“Targeted support” consultation heralds new era for advice options

The Financial Conduct Authority (“FCA”) has published a consultation paper (CP) outlining their proposals for “targeted support”. The proposals in this CP25/17 build on several FCA investigations and consultations.

The FCA recognises that many people lack adequate guidance or confidence when making critical decisions about saving, investing, or drawing on their pensions. Whilst the concept of “investment advice” is longstanding, the rigorous obligations around it mean many firms choose not to offer it at all, or not to investors with lower investment amounts, or it is unattractively expensive for the investors involved. The FCA’s review suggests there is an “advice gap” for a broad population who would benefit from a more tailored facility than current “guidance-only” services, but who are often unwilling or unable to pay for comprehensive individualised advice.

To address this, the CP consults on an additional tier of help for consumers who might otherwise use fully personalised advice.

Overview of targeted support

The FCA’s proposals on targeted support propose a structured framework for firms wishing to provide this new form of support. Key elements include:

• Targeted Support Framework: Targeted support will be delivered by firms:
  • assessing pre-defined “situations” to provide targeted support;
  • creating pre-defined “consumer segments” – being groups of consumers who share common characteristics, such as life stage, financial objectives, or similar circumstances. These will be retail client groups, as the FCA has proposed all clients receiving targeted support are treated as retail clients; and
  • developing “ready-made suggestions” for each segment, which are more specific than generic guidance but not as tailored as full regulated advice. These suggestions are based on limited information. and are intended to be suitable for the group as a whole, rather than for any individual’s unique circumstances.

Firms must pre-define both the situations in which targeted support will be offered and the characteristics that include or exclude consumers from each segment. The process is designed to be flexible, allowing firms to update segments and suggestions as new scenarios or consumer needs emerge.

• Limitations: The FCA has suggested limitations to the targeted support option, including that it should not suggest particular annuities, consolidation into or out of pension products or high risk/restricted investments given the specific nature of those products (such as requiring more granular information).  
• Communications and Disclosure Requirements: Firms must clearly communicate that targeted support is not fully personalised advice and is based on limited data. Communications about targeted support must be clear, engaging, and tailored to the needs of the consumer segment, including those with characteristics of vulnerability. Key information, such as the nature of targeted support, the common characteristics of the segment, and any limitations on the scope of products considered, must be disclosed in a durable medium.
• Better Outcomes: The FCA’s central aim is to ensure that targeted support leads to better outcomes for consumers than if no support were provided.
  • Firms must provide consumers with the option to opt out of receiving a ready-made suggestion and, where appropriate, signpost to other sources of support or tools for further exploration.
  • Firms must act in good faith and use due skill, care, and diligence in designing and delivering targeted support, so suggestions are only made where there is a reasonable expectation of a better outcome for the consumer segment than if no support were provided.
  • The Consumer Duty underpins the regime, requiring firms to act to deliver good outcomes, support customer understanding, avoid foreseeable harm and ensure fair value. Product governance rules (PROD) also apply, requiring robust oversight of both the targeted support service and any products forming part of a ready-made suggestion.
• Regulated Activity: “Targeted support” will be a new category of regulated services – so firms will need to apply for a Part 4A permission to provide this, regardless of whether they hold an existing advising on investments permission or not. HM Treasury will separately specify the new activity (with a publication expected on this on 15 July), and consider whether appointed representatives will be allowed to provide targeted support, but the FCA’s assumption is that they will not be permitted to do so.
• Suitability: While targeted support will be regulated as a form of personal recommendation, it will not be subject to the full COBS 9/9A “suitability” rules that apply to individualised advice. Instead, firms must ensure that ready-made suggestions are suitable for all consumers in the relevant segment, based on the common characteristics used to define the group.
• Interaction with Existing Options:
  • Firms remain free to provide information and generic guidance as before, and can continue to offer full holistic advice or “simplified advice” where appropriate. Targeted support is intended to fill the gap between guidance and advice, providing a new option for consumers who do not need or cannot access full advice.
  • The regime is optional: firms are not required to offer targeted support, but those who do must comply with the new framework.
  • The FCA will also consult further to clarify the boundary between guidance and advice, giving firms more confidence to support consumers without inadvertently crossing into regulated advice.
• Product Governance and Monitoring: The proposals require firms to apply robust product governance processes to targeted support, including pre-launch testing, ongoing monitoring of consumer outcomes, and regular review of the service. Firms must be able to identify if any group of customers is experiencing different outcomes or harm and take action to address this.

