UK: FCA Policy Statement on targeted support – retail investment aspects

Why should I read this?

FCA Policy Statement PS25/22 “Supporting consumers’ pensions and investment decisions: rules for targeted support” sets out near final rules under which financial services firms will be able to give targeted support to the estimated 23 million retail customers currently underserved by the market for advice and guidance, so that they can be assisted to make better investment decisions.

Targeted support is part of the FCA’s attempt to close the “advice gap”; currently less than 1 in 10 people obtain regulated financial advice.   This is at least partially the result of firms being wary of giving consumers specific help or guidance on their investments and financial position in case it crosses the boundary into investment advice and brings with it the associated significant compliance burden.

Targeted support will allow firms to:

In this briefing we consider the application of targeted support to retail investment products and the making of recommendations to retail consumers.  Our Pensions colleagues will publish thought leadership considering the pensions aspects of targeted support in due course.

Giving targeted support will be a new specified activity and firms wanting to give targeted support will need to obtain authorisation to do so.  Targeted advice will involve the giving of recommendations which are designed for groups of consumers sharing similar characteristics, rather than such advice being based on an in‑depth individual assessment.

Following feedback to consultation papers CP25/17 “Supporting consumers’ pensions and investment decisions: proposals for targeted support” and CP25/26 “Consequential Handbook changes following the proposals in CP25/17” the FCA has revised its proposals as follows:

The FCA stands ready to implement the targeted support regime as soon as the UK Government passes the necessary legislation to make targeted support a new specified activity in the Regulated Activities Order (RAO).

See our previous client briefing, “UK: Targeted support for retail customers of financial services firms”.

What do I need to know about targeted support?

Package of reforms

The FCA’s targeted support policy is part of a package of reforms intended to further the FCA’s secondary growth objective.  The reform package is intended to increase access to and the appeal of retail investment products in the UK, and includes:

Purpose

The FCA intends targeted support to enable millions of consumers to receive suitable and meaningful support in a range of circumstances.  The FCA estimates that at least 18 million people could be offered targeted support within a decade.

Authorising firms to provide targeted support

Existing authorised firms wishing to provide targeted support will need to apply to vary their permission to do so.  The FCA’s pre‑application support service (PASS) has been assisting firms considering offering targeted support since October 2025.

The FCA says it is on track to open the gateway for applications from firms to vary their permissions in March 2026, with the aim of granting the first permissions at or soon after the anticipated commencement of the rules in April 2026.

Targeted support framework

The regulatory framework for targeted support covers its design, delivery and purpose.  The section of the policy statement on the framework considers the changes that the FCA has made from the proposals set out in its consultation papers.

Purpose statement

The FCA has updated its purpose statement for targeted support, replacing the word ‘outcome’ with the word ‘position’ so that it now reads:

“A firm should not provide targeted support in circumstances where it does not have reasonable grounds to consider that the provision of targeted support would achieve a better position for the client than if that support were not provided.”

Suitability

Suitability does not need to be assessed at the individual consumer level when providing targeted support.  The targeted support framework is designed so that a consumer within a properly designed segment should receive a suggestion suitable for them. Suitability should be assessed at the point of specifying the ready‑made suggestion for the relevant consumer segment and not on an ongoing basis for individual consumers.

Future proofing

The FCA believes that the outcomes‑focused nature of targeted support will enable regulations to remain fit for purpose as technology develops. The FCA intends to engage closely with industry to ensure clarity around use of AI including for targeted support.

Pre‑defining situations for targeted support

The FCA has confirmed that when it refers to ‘common’ in the context of defining situations it means situations that are shared by multiple consumers, not that those situations should be relevant to a large majority of a consumer base.

Situations can be pre-defined by reference to potential customers as well as existing customers.

Pre‑defining consumer segments

In order to clearly define the boundaries of targeted support, the FCA has introduced a new requirement that firms must not design segments with a level of detail that would reasonably be associated, by a firm in the business of providing investment advice, with a comprehensive consideration of an individual’s circumstances or characteristics. This requirement replaces the guidance that consumer segments should not be overly individualised, and that common characteristics should not be overly complex.

The FCA expects that firms should consider creating new consumer segments or signposting consumers to other forms of support at the design stage when pre‑defining excluding characteristics.  The FCA’s aim in doing this is to reduce the risk that vulnerable consumers are excluded from targeted support or do not receive the support they need.

Firms might also want to consider creating risk questionnaires and the development of basic risk categories, such as preference and/or tolerance e.g. on a scale of 1 to 5, in support of correctly aligning consumers with segments.

Using assumptions

The FCA wants to enable firms to design consumer journeys that do not involve a comprehensive consideration of a consumer’s characteristics or circumstances, and its continues to see a place for assumptions in the framework.  However, firms must not make assumptions which are material to the suitability of the targeted support suggestion. The suitability of the suggestion for individuals in the segment must be assessed by reference to the situation and, where relevant, the common characteristics of the segment, not the assumptions.

