Banks can ‘suggest’ investing to clients from April as City watchdog offers them new powers

Banks and financial firms will be able to offer targeted support from April next year, the Financial Conduct Authority has said, as the regulator looks to plug a massive advice gap.

It means they will be allowed to make generic recommendations to customers about what they could do with their money, based on their financial circumstances and the behaviour of others in similar situations.

This could include suggestions to people to invest for better returns if they are holding ‘too much’ cash. 

The FCA hopes this will lead to better financial decision-making among those who can’t afford, or don’t want to get, formal financial advice.  

The introduction of targeted support could see some 18million people receive extra help with their finances over the next decade, the FCA said.

The City watchdog estimates that there are some 23 million consumers that are underserved when it comes to financial advice and guidance.

Under targeted support, the FCA says consumers will receive recommendations from the financial firms that they use, but these won’t be based on in-depth individual assessments

As few as one in ten people obtain financial advice in the UK, the FCA says, with the advice gap meaning that most people – especially those in lower income households – don’t feel in control of their finances and might not be making the best decisions for them.

Many don’t seek advice due to the costs involved in doing so, or because they don’t realise that it could be suitable for them.

Some seven million people hold more than £10,000 in cash savings, FCA data shows, which it says could deliver much better returns if held in stocks and shares.

Sarah Pritchard, deputy chief executive of the FCA, said: ‘Targeted support will be gamechanging. It means millions of people can get extra help to make better financial decisions.

‘We also hope it will build greater confidence to invest. While investing will not be right for everyone, we know people in the UK invest less compared to the EU or US.

‘People in the UK could be missing out on the potential benefits of investing in the medium to long term.’

Government in investing push 

The move comes as the Government continues to push investing to retail customers in the hopes of creating a ‘culture’ of investing in the UK. In the Autumn Budget, the cash Isa allowance was slashed to £12,000 in a bid to get more people to invest.

Over the long term, investing is likely to deliver much higher growth than cash, but many don’t know where to start.

Before investing, it’s advised to make sure you already have an emergency fund of at least three months’ essential expenses in cash, and that you won’t need the money you are investing for at least five years.  

Under targeted support, the FCA says consumers will receive recommendations from the financial firms that they use, but these won’t be based on in depth individual assessments.

‘Firms will need to make sure the recommendations are suitable and should only be offered when it puts consumers in a better position,’ the regulator said.

Firms with have to apply to the FCA to offer targeted support from March 2026.

Tom Selby, director of public policy at AJ Bell said: ‘The FCA is bang on when it says targeted support has the potential to revolutionise the help millions of people receive about their finances. 

‘The status quo simply isn’t working, with the gold standard of regulated advice out of reach for the majority and generic guidance failing to give people sufficient help with what can often feel like an intimidating financial landscape.

‘Targeted support will allow firms to help customers make better informed decisions about saving, investing and retiring. This in turn should boost engagement and understanding and give more people a fighting chance of building financial resilience both now and in the future.’

However, there are concerns that the move won’t go far enough to address the problem.

Ruth Handcock, chief executive of Octopus Money, said: ‘Allowing firms to make specific, suitable suggestions under the FCA’s new model will help people who currently receive no meaningful financial guidance at all, but it cannot be the end point. 

‘For the 54 per cent of people keeping their money in cash, investing still feels high-risk and inaccessible.

‘Where targeted support can unlock commercial opportunity is in encouraging firms to experiment – to test new models and reach the millions who currently get no help at all. 

‘It won’t close the advice gap on its own, but it has the potential to create the conditions for a more ambitious, more accessible advice market.’