New research by the ABI has revealed that 76% of the people it included in an advice 'experiment' made decisions leading to a better financial outcome when guidance was ‘personalised’ to an individual’s circumstances.

The ABI says this was in sharp contrast with just 14% of participants in the experiment who made a good financial decision when seeing only generic guidance based on existing regulations.

The ABI also found that customers may be more willing to pay for guidance that personalises information and is presented in a way that is tailored to their circumstances.

The life, pensions and investment provider trade body says that personalised guidance can help people to make, “effective, timely and informed decisions”, a key Consumer Duty requirement.

The ABI released the results of its research this week after the FCA last week said it was reviewing the advice/guidance boundary to open up new forms of personalised financial guidance to help millions more get some kind of financial advice.

The ABI said that when guidance was tailored to an individuals’ circumstances and offered “clear, relevant options”, consumers make better financial decisions.

The research was carried out by the Association of British Insurers (ABI) and researchers Thinks Insight and Strategy’s Behavioural Team.

The ABI said that customers were “struggling” to make crucial decisions about their savings, investments and pensions without regulated financial advice. It said that current rules restricted firms from providing guidance tailored to an individual’s circumstances.

The ABI research involved a number of research elements including running an online randomised controlled trial (RCT) with over 3,000 participants aged 55-66 and detailed questioning with 12 participants.

In the experimental setting, the ABI asked participants to choose how much to withdraw from a hypothetical pension pot. The experiment revealed that generic guidance can only go so far, the ABI said, with only 14% of participants able to make a decision that would leave them better off. This figure rose to 76% for participants who received personalised guidance which highlighted a course of action (in this case, a specific withdrawal amount to avoid higher rate tax) and provided helpful prompts about the decision. 

The research also revealed that customers may be more willing to pay for personalised guidance than generic guidance. Some 40% of participants said they would pay for generic guidance. This figure increases to 46% for personalised guidance that offers tailored options presented in a helpful way.

Seeing personalised guidance also reduced participants’ stated need to seek out additional information, from 56% down to 45%, potentially easing the decision-making process, according to the research.

The ABI said: “Our results strengthen the consumer case for financial service providers being able to offer personalised guidance and add weight to the Government and FCA’s recent proposal for a targeted support regime - where firms would be able to use limited personal information about a customer and their circumstances to provide more helpful support.”

Dr Yvonne Braun, director of Long-Term Savings at the ABI, said: “Our research clearly shows that customers can benefit from guidance tailored to their personal circumstances where it presents clear and relevant options to help decision making. This type of guidance should be enabled via the Government and FCA’s recent proposal for a targeted support regime, and we look forward to working further with Government and regulators to bring this regime to life.”

Personalised guidance is defined by the ABI as the provision of information and support, tailored to an individual customer, based on data the provider holds on the customer. Advice rules currently restrict pension providers, mutual societies and investment platforms from offering guidance beyond that which is generic and purely factual to non-advised customers.

• The ABI commissioned the Behavioural Team at Thinks Insight and Strategy to: identify the key decumulation decisions where personalised guidance could be helpful, and that could be tested in an experiment. It conducted qualitative research with 12 people in the UK to understand their approach to decumulation decision-making and also ran and online randomised controlled trial (RCT) with over 3,000 participants aged 55-66.