FCA targeted support rules establish specific compliance requirements for firms offering this new service category between guidance and regulated advice. Understanding these obligations helps firms implement targeted support whilst meeting regulatory expectations.
Core Regulatory Framework
The FCA’s targeted support framework creates distinct requirements balancing consumer access with appropriate protection.
Consultation papers CP25-17 and CP25-26 set out proposed rules with final provisions expected in early 2026. Firms should monitor policy statement publication for confirmed requirements.
Regulatory objectives behind targeted support include expanding access to financial help for consumers who cannot afford or do not need full regulated advice, reducing barriers to appropriate support and addressing the 15.8 million person advice gap.
Consumer Duty alignment means targeted support must deliver good outcomes, provide fair value and ensure customers can make informed decisions. These principles apply across all FCA-regulated activities.
Treating Customers Fairly obligations require that targeted support serves customer interests fairly, provides clear information and does not take advantage of vulnerable consumers.
Financial Promotions rules will govern how firms market targeted support ensuring communications are clear, fair and not misleading about service scope and limitations.
The framework distinguishes targeted support from both regulated advice under COBS 9 and generic guidance under existing rules, creating a distinct regulatory category.
Customer Assessment Requirements
Firms must gather sufficient customer information to provide appropriate targeted support without conducting full advice fact-finding.
Minimum information standards require firms to collect data enabling appropriate customer segmentation. This includes relevant characteristics, circumstances and needs.
Segmentation appropriateness means the information gathered must support assigning customers to groups where standard suggestions meet common needs reliably.
Documentation obligations require firms to record what customer information was collected, how segmentation was determined and what suggestions were provided.
Ongoing updates ensure customer assignments remain appropriate when circumstances change materially. Firms should have processes identifying when re-assessment is needed.
Vulnerable customer identification must occur even within targeted support’s lighter-touch framework. Firms should recognise when customers need additional support or referral to regulated advice.
One firm’s targeted support fact-find covers 15 key data points compared to 40+ for regulated advice, gathering sufficient information for appropriate segmentation without comprehensive financial planning.
Segmentation Methodology Requirements
The FCA expects firms to use sound, evidenced-based approaches for customer segmentation.
Defensible criteria mean segmentation must be based on relevant characteristics demonstrably related to appropriate suggestions. Arbitrary groupings are insufficient.
Sufficient granularity ensures segments are meaningfully different with distinct needs. Too few broad segments may provide inappropriate suggestions to some customers.
Statistical validation through analysis of outcomes demonstrates that segmentation approaches actually produce good results for customers within groups.
Regular review processes verify that segmentation methodology remains appropriate as customer populations, products and market conditions evolve.
Documentation demonstrates to regulators how segmentation was developed, why criteria were chosen and what evidence supports the approach.
Vulnerable customer provisions ensure segmentation recognises vulnerability indicators and routes these customers to appropriate enhanced support or regulated advice.
Suggestion Framework Compliance
Targeted support suggestions must meet standards ensuring they serve customer group interests appropriately.
Needs-based design requires suggestions to address common requirements within customer segments based on analysis of what these groups typically need.
Product appropriateness means suggested solutions must be suitable for customer segments considering characteristics, goals, risk tolerance and circumstances.
Alternative consideration demonstrates firms evaluated multiple options and selected suggestions most likely to meet segment needs.
Clear explanation requirements ensure customers understand suggestions, why they are appropriate and what limitations or risks exist.
Disclosure obligations include providing information about products, charges, key features and important considerations customers need for informed decisions.
Risk warnings appropriate to suggestion types and customer segments must appear prominently. Firms cannot obscure important information.
One wealth manager developed suggestion frameworks for eight customer segments including detailed rationale showing why each suggestion addresses segment needs based on research and analysis.
Outcome Monitoring Obligations
The FCA expects firms to track whether targeted support delivers satisfactory outcomes for customers.
Performance metrics should include customer satisfaction, complaint rates, suggestion uptake and any negative outcomes indicating problems.
