Emma RadmoreThe FCA is consulting on how to provide targeted support to consumers in pensions and retail investments. The paper follows several announcements of the FCA’s desire to see people invest with more confidence in complex products.
It is well aware from its Financial Lives surveys that many people don’t have the means to invest at all, but it wants better support for those who can. It is concerned at how many people are under-saving for retirement, and at those who have no clear plan for how they will make their defined contribution plans work for them. It also found that only 9% of people received regulated advice on their pensions and investments in the 12 months to the end of May 2024, with many younger investors looking to social media for guidance.
So there is a need for more support. At present, the form of targeted support proposed would constitute a “personal recommendation” for the purposes of the RAO. To enable creation of bespoke rules for it, though, HM Treasury is looking to introduce a new specific activity of providing targeted advice, distinct from the current activities. It will do so as part of the Mansion House reform package due to be published on 15 July.
In turn the FCA will build on the existing framework so it can use current requirements, underpinned by the Consumer Duty, to create a proportionate regime. It also proposes to create new outcomes-focussed conduct standards to set a clear, high-level framework for firms, and allow flexibility to tailor their targeted support journeys to customers.
Broadly, the FCA:
- thinks the overall structure of the supervisory regime is suitable for targeted support, with minimal amendment;
- understands that, once the new regulated activity is created, HM Treasury will consider updating the AR regime to allow ARs to offer targeted support – but the FCA does not think ARs should be allowed to offer it;
- thinks that in principle, targeted support will be within the scope of COBS, and it will be for firms to consider whether the way in which they offer the support, and the support they offer, falls within MiFID or the IDD. In principle, COBS will apply to the business, with some adjustments;
- proposes to treat targeted support firms as a new category of “arranger” within IPRU-INV 3;
- considers that customer complaints against targeted support firms should be capable of being escalated to the FOS and that targeted support firms should be within the FSCS scope;
- notes that it needs to consider significant amendments to direct marketing rules to prevent them becoming a barrier to firms being able to provide targeted support effectively; and
- will require firms wishing to provide targeted support to be authorised or to submit a VOP, and will pay close attention to relevant business plans.
Consultation closes on 29 August 2025 and the FCA plans to finalise its rules by the end of the year.
In early 2026, the FCA plans to consult on simplifying its advice rules to create a clearer distinction between simplified and more holistic advice. It hopes that reframing its expectations will allow competent targeted support where a customer has straightforward needs, and this may act as a stepping stone to more complex or holistic advice. The paper also contains more information on the FCA’s proposed approach to clarify further the advice guidance boundary.