People who might otherwise turn to friends, family, or social media influencers for financial advice are to be given new help to invest their money.

Targeted support from registered banks and other financial firms is being given the go-ahead by the City regulator and should start in April.

This will allow firms to make investment and pensions recommendations based on what similar groups of people could do with their money.

It still falls short of individually tailored advice, which can only be provided by an authorised financial adviser for a fee.

Nearly one in five people turned to family, friends or social media for help making financial decisions, according to a survey by the Financial Conduct Authority (FCA).

Sarah Pritchard, deputy chief executive of the FCA, said the new regime would be “game changing”.

“It means millions of people can get extra help to make better financial decisions,” she said.

“We also hope it will build greater confidence to invest. While investing will not be right for everyone, we know people in the UK invest less compared to the EU or US.”

Investing money is not an option for millions of people. The regulator said that one in 10 people had no cash savings, and another 21% had less than £1,000 to draw on in an emergency.

However, FCA data suggested about seven million adults in the UK with £10,000 or more in cash savings could receive better returns through investing.

Investing does come with some risk as the value of an investment can go down as well as up, but the spending power of cash savings can be eroded by rising prices.

The regulator said that many consumers who were in a position to invest but chose not to did so because they were unsure of their options, felt overwhelmed,  or needed more support. Only 9% of people surveyed received regulated advice on their pensions and investments in the 12 months to May 2024.

Targeted support aims to bridge a gap between general guidance and information, and financial advisers who charge a fee.

For example, banks could explain how a large pot of cash savings could be invested, or how investments could be spread out to reduce risk.

“The FCA’s new rules mark a significant step towards closing the advice gap and will empower millions,” said Yvonne Braun, director of policy at the Association of British Insurers.

Some consumer groups have made clear that the new rules must not be a pathway to firms exploiting customers.

The FCA said firms taking part would need to be authorised in advance. They might include banks, building societies, investment platforms and digital wallet providers.

They would also be required to show that their recommendations were suitable and should only be offered when it put people in a better position, the regulator said. Any customer vulnerabilities would need to be identified and taken into account.

Consumers will have the right to take any disputes that arise to the independent financial ombudsman.

There will also be a move to allow people to make more informed decisions with their pensions.

The regulator’s new rules will require legislation, but the government has made it a clear objective to encourage people to invest. The Treasury believes this will help to create economic growth.

It was one of the reasons for the decision by Chancellor Rachel Reeves to cut the annual allowance for cash Isas (Individual Savings Accounts) from £20,000 to £12,000 a year for under 65s, from April 2027.

Separately, the FCA has launched a “firm checker” tool to help prevent people from losing money to fraudsters through investment scams.