Regular reporting to boards or senior management ensures oversight of targeted support performance and prompt action when issues emerge.
Complaint analysis identifies patterns suggesting suggestion frameworks, segmentation or processes need adjustment.
Outcome reviews compare actual results against intended goals verifying that targeted support achieves its purpose.
Corrective action processes address identified issues promptly preventing small problems from affecting many customers.
Consumer Duty evidence demonstrates targeted support delivers good outcomes, provides fair value and meets customer needs appropriately.
One insurance company conducting quarterly targeted support reviews presents outcome data, complaint summaries and any issues to their board demonstrating appropriate oversight.
Boundaries and Limitations
Clear boundaries define what targeted support can and cannot do helping firms stay within regulatory framework.
Complexity limitations restrict targeted support to straightforward needs and products. Complex situations, large investments or sophisticated strategies require regulated advice.
Personalisation constraints mean targeted support provides group-based suggestions, not individual recommendations based on comprehensive assessment.
Advice crossover awareness ensures firms and staff understand when situations exceed targeted support scope requiring referral to regulated advice.
Escalation requirements mandate that firms identify and refer customers whose circumstances require more comprehensive assessment.
Documentation of limitations in customer communications ensures individuals understand what targeted support provides and what it does not.
Professional boundaries maintain separation between targeted support staff and regulated advice functions preventing inappropriate blurring of service categories.
Staff Competence Requirements
Firms must ensure staff delivering targeted support possess appropriate knowledge and skills.
Training standards cover regulatory framework, segmentation methodology, suggestion frameworks and escalation criteria. Staff need comprehensive understanding of targeted support boundaries.
Competence assessment verifies staff can apply segmentation correctly, explain suggestions clearly and identify when customers need regulated advice.
Ongoing development maintains capability as regulations, products and processes evolve. Annual training updates keep staff current.
Supervision arrangements ensure experienced professionals oversee targeted support delivery and staff development.
Quality assurance monitors staff performance identifying training needs and ensuring consistent service delivery.
Documentation demonstrates to regulators that firms maintain appropriate competence management for targeted support functions.
Technology and Systems Compliance
Technology supporting targeted support must meet regulatory standards for reliability and customer protection.
System validation confirms technology performs as intended, applies segmentation correctly and generates appropriate suggestions.
Data protection compliance ensures customer information is handled securely meeting UK GDPR requirements throughout processing.
Audit trail capabilities capture system decisions, data used and outputs generated. Complete logging supports regulatory reviews.
Change management processes control system updates ensuring modifications do not introduce errors or compliance issues.
Business continuity planning maintains targeted support capability during technology failures or disruptions.
Vendor due diligence for third-party systems verifies providers meet regulatory expectations and financial services standards.
Record Keeping Requirements
Comprehensive records demonstrate compliance and support regulatory reviews.
Customer records must include information gathered for segmentation, segment assignment rationale, suggestions provided and customer responses.
Suggestion framework documentation shows how recommendations were developed, what analysis supported them and when reviews occurred.
Outcome data tracking customer satisfaction, complaints and results provides evidence of whether targeted support works effectively.
Complaint files document issues raised, investigation conducted and resolutions achieved. These records support regulatory reporting.
Training records demonstrate staff competence and ongoing development for targeted support roles.
Board minutes show senior oversight of targeted support including outcome reviews and strategic decisions.
Retention periods follow FCA requirements ensuring records remain available for regulatory reviews years after interactions.
Consumer Duty Specific Obligations
Consumer Duty creates particular requirements for targeted support affecting compliance approaches.
Good outcomes focus means firms must demonstrate targeted support achieves positive results for customers consistently.
Fair value assessment requires showing customers receive appropriate benefits relative to costs paid. This is particularly important for mass market services.
Consumer understanding obligations ensure customers comprehend suggestions, limitations and when they should seek regulated advice.
Consumer support quality affects whether targeted support meets Consumer Duty standards. Firms must provide appropriate help when customers have questions.
