you like, and a simplified advice may be able to operate in that area. Yeah, and I think from conversations I've had, it is sort of a lot of advisors have this kind of fear of if they do do it will it backfire on them you know in years to come or will there be sort of like this I guess the line needs to be quite clear as to what it is and it's not kind of at the moment and I guess it's still in consultation but that is sort of one of the concerns and I guess from your experience kind of being on the FCA side previously how do you think it kind of will work from a regulatory perspective so obviously you kind of mentioned what the FCA will need to do but how will it actually regulate this and how or how should it is probably a better question so I think the way it developed the targeted support proposals is a real blueprint to how to develop would be different proposals but in the same way so it's a very collaborative when I was at the FCA we started off the advice guidance boundary review with roundtables with industry the fca had policy sprints so when they developed policy they were doing that constantly talking to firms in terms of how how's this going to work in in the real world and the framework that they've come up with uh gives firms those clear sort of harbor harbor walls um so they can be clear about what is targeted support and what it isn't and i think if they follow that route map for simplified advice, I think they'll have a much better chance of it being successful because as Eddie said, it has to be commercially viable.

8:22So the unique thing about the targeted support proposals and any proposals in relation to simplified advice is there be voluntary. You know, normally when the FCA or regulator comes up with rules, they're mandatory and firms have to follow them. Targeted support, firms don't have to do it if they don't want to. Simplified advice, similarly, firms don't have to do it if they don't want to. But there's absolutely a need from the government, from the FCA, from firms and from consumers for these new regulatory regimes to work. And so if they're going to work, they have to be developed in a way that firms are going to be comfortable using them.

9:06yeah because if they're not then it it won't work yeah yeah and there's almost needs to be that underlying incentive obviously from a commercial point of view but also just a general like i'm going to do this but it's not going to come back to bite me is i'm something doing for the kind of greater good because there is this whole argument that uh firms are not profiting or won't profit from this in the sense that the high net worth clients that they may have or those with kind of the more assets are going to almost be funding the ones that they when they are offering the targeted support the simplified advice because they're not it's not going to be as financially viable for them but it is kind of in the in the whole advice gap kind of solution almost so there does obviously need to be that incentive but obviously flipping that there is this kind of other argument whether simplified advice will actually reduce decision paralysis or will it kind of almost just shift that responsibility onto consumers because they may or may not be aware and this will also align with the targeted support as well.

10:16What's your thoughts there, Andy? So if I come back to some of the point of, I'll unravel some of the things you just said there. I think one of the things that's really important to look at is advisors think of families. So when we ever talk about advisors, we talk about them as looking after people. But actually, in reality, what they do is look after families. Clive sort of mentioned, you know, you've got the other members of the family. So if you end up in a situation where an advisor is able to deal with the whole family, and in particular, that's very important when it comes to intergenerational, wealth transfer.

10:54So we look at the whole family and the advice then enables us to facilitate advice, close the advice gap across the whole family, but you do different types of advice, then that's a great outcome. I also think another really positive outcome would be the enhancement of the trust in our profession. Only 9 % of people take financial advice. So there's a massive market that we need to to find a solution for and if you're the government a good proportion of people have debt and actually the problem that we need to do is close that that issue but there's a lot of people who do have money who will inherit money that need advice so so actually I see that as a another really positive outcome that enhancement of trust and hopefully bring new people into our profession to work because that's the other issue we've got is that we're not bringing enough young people in who become financial planners and that's you know why we launched the million pound investment into the profession at the pfs is is to do that there's the one bit that i think that does concern me um with with all of this is is how the vulnerable will will will fare with this the outcome there uh and in particular with my disability uh ambassador hat on how disabled people will be able to be looked after through the advice process and and actually the communication of everything we do whether we full fat advice or or target advice needs to really consider how we don't end up in the future with a problem around vulnerability and understanding vulnerability and and sending the wrong documents to the wrong people so here's a massive opportunity, I think, for really good data and actually then using that data to really look after the vulnerable clients that all advisors will have in varying numbers.

12:51Yeah, I mean, that's a really good point. And I think there is obviously a lot of focus at the moment on the vulnerability aspect of kind of having this, there's obviously the guide that the CII have put out and then there's a number of other ones that people have put out to help advisors navigate this so I think tying that in quite will come together quite well and kind of almost coming back to the the decision paralysis obviously that will be a lot a lot more kind of focused on those that are in the vulnerable space because it will it kind of mean that advisors then have to take on that little bit more responsibility or will it sort of be on the consumer and how will they be supported through that if you take that paralysis if you take a one group, the neurodivest people, then actually what's happening today is that we all have apps.

13:41We can all go on and watch our performance of all our funds. So actually, what we'll be doing is increasing number of people who will just have an app to track everything. So they won't have the comfort of an advisor guiding them, giving them confidence when markets are volatile. so they won't have that. What they'll have is the app and they'll have all that sort of remote information coming through to them. Now, if you're neurodiverse, that could be a real issue. So I absolutely believe that we are going in the right direction. What I think is important and what the CI guide really highlights is actually are we training people for this future way of giving advice?