Examples of targeted support

The FCA gives several examples of targeted support to illustrate how it could be used in contrast to generic guidance and full advice. Including:

• It would allow a firm to support an alternative pension contribution rate to a consumer under-saving for retirement.
• A firm could suggest that a consumer could access their pension in a way that is appropriate for their group if they are struggling with pension access decisions.
• A firm could suggest a specific investment product to consumers in a position to invest.
• A firm could suggest to a consumer investing in an expensive fund that a fund offering better value is available.

Revisiting simplified advice and guidance

The CP also confirms the FCA’s intention to review and clarify the rules around simplified advice, particularly for cases where advice is delivered on a narrow topic or for consumers with straightforward needs. The FCA will consult further on amendments to the suitability requirements to make it easier for firms to offer streamlined, cost-effective advice propositions, and to provide greater certainty on the distinction between simplified and holistic advice.

The FCA notes that whilst there are similarities between simplified advice and targeted support, there are important distinctions between them. Targeted support should be designed for a group of consumers with common characteristics rather than being individualised advice; while simplified advice focusses on, and takes into account essential information relevant to, a particular consumer’s specific need.

Potential Impact and Considerations for Firms

Firms contemplating the provision of targeted support should consider its implications for their business model, and the steps necessary to comply with the proposed regime. In particular:

• Authorisation Gateway: The FCA proposes an authorisation gateway to assess firms intending to provide targeted support  which will open before the rules come into effect, allowing firms to act quickly to offer the new service. 
• Product Governance and Consumer Duty: As targeted support will use group-level data to categorise customers, firms should review how they design, distribute, and monitor their proposed “ready-made solutions.” Product governance rules still apply, with robust oversight expected throughout the product’s lifecycle.
• Systems and Controls: Firms must establish internal processes for designing, approving, and monitoring targeted support, including record-keeping to evidence compliance, regular review of outcomes, and testing of communications to ensure clarity and prevent consumer misunderstanding. Adequate processes must be in place to identify relevant common characteristics of consumer segments, maintain quality checks around data accuracy, and ensure that suggestions remain appropriate over time—particularly for vulnerable customers.
• Disclosure and Communications: The CP emphasises the need for clarity of communications to ensure customers fully understand the limited scope of the help they receive. Firms should test and refine disclosures and consider layering information (from concise headline messages to more detailed explanations) as considered appropriate.
• Handling Overlaps with Other Services: Firms must ensure that consumers receiving targeted support do not confuse it with holistic advice or believe it confers extensive individual recommendations.
• Pricing Models: While many firms may opt to provide targeted support at no cost to consumers - for example, to encourage retention or to stimulate product engagement, they must still demonstrate compliance with fair price and value rules under the Consumer Duty. In line with the approach for investment advice, firms are not permitted to solicit or accept commissions or other benefits in connection with the provision of targeted support (except for acceptable minor non-monetary benefits). However, cross-subsidisation is permitted.

Next Steps

The FCA is currently consulting on these proposals, and interested stakeholders have until 29 August 2025 to respond. The FCA aims to publish final rules “by the end of 2025,” though the precise timeline may depend on the complexity of feedback received. Once the new regime is confirmed, the FCA will open a dedicated authorisation gateway for firms seeking permission to offer targeted support. Meanwhile, it is anticipated that further consultations will follow in early 2026 on aspects such as refining rules for simplified advice and clarifying guidance boundaries.

A version of this article was previously published by Reuters Regulatory Intelligence.