Targeted support update – FCA publishes near-final rules on new form of advice

The FCA has had a long-standing concern that consumers are not getting sufficient help to make investment decisions. The FCA describes this as an “advice gap”, where consumers who could invest in other products and face complex decisions are not being given advice or guidance. This advice gap, in turn, leads to consumers not making the most of their finances or making decisions that are not right for them.

There are many reasons why the advice gap has arisen and why regulated firms are sometimes reluctant to give advice or guidance, including the following:

• The regulatory perimeter is not always clear. The current regime distinguishes between investment advice, which is a regulated activity - and guidance, which is not. Guidance typically involves providing help to a client but without offering views on the merits of a particular product. Firms can be reluctant to provide assistance where they are not clear whether that they are doing amounts to a regulated activity or not.
• The rules relating to investment advice are quite onerous. If the advice amounts to a “personal recommendation” – i.e. it is presented as suitable for the client or is based on a consideration of the client’s circumstances – the firm has to ensure that the advice is suitable under the FCA rules in COB9 and 9A. To do that, the firm has to obtain information from its clients regarding their knowledge and experience, their financial situation (including their ability to bear losses) and their investment objectives (including their risk tolerance) – and then must recommend products that are suitable, taking that information into account. In addition, staff who are engaged in financial advice may need professional qualifications. The operational burden of complying with these obligations is significant for firms.
• Firms perceive that the risks associated with the giving of advice are relatively high. Giving advice involves making a judgment call, which inevitably carries the risk of the adviser not giving the right advice. The risks of giving advice are also perceived to be heightened by the role of the Financial Ombudsman Service (FOS), which has the power to make compensation awards in favour of consumers against regulated firms. In particular:
  • The FOS does not follow precedent and makes decisions on the basis of what is fair and reasonable in the circumstances. There is a perception that the FOS may award compensation (with the benefit of hindsight) even if the firm was in compliance with the FCA rules when giving the advice.
  • The FOS has historically taken a broad view of what amounts to advice. Even if a firm tells its clients that it does not give advice, there are examples of the FOS awarding compensation because the client perceived the firm to have suggested that they should act in a particular way. To avoid this, some firms have ceased providing help to clients that might be perceived as advice – thus leaving clients with less help than they might otherwise have had.
• There is a perception in the market that clients are reluctant to pay for advice. This can lead firms to conclude that the rewards for giving advice do not justify the additional risks.
• There can be structural impediments to providing advice. For some types of investment, the FCA’s adviser charging rules means that clients have to pay directly for advice, and that cross-subsidisation of advice (e.g. through product charges elsewhere in the firm) is not allowed. This has made firms reluctant to assist clients in making decisions, even as a free or value-added service.

These are not new issues. The FCA has recognised the challenges for many years and there have been several previous initiatives to try and address them.

In 2022, the FCA and the Government began a joint review to examine the regulatory boundary between financial advice and other forms of support. This is known as the Advice Guidance Boundary Review.

The FCA is now making a series of changes to the rules relating to advice. In particular, there is an entirely new concept of “targeted support”, which will be a type of advice. Separate consultations and/or FCA guidance are expected in relation to simplified advice, the investment advice rules generally and the boundary between advice and guidance.

The new targeted support regime introduces a new regulated activity of “providing targeted support”, for which legislative change is required. On the same day as the FCA published its near-final rules, HM Treasury also published a response to the separate consultation that it had published in July 2025 regarding the draft legislation. The response shows that, save for some minor changes, HM Treasury is proceeding with the draft legislation as planned.

The HM Treasury response also noted that concerns had been expressed about whether the Privacy and Electronic Communications (EC Directive) Regulations 2003, which set out rules for how firms may contact consumers for marketing purposes through electronic means, could act as a barrier to targeted support. In relation to that, the Information Commissioners Office (ICO) and FCA have published a Jointly Prepared Statement which seeks to provide more clarity on how firms can deliver targeted support while complying with existing data protection regulations. HM Treasury recognises, however, that that statement will not cover all the issues and so it has announced that it will make further legislation to enable to workplace pension providers to deliver targeted support communications to members to have not opted-out of direct marketing.

The FCA has also issued a separate joint statement with the Financial Ombudsman Service (FOS), which is considered in Chapter 4 below.

