Supporting firms as they zoom in on Targeted Support

Advice firms, banks and insurers are actively preparing to deliver the Financial Conduct Authority’s Targeted Support (TS) framework. The regulator hopes that its bold new initiative, which is open from April, will help customers to bridge the long-standing advice gap. Under the proposals, firms will provide a tailored subset of guidance that sits between generic information and full regulated advice. Firms will be required to define customer segments, establish ready-made solutions, and match those to customers in a way that demonstrably improves outcomes. A2Risk has been busy helping some of the early movers to deliver Targeted Support propositions at inception.

The FCA has confirmed that simple risk questionnaires can be used within or alongside a targeted support journey. This makes sense. Asking customers to self-attribute their risk tolerance results in scores which are not calibrated vs the population. This cannot be expected to reliably identify the most appropriate segment for the customer.

Risk profiling questionnaires provide a simple and effective alternative. But questionnaires are not created equally. Complicated risk questionnaires involving situations and calculations may be too long or difficult. Its easy for those working in financial services to assume levels of knowledge which those seeking targeted support might not have. Other problems include incomplete or overly complicated definitions – all issued which can make the potential customer give up applying. And lengthy questionnaires may be have been designed for personalised advice.

A well-constructed set of questions will be easy for customers to engage with, making it more likely that the customer will complete the information gathering process, especially if the customer is quite new to investing.

For firms thinking about targeted support, clear questions are crucial to achieve:
• Better segmentation, enabling firms to identify which customer cohorts most need particular guidance paths under TS.
• Improved outcomes, by aligning suggested products and information to a client’s real risk profile.
• Regulatory defensibility, giving firms documented evidence they understood client needs and acted accordingly within the scope of targeted support.

At A2Risk we have spent 20 years specialising in risk profiling questionnaires for use in advice and guidance. Designing, testing and applying questionnaires is what we do. Each of our clients has their own proposition and journeys. A2Risk often help develop these processes. We often spot things that can be made simpler and find ways to clearly distinguish support from advice. Perhaps A2Risk can help your firm help to succeed in Targeted Support and help to bridge the advice gap.