The Financial Conduct Authority’s consultation on targeted support could offer valuable opportunities for the UK’s mutuals and friendly society sector if implemented with flexibility, says financial services consultancy Broadstone.
The proposals would allow firms to apply for permission to offer targeted support to groups of customers sharing common characteristics, such as those who have not saved enough for retirement, or have large cash reserves despite being able to invest.
The FCA, which hopes this will improve consumer outcomes, has largely focused the proposals on banks, investment firms, and insurers, but Broadstone says the changes could also strengthen the offering of smaller mutuals and friendly societies. However, this may be limited by the smaller range of products and funds they offer, and the limited sizes or locations of their affinity groups, it adds.
Mutuals which combine savings, investments and with-profits products could use targeted support to guide members who are wary of short-term market volatility towards long-term value, says Broadstone.
However, Broadstone acknowledged that, by their very nature, mutuals and friendly societies have a smaller range of products and funds so it could be less clear the extent to which they can benefit from the proposals.
“The FCA’s targeted support proposals represent an important step in improving financial confidence and engagement among consumers who fall between guidance and full advice,” said actuarial director Rob Kerry. “Mutuals and friendly societies are uniquely placed to benefit from this evolution.
“Their member-focused model already promotes appropriate saving and investment behaviours, and targeted support could help them do even more to encourage the savings habit and improve long-term outcomes.
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“However, it’s vital that the final rules are proportionate and take account of the smaller scale and simpler product sets of mutuals.
“The regulator must ensure that well-intentioned rules do not inadvertently restrict the clear, practical guidance these organisations already provide to their members.”
Regulatory clarity is a key hurdle, added Broadstone, which warned that ambiguity in the proposals risks “stifling” communication between mutuals and their members, “which is at odds with the FCA’s stated aim of increasing consumer engagement”. It is vital that the FCA recognises the unique operating models of smaller mutuals and friendly societies when it publishes its statement, the consultancy added.
“Rather than inadvertently restricting the helpful guidance these organisations already provide, the new regime should make it easier for them to encourage the savings habit and improve financial resilience among their members,” said Kerry.
“If implemented proportionately, targeted support could become a powerful tool for the mutual sector. It has the power to help more consumers make confident, informed decisions about their financial future while staying true to the mutual model of long-term member benefit.”