An example given by the FCA of an acceptable assumption would be the assumption of a willingness to take investment risk, but only where it is not material to the suitability of the attendant suggestion.

Pre‑defining ready‑made suggestions

Ready-made suggestions can be actions in relation to a new or existing product or service, or could involve not taking an action, and may be accompanied by guidance, which if integral to the suggestion, should be developed within the targeted support framework.

The FCA intends, in due course, to consult on changes to its perimeter guidance with the intention of giving better guidance on the boundaries between guidance and advice, and between targeted support and other forms of advice, but notes that the introduction of targeted advice does not change the boundary between guidance and advice.

Product limits and ready‑made suggestions

Non‑Mass Market Investments (NMMIs), Restricted‑Mass Market Investments (RMMIs) and products covered by restrictions in COBS 22 cannot be included in ready-made suggestions.  However, ready-made suggestions can include recommendations of products which have a component part that provides some exposure to one of these restricted products, e.g. a packaged product or default arrangement with an appropriately diversified asset allocation with some exposure to a Long‑Term Asset Fund (LTAF).

The FCA does not envisage that targeted advice could include recommendations regarding specific annuity products or the consolidation of a client’s pensions, given how personal such recommendations would need to be.

Delivering targeted support – verification

Firms can use existing data they hold, or collect new data, to align a consumer with a segment.  However, if a firm thinks the information used to segment a consumer may not be accurate, then they must verify this information with the consumer before they use it to align them with a segment.

Delivering targeted support – additional information

Firms must not provide a ready‑made suggestion if it is, or ought reasonably to be aware of, information about the consumer that indicates the suggestion may not be suitable, for instance the firm is aware that a customer is vulnerable, has debts or shows other indicators of low financial resilience.  This applies equally to information already held by a firm as it does to information volunteered during a targeted support journey.

Providing high‑quality targeted support and monitoring outcomes

Firms providing targeted support will be responsible for monitoring the outcomes of that targeted support, but they will not be required to carry out ongoing suitability assessments for individual consumers.  The FCA’s proposed rules are an extension of what firms are already expected to do under the Consumer Duty and product governance requirements in PROD; firms providing targeted advice will be manufacturer and distributor of the targeted support service and manufacturer and/or distributor of the product forming part of the ready-made solution. This effectively means that each targeted advice solution will need to be monitored for its continuing suitability for the relevant segment.

If a product suggested under targeted support undergoes significant adaption, the firms suggesting it will be required to consider whether mitigating action is required.

Targeted support communications

Communicating with consumers

Firms must communicate the nature and limitations of targeted support, including that it is not individualised advice, along with:

The FCA encourages firms to keep a record of how they meet the applicable disclosure obligations.

The FCA has confirmed that a firm need only consider whether the information needs of advised consumers applies if they are reasonably aware that the relevant consumer is receiving or has recently received relevant investment advice from an adviser.

Assumptions

The FCA is not requiring firms to disclose assumptions made in the course of giving targeted advice. Firms should do so where it is appropriate to support consumer understanding.

Signposting

The FCA believe that it is important for firms to consider what additional support they should bring to consumers’ attention aware. This could include providing additional or specific signposts to vulnerable consumers who are within a targeted support journey and those to whom a firm has been unable to provide a ready-made suggestion.

Labelling ‘Targeted Support’ to consumers

The FCA will require firms to explicitly call the service ‘Targeted Support’ in the communication to consumers which contains the ready‑made suggestion, to help consumers independently research what the service does. There will be some flexibility as to how it is communicated at other stages in the customer journey.

Durable medium

Just as with the FCA’s proposals in relation to CCI, information does not need to be provided in a durable medium at the start of a consumer journey, provided that information is made at the time the ready-made suggestion is provided or as soon as reasonably practical thereafter.

Direct marketing

Direct marketing rules could be a barrier towards proactive delivery of targeted support to the extent that they prevent the marketing of new products. This was seen as being a particular concern in relation to pension customers. The FCA has worked with the ICO to provide guidance on the topic. Ultimately the situation can only be resolved by legislation; while the Government has announced it will take forward secondary legislation to enable workplace pension providers to deliver targeted support communications to members who have not opted out of direct marketing, this is not of broader application so providers will need to think carefully about how they market targeted support products.

Charging and remuneration

Firms will be able to recover their costs through cross‑subsidisation (i.e. payments received from affiliated companies), as long as those are reasonably representative of the relevant costs of delivery. This will better enable targeted support to be delivered free at the point of use.

There will be no need to disclose to consumers the way in which a firm is remunerated or compensated for the provision of targeted support. The broader inducement rules will, however, still apply and firms will need to disclose if a product provided through targeted support costs more than if accessed other than through targeted support.

