Whenever I start writing about what the industry calls ‘the advice/guidance boundary’, I remind myself of when I was editor of Moneywise magazine back in 2015. A reader, Mark, took us up on the offer of a free advice session, on the condition that it was written up in the magazine, together with his photo.
Mark was a high earner in his mid-30s and had a spare £30k to invest that he’d inherited from a generous aunt. After a full fact find, the adviser advised him to put all the money into a self-invested personal pension (Sipp), and recommended this be invested in a global tracker fund.
Importantly, I received a thank you from Mark, who added that he had been considering a tracker fund in a Sipp, but this advice helped prompted him to do it. Without this, Mark would have left the sum languishing in bank account, while he procrastinated for a further six months.
The cost of that simple but sensible advice if Mark hadn’t come through Moneywise’s free service? An eye-watering £1,000, more than 3 per cent of his initial investment. This sort of fee on a small investment does massive damage to the end result over decades — in Mark’s case it could compound up and result in a pension that is £10k or more smaller by the age of 55. This is one of the few silver linings from the fact that advisers haven’t found it cost-effective to serve people like Mark.
Enter the regulator’s new big idea: targeted support. Summer 2025 has finished with the end of the consultation on this new regulatory framework that aims to bridge the gap between free guidance and expensive, personalised financial advice. Targeted support will allow financial firms to provide ‘ready-made suggestions’ to groups of consumers with similar financial needs.
It’s hailed as a once in a generation reform, but I’m worried that it’s going to fail.
Setting aside some of the practical concerns, the multiple calls for targeted support to form part of a broader ecosystem that includes greater access to financial education seem worthy but misses the point.
Oodles of financial education is already out there for those who want to educate themselves. The government backed website MoneyHelper is a brilliant resource, while every reputable financial services firm offers tools, guides and videos.
Plus, people in the ‘advice gap’ have even easier ways to find the solutions at their fingertips. I put Mark’s question ‘How should I invest £30,000?’ into Chat GPT and got a definitive answer – it recommended global equity index funds for someone with a horizon of 20+ years, and a Sipp for higher rate taxpayers. The AI also recommended a diversified model portfolio, made up of specified trackers – I couldn’t see much to argue with there.
AI is already ahead of the game in helping people to educate themselves. But will they be confident enough to actually push the button on an investment purchase?
What Mark had was a confidence gap, not a knowledge gap. And confidence isn’t solved without some personalisation and human interaction.
The former is exactly what’s missing from the targeted support proposals, which don’t take into account an individual’s wider financial circumstances, any specific money worries, or that personal financial circumstances can change dramatically between life stages.
People may only benefit marginally from support that is only relevant for their pension savings in isolation and at one point in time.
Meanwhile, some parts of the industry are already solving the confidence issue by human interaction, within the current guidance regulations. Take the example of financial coaching, which the industry is keen to label the non-regulated Wild West, but seems to be what consumers like Mark actually need.
Octopus Money has a model, built within the current rules, that it claims is thriving, leading its CEO to get an OBE for financial services earlier this year. It offers non-regulated coaching to give the personalised human touch to drive action, alongside AI-driven automated financial advice.
It’s only one example. But it illustrates that the problem wasn’t with the regulations, it was with the creativity of the financial services industry to find solutions.
My worry is that targeted support will take time to implement and embed, and may not be the magic pill that the industry is waiting for. Given there has already been 10 years of pension freedoms, it is time for firms to push the boundaries of existing regulations and find new solutions to inspire confidence.