Banks to push investments on savers under Treasury shakeup

Banks and brokers will be allowed to push their own investments to millions of consumers under plans to relax strict financial advice rules, Telegraph Money understands.

Sources close to the discussions, which have been ongoing for months, said Treasury ministers are considering reforms to regulate financial guidance.

Currently, financial guidance isn’t regulated. Banks and brokers can only guide consumers to investments and products if they offer financial advice and charge fees – which many customers cannot afford.

The Telegraph understands Treasury ministers are now considering asking the Financial Conduct Authority (FCA) to regulate financial guidance so banks and brokers will be allowed to guide customers to a set of their own investment products without straying into financial advice.

The changes, if signed off, mean banks and brokers will be allowed to monitor customers’ savings and assets and market their own investment portfolios and products to them – much like what banks do already when they email or call to offer personal loans or credit card deals – without falling foul of strict financial advice rules.

The Telegraph understands ministers are considering bringing in so-called investment pathways at the same time. Banks and brokers will likely be limited to offering a handful of approved funds, based on risk, in an effort to protect consumers.

These, combined with guidance rule changes, will allow bank staff to directly recommend investments and products to new and existing account holders, either in person or online.

Currently, a regulated firm can only point to wide-ranging and generic investment options and not recommend one option over another. But the proposed changes mean they can guide consumers towards their own products whenever they want.

The changes raise questions about what consumer protections will be in place if millions of people are marketed investments by firms trying to sell their own products, which may not be suitable for them.

The Telegraph has learned that some high street banks and large investment brokers are already preparing for the rule changes, and are building online and in-branch propositions so they can attract millions more consumers who currently cannot afford financial advice.

These services can be offered to customers at a fraction of the cost of financial advice, which is costly because of strict regulation and compliance.

Ministers hope the low cost will allow millions more to invest and make better financial decisions, as, according to the FCA, the City watchdog, only around 10pc of the public currently seeks out financial advice.

Industry stakeholders have for years tried to water down decade-old guidance rules that were brought in after various scandals. But the FCA has until now resisted any changes.

This is because the regulator wants to protect consumers from misselling and rogue salespeople. Regulated advisers need to follow FCA rules or face bans, fines and penalties if they do the wrong thing.

A Treasury spokesman said “no decision” has been made on the changes, but that it and the FCA will outline proposals in a policy paper later this year.

They said: “People ought to know how they can make their money work for them.

“This review aims to make it easier for people to get useful support with their financial decisions.

“While no decisions have been made, we and the FCA will continue to engage the sector on how best to deliver this.”

The Government has been pushing various financial services changes in recent months as part of Chancellor Jeremy Hunt’s Edinburgh Reforms.

Ministers want more people to invest their savings and receive better financial advice and guidance to make the most of their money, as well as boost the UK economy.

The Telegraph revealed last month that savers will be pushed to invest in stocks and shares under a shakeup of the Isa regime being considered by the Treasury.