New measures allow banks and financial firms to to provide investment and pension recommendations from April, based on the needs of similar customer groups.
The new initiative was authorised by the Financial Conduct Authority (FCA).
Sarah Pritchard, deputy chief executive of the FCA, described the change as “game changing” for consumers across the country.
She said: “It means millions of people can get extra help to make better financial decisions.”
Ms Pritchard said: “We also hope it will build greater confidence to invest” and added that people in the UK invest less than consumers in the EU or US.
The regulator believes the reforms will address a substantial gap in financial guidance that has left many people without suitable support.
FCA research found that nearly one in five adults relied on family, friends or social media for financial decisions.
The findings also showed just nine per cent of those surveyed received regulated advice on pensions and investments in the year to May 2024.
According to the FCA, around seven million adults holding £10,000 or more in cash savings could achieve better returns through investing.
Many who could invest have chosen not to because they felt uncertain about their choices or believed they needed more support to make decisions.
New measures from April allow banks and financial firms to offer investment and pension recommendations tailored to similar customer groups
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The regulator noted one in 10 people have no savings, while 21 per cent have less than £1,000 available for emergencies.
Targeted support will fall between general guidance and the fully personalised advice provided by authorised financial advisers for a fee.
Banks may, for example, outline how large amounts of cash could be placed in investments or how spreading money across different types of assets may reduce risk.
Ms Pritchard told the BBC: “It’s important that consumers understand what it is and what it isn’t, and it’s not detailed advice.”
The FCA confirmed the assistance should be free for consumers.
Ms Pritchard said: “Commission is banned, and we’re expecting most firms that do provide it, subject to our regulation, will be providing it free of charge to consumers.”
The help banks can now provide should be free for consumers
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GETTY /PAYvonne Braun, director of policy at the Association of British Insurers, said: “The FCA’s new rules mark a significant step towards closing the advice gap and will empower millions.”
Consumer groups have warned the framework must not become a mechanism for firms to take advantage of customers.
The FCA has outlined a series of safeguards to protect those receiving targeted support.
Firms must obtain authorisation before participating, with eligible organisations likely to include banks, building societies, investment platforms and digital wallet providers.
These firms will be required to show that their recommendations are appropriate and should only offer suggestions where they could leave customers in a better position.
They must also identify and respond to any customer vulnerabilities.
Consumers will continue to have the right to refer complaints to the independent financial ombudsman if disputes arise.
The FCA has additionally launched a “firm checker” tool designed to help the public avoid investment scams.
The changes will require legislation to proceed, though the Government has expressed support for measures intended to boost investment levels among the public.
This objective underpinned Chancellor Rachel Reeves’s move to cut the annual cash Isa allowance from £20,000 to £12,000 for under‑65s from April 2027
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GB NEWSThe Treasury considers increased investment activity to be a driver of economic growth.
This objective formed part of Chancellor Rachel Reeves’s decision to reduce the annual cash Isa allowance from £20,000 to £12,000 for people under 65, a change scheduled for April 2027.
The FCA said that investing carries risks because values can rise or fall, while inflation can erode the purchasing power of cash held in savings.
The regulator also acknowledged that investing will not be suitable for everyone, particularly given that one in 10 adults have no savings.
