The FCA's recent proposals for the introduction of "targeted support" are part of its continuing efforts to enable consumers to make more informed decisions about their pensions and investments. The goal is to close the "advice gap" so that more people get the help they need to make better choices for their long-term financial health. Firms providing targeted support will be able to make specific recommendations to groups of consumers with similar characteristics to help them achieve better financial outcomes. The importance attached to this by the Government was confirmed in this week's Mansion House speech in the context of reversing the "tangled system of financial advice and guidance" which has led to consumers not receiving the right support.
The FCA's paper also discusses the importance of consumers having a range of options when it comes to accessing support for financial decision-making. This includes "simplified advice", which the current rules allow but which firms are wary of providing. The FCA will consult separately on changes to make it clearer when simplified advice can be given without firms worrying about being in breach of the rules.
We expect there to be high levels of engagement with the FCA's proposals and wide support for their introduction. Although the FCA does not anticipate that all firms will offer targeted support, it seems likely that many will want to help their customers make better choices.
Below, we consider some key aspects of the FCA's proposals (see CP25/17). In a later post, we will look more closely at the proposals and at some of the issues they may raise for firms. The deadline for comments is 29 August 2025, which is shorter than the more usual 12 weeks. Final rules are expected by the end of the year.
The bigger picture
The Advice Guidance Boundary Review was launched in 2022 to consider the regulatory boundary between regulated financial advice and other forms of support. It reflected a growing concern that consumers in the UK are not getting the financial help they need when it comes to making important decisions about meeting their long-term financial needs (the so-called "advice gap"). This was despite earlier initiatives, which aimed to improve outcomes for consumers in retail investment markets. For example, whilst the Retail Distribution Review improved professionalism and transparency in financial advice, it also left many consumers unable or unwilling to pay for financial advice, particularly those with smaller investment needs.
An FCA discussion paper (DP23/5) published in December 2023 contained proposals for closing the advice gap by creating a regulatory system that incorporates different forms of advice and support. The FCA subsequently released CP24/27 which contained high-level proposals on targeted support for pensions customers. CP25/17 builds on those proposals and expands their scope to cover retail investments.
What is targeted support?
Targeted support represents a new form of support for consumers to help with financial decisions about pensions and retail investments. On the information/guidance to regulated advice continuum, it will sit between existing guidance and information services and full financial advice. It will enable firms to provide "ready-made suggestions" that are designed for groups of consumers with common characteristics. Each such group is referred to by the FCA as a "consumer segment". The ready-made suggestions will relate to a particular product or course of action, including a firm's own product.
Underpinning the targeted support proposal is that customers should achieve "better outcomes" than if targeted support had not been offered. This aim is related specifically to their financial position before versus after receiving targeted support. This is distinct from the Consumer Duty requirement that they achieve "good outcomes", which will continue to apply across all of a firm's services. The FCA emphasises that the provision of targeted support could contribute to the fulfilment of a firm's overarching Consumer Duty obligations, but that does not mean that it will automatically be considered as having complied with the duty.
The FCA acknowledges that there is a trade-off: targeted support suggestions may not be as beneficial as more personalised recommendations given through advice provided to an individual consumer. However, it is willing to accept this trade-off, not least because many consumers who do not receive support are experiencing harms.
The possibility that targeted support acts as a "stepping stone" to simplified advice or more comprehensive investment advice is also contemplated in the consultation paper.
Targeted support: legislative framework
Under the current regulatory framework both the FCA and the Government take the view that targeted support would be regarded as a "personal recommendation" for the purposes of Article 53 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). Recommendations (or "suggestions") made by a firm that is providing targeted advice are, however, designed for groups of consumers which share characteristics and circumstances and will be based on more limited information than is needed to deliver a personal recommendation.
Firms who provide targeted support will, as a consequence, be subject to bespoke conduct standards that are distinct from the requirements that apply to Article 53 activities. To enable this, the Government has published draft legislation which will establish targeted support as a new regulated activity under the RAO, at the same time as excluding it from being "advice" under Article 53. This avoids any need to amend the definition of a "personal recommendation" and the disruption that such a change would inevitably bring to the advice market.
