Targeted support aims to sit in the gap between full financial advice and its less formal counterpart, financial guidance. The FCA’s goal is that by introducing such a regime, consumers will be empowered to make decisions about their pensions and investments, and the 'advice gap' created by the prohibitive cost of financial advice will be reduced.
Imminent changes to legislation will be required to introduce the regulated activity of targeted support, and it is expected that firms will be able to apply for permission to offer this new regulated activity in March 2026, with final rules coming into force on 6 April 2026.
What will the targeted support regime look like?
Sarah Pritchard, Deputy Chief Executive of the FCA, has described the anticipated regime as 'game changing', and the recently launched policy statement sheds some light on the FCA’s framework for governing targeted support.
Key features of the framework include:
- Consumer segmentation – firms will pre-define groups, or segments, of consumers who have similar support needs or objectives (and, in relevant circumstances, common characteristics). A balance must be struck by firms in allowing segments to be 'sufficiently granular' without being designed based on a 'comprehensive consideration of an individual’s circumstances'.
- Ready-made suggestions – this is the form targeted support will take. Depending on the consumer’s segment, and using reasonable assumptions, firms will provide a particular ready-made suggestion to consumers, which may include doing nothing, allowing them to act and pursue their financial objectives. This approach allows firms to serve many consumers efficiently, and any ready-made suggestions will have to comply with pre-existing Consumer Duty requirements.
- Product governance – firms will have to adhere to the FCA’s Product Governance (PROD) rules, which aim to ensure firms have robust systems in place to design, approve, market and manage products throughout their lifecycle to help deliver for consumers.
- Communications – firms must explicitly label the support provided to consumers as 'targeted support', and they must also explain the basis of consumer segmentation, the nature of the service being provided, and its limitations.
- Monitoring outcomes – firms will have to ensure they regularly monitor outcomes to confirm their services continue to comply with Consumer Duty requirements. However, there is no obligation to assess each individual consumer’s outcomes.
Considerations for firms
The financial services sector is fiercely competitive; therefore, firms should consider whether they should apply for authorisation for targeted support to enhance their service offerings and strengthen their market position.
Alternatively, where a firm has already decided to pursue authorisation for targeted support, they will need to consider the implications of the recently issued policy paper, any changes it introduces to the regime, and the wider regulatory landscape to inform their approach.
Conclusion
For consumers who would not otherwise receive financial advice, targeted support has the potential to significantly affect the way they interact with firms and obtain information to make informed financial decisions. For firms to take advantage of this opportunity, they will need to ensure their governance structures and processes are consistent with regulatory rules.
MFMac regularly advises firms on financial services regulation. Please do not hesitate to contact us if you would like legal advice or assistance.
This article was co-authored by Matthew Paton, Trainee Solicitor in MFMac's Banking & Finance team.
