In November, the FCA published an update setting out the next steps in its work on the Advice Guidance Boundary Review (AGBR) - see our earlier blog post here.

The update anticipated a first consultation in December 2024 focusing on pensions support and how the FCA envisages targeted support working for pension savers.

To recap, targeted support is intended to be a middle ground between holistic advice where the recipient is given a personal recommendation based on their personal circumstances and generic guidance-based services. Instead, targeted support would involve providing suggestions based on limited information to relevant consumers with common characteristics where a firm considers they could deliver a better outcome for their customers.

The core of the regime set out in the new consultation (CP 24/27) would entail firms:

  • pre-defining specific scenarios to provide targeted support;
  • pre-defining relevant consumer segments (i.e. groups of consumers with common characteristics) within the scenarios; and
  • establishing a ready-made solution for each pre-defined consumer segment in the relevant scenario.

The delivery of the targeted support would involve firms:

  • identifying that a customer falls into a pre-defined particular scenario;
  • verifying if the customer can be appropriately placed in a consumer segment and provided the ready-made solution.

The FCA also proposes an important threshold: firms should have reasonable grounds for believing that the delivery of targeted support suggestions would deliver a better outcome for their customers than if targeted support was not provided. There are a number of nuances still open for discussion here. For example, while firms cannot ignore information they come across or already hold meaning a specific consumer would not achieve a better outcome through the ready-made solution or that the consumer segment allocated would be inappropriate, they are still not positively required to undertake a full assessment of the individual consumer’s needs. The FCA has invited feedback on how to articulate this effectively.  

The FCA is also continuing to explore where the provision of targeted support fits in relation to the current regulatory framework, including the regulated activity perimeter. The FCA says it will continue to work closely with the Treasury on the options to implement targeted support, and reiterates the non-exhaustive options set out in DP23/5:

  • introducing a new regulated activity;
  • creating a new sub-permission within the current advising on investments activity; and
  • allowing authorised firms to carry out targeted support where they have certain existing permissions linked to relevant products.

The consultation paper also discusses the interaction with guidance-based services. For example, the FCA says it would welcome feedback on how best to capture support that provides a suggestion which does not relate to a particular product within the targeted support framework, without stopping what firms are already doing by way of guidance.

The consultation paper also covers other areas such as:

  • proposals for applying a combination of existing requirements and some more specific new conduct standards to manage the potential harms associated with the provision of targeted support;
  • proposed requirements for communications to consumers about targeted support; and
  • the FCA's current view that it would be for firms to determine the appropriate charging structures rather than the FCA prescribing how firms charge, fund or recover the cost for the service (albeit in the context of the proposed conduct standards and existing obligations including under the Consumer Duty).

This consultation is open until 13 February 2025 and seeks feedback on the FCA's proposed direction rather than setting out proposed new rules at this stage. 

However, the FCA draws a link with its parallel work on how targeted support could apply in a wider retail investments context ahead of further consultation on rules for both pensions and retail investments this year. Despite some necessary areas of divergence, the FCA anticipates applying the same general approach and most of the policy framework to targeted support for wider retail investments. 

The consultation will therefore be of interest across the whole consumer investments sector as the FCA continues to push forward the AGBR.