The Financial Conduct Authority (FCA) is consulting on plans to allow firms to offer targeted support to consumers and provide suggestions to groups of consumers with common characteristics, in what has been hailed as a "once-in-a-generation" advice change.

As part of its Advice/Guidance Boundary Review, the FCA previously gathered industry views on how it could better ensure people have access to the right support to navigate complicated financial decisions, consulting on its initial proposals for targeted support for pensions in December 2024.

The latest consultation confirmed that, whilst it has made a small number of changes in light of industry feedback, the FCA is pushing ahead with its proposals for investments and pensions, allowing firms to offer targeted support to consumers and provide suggestions to groups of consumers with common characteristics.

This includes people who have excess cash sitting in a current account, or those who are drawing down on their pension unsustainably or not saving enough for retirement.

The FCA said that targeted support also has the potential to act as a stepping stone to simplified or more comprehensive investment advice where consumers want or need more personalised advice.

In addition to this, the changes, which have inbuilt protections for consumers, are expected to support growth by enabling increased investment and innovation.

Under the current regulatory framework, targeted support as proposed would fall within the existing definition of a ‘personal recommendation’ as set out in Article 53 of the Regulated Activities Order (RAO).

However, the FCA acknowledged that existing requirements relating to the provision of personal recommendations make it difficult for firms to establish support models such as the one proposed.

It also argued that it is "crucial" that the provision of targeted support is regulated differently from existing forms of advice, with a bespoke set of conduct standards set out in FCA rules and a dedicated authorisation gateway.

To enable this, the FCA confirmed that the government will consult on proposed amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to create a new specified activity of targeted support, establishing targeted support as a new service.

“We want to help consumers navigate their financial lives and plan for the long term,” FCA deputy chief executive, Sarah Pritchard, said.

“Some of the most difficult financial decisions we face are how to save, invest and prepare for a comfortable retirement.

“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.”

Alongside the targeted support proposals, the regulator outlined its plans to reform the framework for simplified advice.

It argued that consumer access to a choice of full financial advice, simplified advice, targeted support, and guidance should help reduce the advice gap and support its ambition for consumers to have access to the help and guidance they need to make informed decisions.

"Our proposals taken together allow firms to provide a sustainable continuum of support to help their customers at different times of their life, as their needs and circumstances change," the FCA stated.

In developing its proposals, the FCA also ran a six-week policy sprint, where firms designed consumer journeys to help design the rules in the consultation.

It also completed “detailed” consumer testing, which was published alongside the consultation.

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