The FCA is broadly maintaining its ban on monetary and non‑monetary benefits paid or provided by a third party to a targeted support provider, but is allowing an exception where the relevant commission is received from a provider of annuity brokerage services and the targeted support provider is referring a customer to such a brokerage. Such situations will, however remain subject to existing inducement rules (including as to disclosure).

Application of existing requirements

MiFID business, IDD and designated investment business regimes, including COBS

Targeted support recommendations which include financial instruments will fall within the scope of investment services regulated under MiFID.

Targeted support involving a personal recommendation in relation to a contract of insurance, will fall within the scope of the Insurance Distribution Directive (IDD).

Targeted support will be classified as designated investment business to ensure that targeted support is subject to COBS requirements.

SYSC 5, 19G and 25

The FCA has amended its proposals so that the application of SYSC to a firm providing targeted support is aligned with that for a firm providing investment advice, for the purpose of the exclusion from being an enhanced scope SM&CR firm. Competent employee rules will apply to employees involved in the provision of targeted support.

COBS 2.4 – Reliance on others

A firm required to carry out a suitability or appropriateness assessment will not be permitted to rely on targeted support provided by another firm when undertaking those assessments.

COBS 15 – Cancellation

The FCA wants consumers to have the same rights to cancel contracts as they currently do in relation to the provision of personal recommendations.

Collective Investment Schemes sourcebook (COLL) 6/Investment Funds sourcebook (FUND) 1

References to ‘investment advice’ in the permitted business of alternative investment fund managers (AIFMs) and management companies for Undertakings for Collective Investment in Transferable Securities (UCITS ManCos) will include targeted support.  The FCA is consulting with HM Treasury HMT) as to whether consequential legislative changes are required to the RAO.

Appointed Representatives

HMT has confirmed that appointed representatives (ARs) will not be able to deliver targeted support initially when the new rules come into force, but it will review this position once its broader reforms of the AR regime have been introduced and are established. 

Prudential requirements

All FCA prudentially regulated firms that choose to deliver targeted support will need an absolute minimum level of regulatory capital of at least £500,000.

Complaints and redress

Compulsory jurisdiction of the Financial Ombudsman

The FCA intends to apply its complaints handling rules and guidance in DISP, including extending the Financial Ombudsman’s (FOS) compulsory jurisdiction (CJ), to all authorised firms providing targeted support.

Dealing with complaints relating to targeted support

The FCA and FOS have published a joint statement on how they intend to work together and consult each other on the interpretation of regulatory requirements for targeted support. Case studies will not, however, be provided for the moment, to give time for practice to develop. The FCA and FOS will monitor market practices and consider whether further clarification would be helpful in the future.

Voluntary jurisdiction of the Financial Ombudsman

The FOS does not propose to make its voluntary jurisdiction (VJ) available for complaints relating to targeted support activities before the introduction of the new regulated activity or to cover targeted support activities carried on after regulation day from an EEA or Gibraltar establishment.

Financial Services Compensation Scheme (FSCS) coverage

FSCS compensation will be available for eligible claims relating to targeted support.

Authorisations and measuring success

Approach to authorisations

Providing targeted support is to be a regulated activity under the RAO, meaning that firms will need to apply for a Part 4A permission to provide targeted support.

The FCA will pay particular attention to the following areas in the authorisation process:

PASS is the FCA’s voluntary support service which gives firms the chance to engage directly with the FCA on their proposals for targeted support and receive feedback ahead of making an application for targeted support permission. It has been open since August 2025. Firms are encouraged to engage with the FCA directly through PASS; those firms which, in doing so, demonstrate that they are ready, willing and organised to deliver targeted support, will be granted permission swiftly.

Measuring success

The FCA will periodically collect data from firms authorised to provide targeted support in the year after the gateway for authorisation applications opens in March 2026. This data will include data regarding the customer uptake of targeted support and its outcomes. The FCA will use this, and other data, to carry out a post implementation review within 2 years of the gateway opening. Firms should identify and collect relevant sources of data, both to ensure they can comply with the FCA’s likely requests for that information and so they can assess and monitor the outcomes for their customers.

Next steps

The targeted support permissions gateway will open in March 2026.  The FCA expects the final rules to take effect from 6 April 2026.

How Eversheds Sutherland can help

As a leading adviser to the industry we regard the launch, day-to-day operation, re-organisation and termination of funds and their associated regulation as part of our “business as usual” work.

We are widely recognised as one of the leading advisers to the investment funds industry, with over 40 years' experience of investment funds. The nature of our client base means that we are very used to dealing with the fund projects and the issues funds face.

We are active in the industry and trade bodies. We work closely with the Treasury on new fund developments, for instance, major projects such as bilateral discussions on the Long-Term Asset Scheme (LTAF).