The Financial Conduct Authority (FCA) is spearheading a significant reform of the UK’s financial advice sector, proposing changes that could unlock billions in dormant savings for productive investment. This initiative aims to address a long-standing “advice gap,” making investment guidance more accessible to millions of British adults currently holding substantial cash reserves that could yield higher returns if invested.
At the core of the FCA’s strategy is the introduction of two new categories of advice: “targeted support” and “simplified advice.” These frameworks are designed to enable financial firms to offer general recommendations to groups of consumers with similar profiles or specific product suggestions, respectively, without the exhaustive, costly suitability assessments typically required for personalized advice. This move represents the most substantial overhaul of investment advice regulations in a decade, intending to streamline the process for both providers and consumers. Analysis by Barclays highlights the magnitude of the opportunity, estimating that approximately 13 million UK adults are holding around £430 billion in cash savings—equating to more than six months’ income—that could be channeled into investments.
This regulatory shift comes more than a decade after the FCA’s Retail Distribution Review, which, while enhancing the quality of financial advice, inadvertently made it more expensive and less accessible for a broad segment of the population. The new regime is a direct response to this “advice gap,” particularly for the estimated 7 million British adults who possess over £10,000 in cash savings but no investments. By reducing the regulatory burden for certain types of advice, the FCA seeks to empower a significant portion of the population—estimated between 13.5 million and 30.6 million individuals—to make more informed investment decisions, fostering a healthier retail investment culture across the nation.
Industry Perspectives on Reform
The FCA’s proposals have garnered considerable attention and broad support from key figures within the UK’s financial industry. Dan Olley, Chief Executive of Hargreaves Lansdown, the UK’s largest ‘DIY’ investment platform, described the proposals as “genuinely transformational.” He emphasized the critical moments in life when individuals find themselves in the advice gap, unable to afford comprehensive financial advice yet needing more guidance than current rules permit.
James Daley, a leader at the consumer advocacy group Fairer Finance, while acknowledging the positive direction of the changes, underscored the importance of implementing these proposals with robust consumer protections. His comments reflect a vital concern that increased accessibility should not compromise consumer safety or lead to exploitation. Similarly, Jon Cleborne, Head of Vanguard in Europe, welcomed the proposals as crucial for enabling more people to benefit from long-term investing and achieve their financial objectives. Verona Kenny, Chief Distribution Officer at Aberdeen Adviser, highlighted the pressing need for such reforms, noting that over 40% of individuals admit to having done little to financially prepare for retirement. She views these changes as a generational opportunity to address this widespread issue, potentially mobilizing significant capital for long-term growth and individual financial well-being.
Michael Carter holds a BA in Economics from the University of Chicago and is a CFA charterholder. With over a decade of experience at top financial publications, he specializes in equity markets, mergers & acquisitions, and macroeconomic trends, delivering clear, data-driven insights that help readers navigate complex market movements.