31st July 2025
Targeted Support - a whole new level of advice
The FCA released a paper at the end of June - The Advice Guidance Boundary Review - which introduces the concept of "Targeted Support".
The Advice Guidance Boundary Review is a response to a growing concern that most consumers in the UK are not getting the financial help they need. The FCA proposals for targeted support will allow firms to offer suggestions to groups of customers with common characteristics. Millions more people could get help navigating their financial lives with support on pensions and investments. The FCA wants consumers to have access to different types of support to meet a range of needs. The FCA wants to see a thriving and trusted market for full financial advice, simplified advice, targeted support and guidance.
What is Targeted Support?
The FCA is consulting on a new regulatory proposition for targeted support in pensions and retail investments. Pensions and retail investments have a vital function allowing people to build wealth and provide income for later life. The FCA wants people to invest for their future with confidence, understanding the rewards, risks and protection they will get.
Decisions about pensions and retail investments are complex and consumers need support. This consultation sets out FCA proposals to introduce a new form of support, called targeted support. The FCA targeted support proposals will enable firms to provide suggestions designed for groups of consumers with common characteristics to help them make financial decisions.
This would allow firms to make specific recommendations designed for groups or cohorts of consumers, allowing them to direct people to products that would deliver better outcomes for them.
It is important that consumers know what targeted support is, and what it is not. It is not fully personalised financial advice, and it will not be tailored to the specific needs of individuals. It is designed for groups of consumers with common characteristics. But it will enable firms to better support consumers. It will help to fill the gap in support.
That gap is real. Only 9% of people received regulated advice on their pensions and investments in the 12 months to May 2024 and 61% of adults with £10k or more in investible assets hold these mostly in cash. Of those who do not receive financial advice, but hold £10k+ in cash savings, a quarter (24%) say they do not invest because they do not know enough, 12% because they feel overwhelmed and 8% say they would like to but need support.
The targeting will be vital to the success or otherwise of this project. How are providers identifying the target market? What criteria are they using? What is the message? This is the way marketing campaigns have been done through the years.
Examples of how targeted support could help.
|
Problem |
Currently |
Under targeted support |
|
Consumers under-saving for retirement. |
Firms can warn a consumer that they may be under-savings for retirement. |
A firm could suggest an alternative pension contribution rate. |
|
Consumers struggling with pension access decisions. |
Firms can provide a consumer with factual information around their decumulation options. |
A firm could suggest how a consumer could access their pension in a way which is appropriate for their consumer group, for example, taking an income in a more tax efficient way using an uncrystallised funds pension lump sum rather than drawdown. |
|
Consumers drawing down their pension unsustainably. |
Firms can warn a consumer that they may be drawing down their pension unsustainably. |
A firm could suggest an alternative drawdown rate. |
|
Consumers in a position to invest. |
Firms can suggest that consumers may be in a position to start investing. |
A firm could suggest a specific investment product for a consumer. |
|
Consumers with investment products. |
Firms can provide information about investments consumers hold. |
A firm could suggest an alternative investment product. |
|
Consumers who are investing in an expensive fund when a cheaper alternative is available. |
Firms can inform consumers that there are alternative products with lower charges. |
A firm can suggest a particular fund which would offer better value. |
|
Consumers choosing between investment and pension products. |
Firms can suggest certain investment wrappers, like ISAs, to a consumer, but not a specific product. |
Firms will be able to go beyond suggesting certain investment wrappers, and suggest either a specific investment or pension product. |
What I am intrigued by is how the support element of this equation is going to be provided. If this involves any element of service, how is the cost of this going to be covered? Id there going to be paperwork? Who is going to help with this? What documents will be provided?
To look at the various levels of advice that will be available:
- Holistic Advice - Comprehensive and personalised, covering the client’s full financial situation.
- Focused Advice - Narrow and specific, addressing a single financial issue or product.
- Simplified Advice - A type of regulated advice with limited scope and decision-making.
- Targeted Support - Tailored help for specific financial needs but hitherto not regulated advice.
- Guidance - General information and education - “not advice”.
Many advisers state that they provide holistic advice, but very few actually do. Most business that I see is undertaken on a focussed advice basis. Most consumers do not understand the difference between advice and guidance. This was not helped by the Government setting up the Money Advice Service, which gives guidance only. It is now called Money & Pensions Service. So, I wonder with this new level of advice will simply muddy the waters further.
The providers able to join this market are likely to be limited as the FCA foresees a capital adequacy requirement of £500,000 for firms to be able to offer Targeted Support. This is much higher than most advisory firms can provide. I guess that it represents the perceived risk involved in providing this level of advice.
Where a firm is only authorised to provide Targeted Support, the FAC proposes to treat it as an “arranger firm. It is difficult to see how a firm only offering targeted support could possibly hold that level of capital adequacy.
When I was asked to write this article, I had not familiarised myself with Targeted Support. So, I read as much of the 215-page document (too long) as I needed and actually completed the consultation paper (80 odd questions) (again, far too long).
This looks like a well-meaning attempt by the FCA to kick-start a market that may not be willing or able to partake. I cannot see too many firms wanting to register for the permission, although they will now need to modify their marketing going forward to avoid falling into Targeted Support by accident.
I felt that Targeted Support was a recipe for a lot of miss-buying and miss-selling. The good news may be that it will become another gift that keeps giving to my compliance community.
Tony Catt
Compliance Consultant
The Catt’s Eye View
07899 847338
view@tonycatt.co.uk
www.thecattseyeview.co.uk
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