Targeted support is a service under which a regulated firm can follow a four step process:

(1) Situations: Pre-define situations in which to provide targeted support (such as where consumers have a common financial support need or objective)

(2) Consumer segments: Pre-define a consumer segment (that is, a group of consumers with common characteristics).

(3) Ready-made suggestions: Pre-define a “ready-made suggestion” for the consumer segment.

(4) Delivery: Deliver the ready-made suggestion to a consumer who is aligned to that consumer segment.

If a firm follows this process, it can make suggestions to clients (in effect, a form of financial advice) without having to comply with all the obligations that would have applied if they had been making personal recommendations to those clients.

When should a firm be providing targeted support?

The FCA’s Consultation Paper gave examples of a number of consumer needs or objectives which the FCA anticipates might be met by targeted support. These included: consumers under-saving for retirement; consumers drawing down their pension unsustainably; consumers in a position to start investing; consumers who are investing in an expensive fund when a cheaper alternative is available; and consumers choosing between investments and pension products.

The new FCA rules include provisions relating to when and how firms should be providing targeted support. These include the following requirements:

• A firm must not provide targeted support in circumstances where it does not have reasonable grounds to consider that the provision of targeted support would put the client in a better position than if that support were not provided. (The version of the rules that was consulted previously on had referred to achieving “better outcomes” for the client, but this has been changed following the consultation.)
• A firm must not approach a client with a view to the provision of targeted support unless (i) the client initiates the approach; or (ii) the firm has reasonable grounds to consider that the client is in a situation which may be met by targeted support.

These requirements mean that, in practice, a firm will have to be selective about which of its clients it considers for targeted support.

What are “consumer segments”?

“Consumer segments” are groups of consumers in a common situation and, where relevant, sharing common characteristics. Firms will be required to identify the relevant consumer segments as part of any targeted support offering, and then only deliver a ready-made suggestion to a client where they identify that the client aligns with a consumer segment.

For firms who are planning to provide targeted support, the main points to note are as follows:

• Firms must define their consumer segments at a level of detail that is sufficiently granular as to enable the firm to assess whether a ready-made suggestion would be suitable for an individual within that consumer segment. Following the consultation, the FCA has introduced an additional requirement: a firm must not define a consumer segment at a level of detail that an adviser firm would reasonably associate with a comprehensive consideration of a person’s characteristics. This is to address the risk that the client may think that they are receiving full advice.
• Firms are allowed to make assumptions about the type of individuals covered by the consumer segment, but those assumptions have to be reasonable and referable to evidence. Following the consultation, the FCA has added further guidance regarding assumptions, including that firms must not make assumptions which are material to the suitability of the suggestion. There is no requirement to disclose assumptions to customers, but the FCA has clarified that should firms should inform the consumer, where appropriate, to support consumer understanding.
• Firms must ensure that, in a particular situation, it is only possible for an individual consumer to align with one consumer segment.
• A consumer segment can be developed without necessarily considering the common characteristics of clients. For example, if a firm identifies that clients are invested in a product where an equivalent cheaper product is available, it can make a consumer segment for those clients without having to consider the clients’ characteristics.
• When firms do consider common characteristics of clients, they have to consider not only the common characteristics that would align a client with a consumer segment (so-called “including characteristics”), but also common characteristics which that prevent a client from being aligned with a consumer segment (“excluding characteristics”).
• Firms are required to undertake verification – i.e. to confirm that a particular client is in the common situation and has all of the including characteristics and none of the excluding characteristics of the segment. Where this could mean that certain types of client (e.g. vulnerable customers) are more likely to be excluded from a consumer segment, the firm will have to identify ways to direct the individual to other forms of support.
• Firms must consider whether there is any other information about the client of which they are aware, or ought reasonably to be aware, that would indicate that the ready-made suggestion may not be suitable for the client. If there is, the firm should not make the ready-made suggestion.

What is a “ready-made suggestion”?

Ready-made suggestions could be suggestions to take action in relation to an existing product or service, or new products. They could also include suggestions to not take an action.

Firms will be required to have a reasonable basis for determining that the ready-made suggestion that it specifies for a consumer segment is suitable for all the individuals in that consumer segment.