14:27are we ensuring that people who are vulnerable and disabled people are part of the design process? So it's really important that we design everything with the variety of customers that potentially will be involved in this. And I think that the paralysis bit, certainly neurodiverse people, you overload them with information, it will become harder for them to make a decision. And that's really one of the real advantages of having an advisor and full advice is that you get helped with the decision making process and supported during volatile periods as well. Yeah, definitely. And I think that will be really key to see how firms implement it and how they take this kind of on board to make it more holistic or, you know, the kind of view of taking into account everyone, sort of different types of people.

15:22when it comes to obviously people that the actual uptake there is this argument that firms and and kind of um uh the industry in general is is competing with sort of the people on social media the the kind of influences the ai software that is now out that you can just sort of ask questions to do we think that simplified advice will be able to kind of win against some of those sort of competing areas? I think if you look at the FIM fluences and you look at AI, we've all been doing that for many years. We've all been talking to our friend in the pub. We've all been going on Google or doing our own research.

16:10That's not different to today. What is different is the sheer volume that you now have and the ease you can do that. And actually, I think it is, you know, these tools are really good and they can help and they can, if set up correctly, they can really work. The problem is you have to ask the right question to get the answer. I don't know, Clive? Yes, I think you're right. I think the important thing is that with targeted support and simplified advice, there will be an alternative to what is out there at the moment. and as targeted advice and simplified advice comes along as they grow and more people use them more people be aware that that's somewhere that they can go and they can go through the entire journey if they want to or part of the journey I think there'll be more information out there in the future at the moment firms have always been a bit reticent in the amount of information they provide not talking about financial advisors but but other firms because they're worried about straying in across the boundary into giving financial advice and now targeted support will allow them to give more information to more people so there will there will be an alternative out there yeah definitely and the the kind of question that i guess is on my mind and maybe other people's is will it sort of risk and maybe this is the point of simplified advice and targeted support and the whole advice guidance boundary but will will there sort of be a risk of there being a two-tier system or kind of a system a tiered system approach when it comes to advice and is that sort of the point or is that going to have sort of negative a negative impact i think there's two things first of all there is a support gap so there is a as a gap as eddie was saying only nine percent of people get full holistic financial advice so there there is a support gap of people who need advice probably want advice or support but but aren't getting it for various reasons and target support will allow for that and a simplified device will help that as well and then i think the second point is that it may be modular so it may be that somebody either starts, as I said, through their journey, at the beginning of their investment journey, with targeted support, then moves to simplified advice and then moves to full-fat, holistic advice, or they may do bits of all three of them, depending on where they are in their journey and what they want to do and how involved they want to be.

18:57So I think it will be a much more dynamic market in terms of services being provided, but also information that's going to be provided for consumers. And I think that can only be a good thing. Eddie, did you want to add anything to that? The bit I was going to add is we also perhaps need to look at it in the context of the rise of financial coaching as well because what we're seeing is lots of information, lots of employers now are actually keen to think about financial wellness for their employees. So if you take a step back and think about it from an individual's perspective, you now have more choice, more options.

19:41Some people are probably trading and getting involved too much and need some additional help and support. But ultimately, what you are seeing is better engagement. And if you look at the UK compared to other countries, that engagement hasn't really been there compared to, and certainly America is always the one that's often used, that people are far more invested in financial planning than they are in the UK. So I think we need to do this to get people involved. I sit on the board of the European Financial Planning Association. We've just launched some research on financial wellness across Europe.

20:20And what you see in the UK is that, and it's quite a marked difference, in the UK we estimate our income is much, much higher than it actually is. And we underestimate our expenses as a nation. And that's compared to other European countries. so there's clearly something not quite right when you look at the UK and money compared to other countries and and somehow we need to learn from what other countries are doing and then bring that into the UK so I think the FCA are starting that process and and hopefully we'll have more people engaged yeah definitely and it kind of ties me on to sort of my last question which would be if you were sort of designing simplified advice from scratch with no kind of regulatory concerns as such at this point, is there anything you would do differently or is there anything you would suggest to be done differently?

21:21I'll come back to the point I made, is that if we're going to get better design, we need to have the vulnerable involved, we need to have disabled people involved, we need to have firms involved, we need everyone involved. and I would question whether we have the full spectrum of people involved today. What I experience with disability is that many times something is designed and then we have to add bolt-ons to fix the things that everyone forgot about. So I'd really like to see and know what involvement there is for disabled people in particular in this process because they will have different needs and it will be great to get them in that original design rather than bolting it on later on.

22:12Yeah, definitely. I mean, it's a really fair point and probably one that needs to be considered that kind of little bit more. Can I have anything to add there in terms of the same question? Yes, I agree with Eddie. It's important to absolutely, as you say, when you're designing a new regime from scratch to consider vulnerable customers, how they're going to be identified, how their needs are going to be identified and how you support them through the journey. I think it's really important when the FCA look at designing a new regime for simplified advice, they obviously will look at it through the need for consumer protection, but also they need to look through the need of coming up with something which is commercially viable for firms, something where the the administrative costs the compliance cost and and the amount of risks that firms need to take or or will have to take is a is that a level lower enough which will make simplified advice commercially viable i think that we've kind of covered quite a lot of ground there and it's been really interesting to speak to you both so thank you for joining me unfortunately that is all we've got time for today so um i just want to say thank you to those who are listening join us next week as we discuss another hot topic in the financial services industry