Vulnerable customer protection requires identifying vulnerability and adjusting approaches appropriately even within targeted support framework.
Product governance ensures products suggested through targeted support are designed to meet customer needs and perform as expected.
Marketing and Communications Compliance
How firms communicate about targeted support must meet regulatory standards for clarity and fairness.
Service description clearly explains what targeted support offers, how it differs from regulated advice and what limitations exist.
Customer eligibility criteria help individuals understand whether targeted support suits their needs or whether other services are more appropriate.
Fair value communication demonstrates what customers receive relative to any costs charged directly or embedded in products.
Comparison accuracy ensures any statements about targeted support versus advice or guidance are factually correct and not misleading.
Testimonial compliance applies if firms use customer feedback in marketing. Testimonials must be genuine, representative and not misleading.
Financial promotion approval follows standard FCA processes ensuring all communications meet regulatory requirements before publication.
Regulatory Reporting Requirements
Firms must provide information to the FCA about targeted support activities and outcomes.
Implementation notification may be required when firms begin offering targeted support. The FCA wants visibility into market development.
Product sales data reporting follows existing requirements for products sold through targeted support channel.
Complaint reporting includes targeted support complaints in standard submissions to the FCA.
Significant issues must be reported promptly if firms identify problems affecting customer outcomes or regulatory compliance.
Annual information gathering may request targeted support specific data as the FCA monitors this new service category.
Ad hoc requests for information about targeted support implementation, outcomes or issues should be anticipated as regulators learn about market practice.
Professional Indemnity Insurance
Appropriate insurance coverage protects firms from risks associated with targeted support delivery.
Policy scope should cover targeted support activities explicitly. Firms must confirm with insurers that this new service category is included.
Coverage limits reflect potential exposure from targeted support claims considering customer volumes and potential losses.
Exclusions and conditions must be understood ensuring firms know what circumstances are and are not covered.
Claims notification requirements obligate firms to report potential issues promptly to maintain coverage.
Premium costs reflect targeted support risk profiles which may differ from regulated advice premiums.
Vendor coverage for technology providers should be verified ensuring adequate protection across the service delivery chain.
Transition and Grandfathering
Firms offering services that may become targeted support under new rules face transition considerations.
Existing customers receiving services similar to targeted support may need communication about regulatory classification changes.
Process adaptation may be required to meet new targeted support requirements even if firms provided similar services previously.
Documentation updates ensure records reflect targeted support framework language and requirements.
Staff retraining familiarises teams with formal targeted support requirements even if processes are similar to existing practices.
Regulatory engagement with FCA supervisors about transition approaches helps firms navigate classification changes appropriately.
Enforcement and Consequences
Understanding potential enforcement actions encourages appropriate compliance attention.
Supervisory reviews may examine targeted support implementation, customer outcomes and compliance with requirements.
Remediation requirements could follow if firms fail to meet standards requiring customer compensation or process corrections.
Regulatory fines may be imposed for serious compliance failures or customer harm from inadequate targeted support delivery.
Restrictions on activities could prevent firms from offering targeted support if significant issues emerge.
Reputational damage from regulatory action or poor outcomes affects customer confidence and market position.
These consequences emphasise the importance of robust compliance frameworks even though targeted support has lighter requirements than regulated advice.
Frequently Asked Questions
When will final targeted support rules take effect? The FCA expects to publish final rules in early 2026 with implementation likely by late 2026 or early 2027.
Are targeted support compliance requirements less stringent than regulated advice? Requirements are different, not less stringent. Targeted support has adapted obligations appropriate for group-based suggestions rather than individual advice.
Must firms notify the FCA before offering targeted support? Final rules will clarify notification requirements. Firms should anticipate some form of registration or notification process.
What happens if a customer complaint suggests our segmentation was inappropriate? Firms should investigate thoroughly, address the specific case and assess whether broader segmentation changes are needed to prevent similar issues.
Learn how Aveni helps advice firms implement compliant targeted support delivery →