Ready-made suggestions could include suggestions to invest in a particular product (subject to certain exceptions, in relation to which see further below). However, when designing a ready-made suggestion, the firm must be able to demonstrate how, for any product it intends to recommend, it has considered, at least (i) the costs and charges of the product; (ii) whether the target market of the product is consistent with the relevant consumer segment and ready-made suggestion; and (iii) the financial strength of the product provider. Firms will, in effect, have to do due diligence on any products that they recommend through targeted support.

The new rules only apply to “investments” and pensions. Investments in this context means securities (including investment funds and structured products) and investment-based life insurance products.

Other types of products, such as mortgages and non-investment insurance contracts (including pure protection insurance – i.e. life insurance without an investment element) are not in scope. The existing advice rules continue to apply in relation to those other products.

Within the category of investments and pensions, some types of products are also excluded. Targeted support cannot be used to recommend:

• that a client consolidates any of the pension arrangements that they hold;
• restricted mass-market investments (such as unlisted securities and qualifying cryptoassets);
• non-mass market investments (such as units in unregulated funds);
• investments which cannot be marketed to retail clients (such as certain types of derivative);
• products that are leveraged or which are structured in a way that means the consumer could lose more than they invest; or
• a particular annuity (although, following the consultation, firms providing targeted support will be able to direct consumers to whole of market annuity brokers, provided they do not do so within the targeted support interaction).

In some cases, such as with annuities and pension consolidation, part of the reason why targeted support is not available is because those products would require a detailed, personalised assessment which is incompatible with the targeted support framework.

Pensions dashboard service (PDS) firms cannot offer or provide targeted support as a post-view service.

The main points to note from the near-final rules are:

• Suitability and appropriateness: Targeted support is not subject to the suitability standards in COBS 9 and 9A that currently apply to firms when they make personal recommendations. However, a new chapter of the FCA rulebook (COBS 9B) contains detailed rules about targeted support – which include that the firm must be satisfied on reasonable grounds that the ready-made suggestion it specifies for a consumer segment is suitable for an individual in that consumer segment. This is, in effect, a new type of suitability test (COBS 9B suitability) specifically for targeted support. The FCA rules requiring an assessment of appropriateness (COBS 10 and 10A) do not apply (on the basis that COBS 9B suitability will already have been assessed).
• Client categorisation: A firm providing targeted support must treat its client as a retail client, even if the client could have been categorised as a professional client.
• Disclosures: There are specific disclosure requirements, including for the firm to disclose to the client (i) the fact that they are receiving targeted support rather than comprehensive, individualised advice; (ii) the common characteristics of the consumer segment that have been identified; and (iii) the nature of any limitations on the scope of products considered by the firm in developing its ready-made suggestions (including, if applicable that the firm has only considered products provided by the firm itself or its affiliates).
• Charges: A firm can elect whether to charge a client for the provision of targeted support. It is allowed to provide targeted support free of charge – and in the Consultation Paper, the FCA said that, in most cases, it expects that targeted support will be provided for free. Firms are reminded of their obligations under the Consumer Duty to ensure that the product offers fair value.
• Rule against commissions: A firm must not solicit or accept (and ensure that none of its associates solicits or accepts) any fees, commissions, monetary or non-monetary benefits in connection with its business of providing a targeted support service or any other related services which are paid or provided by: (a) any third party; or (b) a person acting on behalf of a third party. (There is an exception for referrals to whole of market annuity brokerage services.)
• Cross-subsidisation: Firms are allowed to use cross-subsidisation or multi-product pricing strategies to recover the costs of providing a targeted support service – so that, for example, a firm can charge higher prices for related products used by the same clients to compensate the firm for providing the targeted support. However, the cross-subsidisations will have to be reasonably representative of the cost of providing targeted support.
• Testing: Firms are required to test their targeted support communications and take reasonable steps to ensure consumer understanding.
• Design: When it designs a targeted support service, a firm is regarded as a manufacturer of that service – and when it provides the service, it is a distributor of that service. The firm therefore has to comply with the FCA’s product governance rules (PROD) for manufacturers and distributors. Firms are also reminded that the Consumer Duty applies to the design and delivery of targeted support.
• Complaints handling and access to the FOS: Complaints relating to targeted support will come within the jurisdiction of the FOS. In the Consultation Paper, the FCA said that, provided that the firm has operated within the targeted support regime and the consumer has not been misled, the FOS would not expect the firm to have conducted the same fact-finding or suitability process as required when giving a personal recommendation. On the day that the FCA published its near-final rules, it also published a joint statement with the FOS. The statement does little more than reflect what the FCA rules say, but it does contain an acknowledgment from the FOS that there are many differences between targeted support and other forms of investment advice and that the way firms deliver targeted support will evolve over time.
• Training and qualifications: There are no professional qualification requirements for employees involved in targeted support.
• Prudential requirements: Firms that choose to deliver targeted support will need minimum regulatory capital of at least £500,000. This is a baseline. The FCA has said that it is not proposing to add a scalar for targeted support at this time, but that it will keep this under review and amend its prudential requirements, as necessary, in the future.
• Ongoing monitoring: Firms must monitor, on an ongoing basis, the outcomes which are generated by their targeted support service, and review their processes (including their ready-made suggestions) both “regularly and with appropriate frequency”.
• Direct marketing: In the Consultation Paper, the FCA had acknowledged that if clients have opted out of receiving direct marketing, this could act as a barrier to firms who wanted to provide them with unsolicited suggestions as part of targeted support. On the same day that the near-final rules were published, the Information Commissioners Office (ICO) and FCA have published a Jointly Prepared Statement which seeks to provide more clarity on how firms can deliver targeted support while complying with existing data protection regulations.

