Personal finance app Plum has received the go-ahead from the Financial Conduct Authority (FCA) to encourage those with significant cash savings to consider investing some instead.
As part of the government’s wider initiative to get British people back in the investing habit, one of the key changes announced was to try to fill the gap between free, general guidance around personal finances, and the paid professional advice which has long been out of reach for many.
Targeted support is intended to play a key role here, identifying groups of customers of banks or other financial services companies who have similar traits and who have the potential to put some of their money to work in investments.
It is estimated that over seven million adults across the UK have more than £10,000 in cash savings – and now Plum will join the cohort of firms who could get in touch with some customers over utilising some of that money elsewhere.
Plum’s addition to the list is notable, as it’s used by over 2 million people as an all-round personal finance app – for roundups, automations and challenges alongside the usual savings and pension options – rather than the often more formal-feeling banks, insurance firms and asset managers who are already approved to offer targeted support.
A year ago in announcing the plans, Sarah Pritchard, deputy chief executive of the FCA, said it would be a “game-changing” scheme which would let “millions of people get extra help to make better financial decisions”.
Over longer periods of time, investing can provide significantly better returns than cash savings alone can manage, though the added risk involved means there can be ups and downs along the way.
That uncertainty seems to have put off a generation of Britons from actively investing, but from next April at least £8,000 of each person’s £20,000 annual ISA allowance will be reserved for stocks and shares products, rather than cash ISAs only – another part of the government’s attempt to get more people investing.
In practice, approval will allow Plum and other firms to offer ready-made savings or investment suggestions to groups of consumers who share characteristics, rather than specific individual recommendations or suggesting exactly which investments to make.
The fintech firm will be among the first to offer an AI-led targeted support system, The Independent understands, allowing for automatic and proactive contact with customers who might otherwise leave larger amounts of money sitting in cash.
At present, The Independent understands that up to 15 firms have been approved by the FCA to provide targeted support, with 11 of those having publicly announced their involvement: Barclays, Aviva, Forester Life, Legal & General, Quilter Invest, Monzo, Bank of Scotland, Lloyds Bank, Vanguard Asset Management, Royal London Mutual Society and Zopa Bank. The Independent is aware of several more businesses who remain with open applications to also offer the service.
Will Bryant, director of wealth strategy at Plum, said: “It’s currently estimated by the FCA that 23 million consumers are underserved by the advice market. With cost-of-living challenges continuing to squeeze people’s pockets as energy prices rise, consumers need this type of support now more than ever.
“Targeted Support can help make sure people are making their money work harder for them and making strides towards actively building their wealth over the long term through investing - not just saving money and budgeting.
“Now Plum has been approved to offer Targeted Support, our customers will be able to access more helpful, ready-made suggestions to put them in a better position, helping them on their wealth-building journey.”
Victor Trokoudes, CEO and founder of Plum, added: “From day one, Plum has existed to democratise finance. Now, with targeted support approval, we’re going to further help the 91 per cent of people in the UK who don’t access personalised financial advice through the latest AI technology.
“Now we can deliver proactive support that helps customers make smarter financial decisions and find ways to make their money work harder over time.”
Plum is also expected to offer more personalised investment advice options to customers in future.