Targeted support: regulatory framework
The FCA's approach to setting a regulatory framework for targeted support has been to use existing requirements, where possible, underpinned by the Consumer Duty. It will also set new outcomes-focused conduct standards which are designed to give firms the flexibility to tailor targeted support journeys that work best for their customers.
There is a great deal for firms to digest here, but some of the key aspects of the proposed framework and conduct standards include:
- Existing suitability requirements in COBS 9 and 9A will not apply to targeted support.
- Nonetheless, the FCA's draft rules, when taken in conjunction with Principle 9 ("A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment"), are designed to ensure that suggestions made are suitable for all consumers in the relevant pre-defined consumer group.
- Firms can choose whether to offer targeted support to their customers. It is not something that they have to offer in order to fulfil their Consumer Duty obligations.
- However, where a firm does offer targeted support, it must treat all recipients of targeted support as retail customers and the Consumer Duty applies to its design and delivery.
- Providing targeted support also does not necessarily mean a firm is meeting all of its broader obligations under the Consumer Duty.
The FCA suggests that its proposed standards for targeted support are likely to be satisfied by a firm that:
- sensibly identifies situations posing a risk of foreseeable harm to customers or the potential for customers to better meet their financial objectives;
- competently determines ready-made suggestions for those situations; and
- carefully identifies who that suggestion is for (or not for) so that the ready-made suggestion is not mis-delivered
The FCA is also seeking to future-proof its rules as much as possible. It wants to ensure, for example, that any rules developed for targeted support do not act as a barrier to the use of safe and responsible AI.
What is simplified advice?
In contrast to targeted support, the FCA describes simplified advice as a type of personal recommendation, which is focused on a consumer's specific need and assessed as suitable by taking account of essential information relevant to that need.
Existing suitability rules in COBS 9 and 9A allow firms to provide advice that is broad or narrow (the latter encompassing simplified advice). However, despite FCA guidance on streamlined advice and earlier policy interventions, there has not been widespread adoption of simplified advice models. The FCA acknowledges that inconsistency in terminology and previous proposals may have led to confusion on the part of firms.
As its next step, the FCA intends to publish a consultation paper in January 2026 to create a clearer distinction between simplified and more holistic advice. Through this process, it will seek to remove ambiguity and give firms greater flexibility to develop and deliver appropriate advice propositions to meet different consumer demands and needs.
Importantly, the FCA considers that this approach will encourage innovation as firms seek to develop more efficient means of delivery, including through greater use of technology (for example, automated and hybrid models).
Conclusion
There is a sense in the market that these proposals could bring about real change in how consumers invest. The FCA wants to see a "thriving and trusted market for full financial advice, simplified advice, targeted support and guidance". Its vision is for well-informed investment and pension decisions to become the norm. Not only will this help individual consumers achieve good outcomes, but increased market participation will release capital that will drive the UK economy and boost growth - a key strategic priority and a secondary statutory objective for the FCA (see our previous blog post on the FCA's priorities for regulation).
Although the FCA does not anticipate that all firms will offer targeted support, it has indicated that firms have expressed "significant interest" in the proposals. One obvious attraction for some firms will be that they can steer people towards their own (suitable) products via "ready-made suggestions". Care will need to be taken in such cases, however, that firms' other obligations to customers, including under the Consumer Duty, are met.
Firms that look to offer targeted support will also need sensible and prudent governance frameworks and controls. They will need to map consumers to consumer segments and, although this categorisation is sensibly couched in the firm having "reasonable grounds", it will become trickier if a firm has additional information on a consumer over and above that of the common characteristics of that pre-defined consumer segment. Firms will be expected to take that into account when considering suitability.
This new approach will also need active support from the FOS, so that the application of its "fair and reasonable" jurisdiction to future complaints does not, in effect, erase or undermine the distinction between the proposed categories of advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
