Directly authorised advice firms will be able to offer ‘targeted support’ from early 2026, the Financial Conduct Authority has confirmed.
The FCA has published details on how firms can introduce the new form of support, which it believes will benefit millions who are unable to access full financial advice.
These “once-in-a-generation reforms” would allow firms to make suggestions to groups of consumers with common characteristics based on “reasonable assumptions”.
This would work as a “people like you might benefit from this” type of scenario.
This could include those who may be drawing down on their pension unsustainably, not saving enough for retirement or who have cash sitting in a current account.
Firms will have the choice to offer targeted support free of charge, or to charge for it if they wish.
The FCA said its research shows most firms plan to offer it at no additional cost to customers, viewing it as an extension of their existing services.
Where targeted support is provided for free, the FCA said it wants consumers to clearly understand the basis on which it is provided.
It is therefore proposing that targeted support providers will be required to disclose to customers how the firm will be remunerated for the provision of the service.
Where firms choose to charge, they must ensure that charges are disclosed to, the client and meet the relevant requirements of the Consumer Duty.
In a warning shot to providers, it said it wants to prevent them making biased recommendations towards specific products due to their commercial benefits, rather than the best interests of customers.
It added that consumers need to understand the nature of the support they receive so that they can assess whether the suggestion is right for them.
This includes understanding that the suggestion was designed for groups of consumers and therefore does not constitute individualised advice.
Firms must also be clear that limited information was used to generate the suggestion.
The targeted support proposals are directed towards suggestions relating to investments and pensions only.
Support relating to other types of products, such as mortgages and pure protection insurance, is not included within the scope of targeted support.
There are question marks over whether appointed representatives will be able to off the service, with the FCA ultimately saying it is up to the Treasury to confirm.
“As we see risks with ARs delivering this service, we are consulting on the basis that ARs would not be permitted to undertake targeted support,” it said.
“This would mean that targeted support could initially only be undertaken by directly authorised firms.”
The regulator is also proposing to scrap the requirement to make firms review their targeted support service annually and leave it up to them to determine the appropriate review intervals instead.
Sarah Pritchard, deputy chief executive of the FCA, said: “These once-in-a-generation reforms will help people navigate their financial lives and give them greater confidence to invest. This is a win-win for consumers and firms alike.”
As well as its proposals for targeted support, the FCA has also set out plans to reform the framework for simplified advice, quashing rumours that it might be scrapped.
The regulator said it has “set out a fairly clear direction for simplified advice” and will be looking to give the industry more information later in the year.
It said it took the decision to pushed targeted support ahead of simplified advice, but added the latter is still in the mix.
Consumer access to a choice of guidance, targeted support, simplified advice and full financial advice should help reduce the so-called “advice gap”, it added.
Just 9% of adults received financial advice about their pensions or investments in the previous 12 months, according to the FCA’s latest Financial Lives survey.
Of those who did not receive financial advice, but hold £10,000 or more in cash savings, 24% said they don’t invest because they don’t know enough about it, 12% because they feel overwhelmed by the number of options available, and 8% said they would need more support before they invest.
There are also about seven million adults in the UK with £10,000 or more in cash savings who may be missing out on the benefits of investing throughout their lives.
The FCA is inviting firms to have their say on the updated guidance via an eight week consultation, which is open now.
Firms will need to apply for a Part 4A permission to provide targeted support and will be able to apply for authorisation through the FCA gateway early next year.
