Written by Steve Fairclough, who has over 20 years of experience in financial services, compliance, risk management, and regulatory training, including senior roles at HSBC, the FCA, and major global banks. His extensive industry expertise enables him to deliver engaging and practical training on compliance, financial crime, and vulnerable customer care.The
FCA Targeted Support rules are a proposed new regulatory tier situated between "holistic" financial advice and "non-advised" information. A regulatory intervention designed to bridge the widening "advice gap."
Historically, the boundary between these two has been rigid. Firms either provided full regulated advice—involving a deep dive into a consumer’s personal circumstances—or they provided "guidance." Often so generic that it fails to help consumers make meaningful decisions.
For firms operating in the retail investment and pensions sectors, Targeted Support is no longer a peripheral policy discussion. It is a fundamental component of the future operating model.
Here’s what you need to know.
What is Targeted Support and Why Does It Matter?
Targeted Support allows firms to offer suggestions to consumers based on "people like you." It permits a level of personalisation that is data-driven and reflects a customer’s current position, without requiring the full, often expensive, suitability assessment process for holistic advice.
This matters because the "advice gap" in the UK is stark.
Millions of consumers hold significant cash balances that are being
eroded by inflation, or remain in legacy pension schemes that no longer meet their needs. Simply because they cannot afford, or do not feel they need, full independent financial advice.
Targeted Support is the regulator’s attempt to ensure these "mass affluent" or "underserved" consumers are not left to drift.
Who Offers Targeted Support and Why Consumers Want It
The primary architects of Targeted Support will likely be banks, building societies, and large-scale wealth managers or pension providers. These firms sit on vast amounts of customer data. They know when a customer has an "excess" cash balance or when a life event (such as a milestone birthday) might need a change in investment strategy.
From a consumer perspective, the appeal is clarity and accessibility. Most consumers do not wake up wanting "financial advice"; they wake up wanting to know if their money is in the right place.
Consumers value:
- Low Friction: The ability to receive a proactive suggestion through a digital banking app or a simple web portal.
- Affordability: Targeted Support is intended to be a low-cost or "free at point of use" service, funded by the firm’s broader commercial model rather than a hefty upfront fee.
- Confidence: It provides a "nudge" from a brand they already trust, reducing the cognitive load of navigating complex financial markets alone.
The Risks of Standing Still
For firms, the temptation may be to wait and see. However, the risks of failing to adopt Targeted Support are not merely commercial but regulatory.
1. Commercial Erosion: As larger incumbents and agile FinTechs adopt Targeted Support, they will "lock in" the mass market. Firms that stick strictly to a binary "full advice or nothing" model risk losing their future pipeline of clients.
2. The "Sludge" Risk: Under the
Consumer Duty, firms must not create "sludge" or friction that prevents consumers from making good decisions. If a firm has the data showing a customer is languishing in a poor-value product but fails to use the Targeted Support framework to highlight a better alternative, it may find itself in the regulator's crosshairs for failing to support "good outcomes."
3. Reputational Decay: In an era of high transparency, being perceived as a firm that only helps the "ultra-wealthy" while ignoring the needs of the average saver is a significant brand risk.
Compliance Concerns and the Consumer Duty
Implementing Targeted Support is not without its hurdles. The challenge we must solve is how to provide this support without inadvertently crossing the line into "regulated advice" (which requires a suitability report) or falling back into "generic guidance" (which is ineffective).
The key compliance anchor here is the
Consumer Duty.
Consumer Understanding
Firms must ensure that when they offer "Targeted Support," the consumer understands exactly what it is and isn't. There must be no ambiguity that this is a suggestion based on a cohort ("people like you"), not a bespoke recommendation based on a comprehensive fact-find.
Price and Value
If Targeted Support is "free," firms must prove how the underlying products recommended still represent fair value. The FCA is wary that firms may use Targeted Support as a sophisticated sales funnel for high-margin, proprietary products that may not be the best fit for the user.
Data Integrity and Bias
This is perhaps the most significant "evidential" challenge.
If a firm’s algorithm suggests a specific ISA or pension fund to a cohort, the data underlying that suggestion must be robust. If the data is biased or if the "Targeted Support" consistently favours the firm’s own products over better-performing alternatives, it will constitute a breach of the "Avoid Foreseeable Harm" rule of the Duty.
The "Target Market" Definition
Under the
Product Intervention and Product Governance (PROD) rules, firms must be precise about who the Targeted Support is for. Offering a "nudge" into a volatile equity fund to a customer cohort that demonstrates high capital-preservation needs would be a failure of governance.
Moving from Theory to Practice
The FCA Targeted Support rules represent a "brave new world" for UK financial services.
It is a pragmatic admission by the FCA that the previous advice boundary was too restrictive. However, with this new flexibility comes an increased burden of proof. Firms must be able to evidence that their "nudges" are driven by a genuine desire to improve consumer outcomes. Rather than just shifting units.
The transition requires more than a policy change. A change in culture and a deep understanding of the regulatory nuances are needed.
Navigating the boundary between guidance, targeted support and advice requires precision. We offer in-house
compliance training options, entirely customised to your firm's specific product suite and risk appetite. Our sessions are fact-based, drawing on the latest FCA commentary, ensuring your frontline staff and compliance teams are aligned with the new expectations to deliver commercially pragmatic compliance.
To discuss how we can tailor a training program for your team, please
contact us today.
FAQ
What is an example of FCA targeted support?
An example of targeted support from the FCA is a bank sending tailored guidance to customers who regularly keep large amounts of cash in a low-interest savings account.
The firm could identify that group and provide information about alternative savings products that may better suit their needs, without giving full regulated financial advice. The support is aimed at a specific group with common characteristics, rather than giving generic information to all customers.