“Providing targeted support” will be a new, separate category of regulated activity in its own right.  This will require legislation to be passed.

The new regulated activity will be different to the existing regulated activity of “advising on investments”.  The Consultation Paper said that the activities that the new concept entails would be ones that already come within the definition of “advising on investments”.  The intention is not to extend the regulatory perimeter to cover activities that are not regulated today.

One consequence of targeted support being a new type of regulated activity is that firms will need to apply to the FCA to vary their permission in order to be able to do it – even if they already have permission to give advice on investments. 

The FCA is not proposing any kind of “grandfathering” arrangement, under which a firm that already has permission to advise on investments would be entitled to a permission to provide targeted support as well.  See Chapter 8 regarding next steps.

Appointed representatives

During the consultation phase, it was not clear whether or not appointed representatives (ARs) would be able to provide targeted support.

In its consultation response, HM Treasury has now determined that AR will not be able to provide targeted support from the point of roll-out of the new regime.  However, HM Treasury says that it will review this position once its separate reforms to the AR regime have been introduced and are well established.

Guidance will continue to be an unregulated activity.  This means that firms providing guidance services can continue to do so without FCA authorisation.

The FCA says that it plans to improve its existing guidance on the boundary between (i) the provision of information and guidance, and (ii) the different forms of advice. 

An FCA consultation on simplifying and consolidating its investment advice rules is scheduled for Q1 2026.  This is expected to cover the concept of simplified advice and the advice/guidance boundary.

The new rules are likely to be helpful to firms in a number of respects:

• They introduce a new type of service which should be less operationally challenging than providing full advice.
• They reduce previous concerns that firms had about how advisory services must be paid for – in particular, by saying that firms can provide targeted support for free and that some cross-subsidisation will be allowed.

However, there are still likely to be challenges for firms that wish to operate in this space:

• Firms will be subject to significant operational obligations – including, in particular, the need for firms to ensure that ready-made suggestions are suitable for all the individuals in a consumer segment, and to have the right information about those individuals to make that assessment. Firms might look at the FCA’s expectations and conclude that there is not much difference between what they will have to do to support targeted advice and what they have to do under the current rules for full advice. Nevertheless, the possibility of having a more streamlined process may be attractive to firms – particularly those who are already set up to provide full advice.
• The FCA’s comment in the Consultation Paper that it expects most targeted support to be offered for free gives a clue as to how remunerative the new service is likely to be for firms. While targeted support may not be a significant driver of revenue in itself, the new service may help drive revenues for other parts of the business of firms who can also provide the other products that the client might be directed towards.
• The question of how the FOS approaches targeted support could affect the success of the targeted support initiative. As noted above, the FOS and FCA have published a joint statement, but it says little beyond restating what the law requires.
• The need for firms to obtain a new permission to provide targeted support is likely to be unhelpful, in that firms who want to provide the new service will have to go through a variation of permission process, with all of the additional work that that entails.

We will have to wait and see whether this initiative is more successful than some of its predecessors, but the willingness of the FCA to try and find a creative way to fill the advice gap is likely to be regarded positively.