Advisers have warned the FCA that its proposed introduction of targeted support under the Advice Guidance Boundary Review could cause significant consumer harm if the difference between guidance and advice is not more clearly defined.

Yesterday saw the close of the FCA consultation into the Advice Guidance Boundary Review.

The FCA consultation into targeted support is focused on helping consumers understand their choices around pensions and if it could help close the advice gap.

Advisers welcomed the idea of introducing targeted support as a valuable tool to help close the advice gap but warned of potential consumer harm if the difference between guidance and advice is not made very clear.

James Heal, director of public policy at wealth manager St James’s Place, said: “It is vital that it is clear for consumers, at the point of use, what a service is and isn’t. Targeted support must not be confused with financial advice if consumer harm is to be avoided. Users of targeted support will share some characteristics with a generic segment of customers and there should be helpful actionable steps available without the customers perceiving that they have been told what to do.

“The industry will most effectively be able to design their own targeted support offerings if the rules are clear about what targeted support is and isn’t.”

Steven Levin, CEO of Quilter, called for financial advisers to play a role in delivering targeted support but agreed clear boundaries must be set.

He said: “It is important to distinguish between targeted support and holistic financial advice. Those already receiving ongoing financial advice should have a holistic plan and thus not need targeted support. The new framework should focus on helping those who would otherwise struggle to access support.

“Affordability is a key challenge, and firms must have the flexibility to establish their own charging structures. If upfront fees are mandated, many of the people who stand to benefit most from targeted support may be discouraged from using it altogether. Ensuring that the framework is commercially viable for firms while remaining accessible for consumers will be critical to its success.”

Providers also welcomed the review, and called on financial advisers to offer targeted support.

Steven Cameron, pensions director at Aegon, said targeted support could benefit millions of non-advised individuals, but said barriers to success remain.

He said: “It will be essential that the Financial Ombudsman Service offers concrete assurances over how it will differentiate between its expectations for full advice and for the less personalised suggestions from targeted support.   

“The FCA has recognised that currently, the Privacy and Electronic Communications Regulations (PECR) rules may act as a barrier to firms being able to proactively offer targeted support. We believe there is justification for exempting firms with certain FCA regulated permissions from the scope of PECR.”

The Society of Pension Professionals (SPP) also highlighted some potential issues with elements of the proposed changes. In particular the professional association highlighted that they do not believe that targeted support will succeed without firms having access to wider pension savings information.

In their response to the consultation they also highlighted member concerns around risk, saying that providers will need clarity concerning how responsibility for complex decision will be allocated between providers and consumers if they decide to offer targeted support.