New proposals for targeted support

June 2025

Following its December 2024 consultation, the FCA has published a consultation paper for a ‘targeted support’ (TS) regime for pensions and retail investments. This would provide a middle ground for individuals between either taking regulated advice or simply relying on information and generic guidance, and will allow firms to better indicate suggested actions for their clients to consider.

Most of the proposals from the FCA’s December 2024 consultation are being taken forward. This latest consultation paper sets out detailed rules and guidance, but has a short feedback period, reflecting the amount of feedback already gathered by the FCA.

The TS proposals have the potential to be transformational for the industry and for consumers who may not be able to access or afford advice today. They are also linked to the regulatory growth and competitiveness agenda (you can read more on this topic in a recent KPMG in the UK, PIMFA and UK Finance report here). However, there are also several risks that firms will need to be mindful of, as explored below.

The FCA plans to consult separately on simplifying its advice rules and guidance and has decided not to progress proposals for a bespoke simplified advice regime.

Targeted support considerations at a glance

The regime will be available for a variety of firms that would like to offer TS in relation to investments or pensions, including wealth and asset managers, advisers, platforms, retail banks, insurers and SIPP operators. The FCA’s final rules are expected to be published by the end of 2025.
The FCA’s central estimates are that 96 firms will take up the regime and that the average wealth of consumers expected to act on targeted support is £37k.
The regime has the potential to be transformational for firms and consumers alike, but there are a variety of risks to be addressed and considered.
Firms can start work now to prepare, including working through the fundamental building blocks of the regime including the better outcomes concept, consumer segments, and ready-made suggestions.

Scope of the proposals

The TS regime is expected to be operationalised as follows:

The FCA will introduce new requirements in its Handbook, with COBS 9B containing the main rules and guidance on the TS framework.
In parallel, the government will consult on amendments to the Regulated Activities Order (RAO) to establish TS as a new service, different to existing forms of advice.
Any firm seeking to provide TS will therefore need to seek permission from the FCA via submitting a Variation of Permission (VoP) or submitting a new firm application. Notably, the FCA will open the authorisations gateway before the rules come into effect and will extend its pre-application support service to TS firms.
The TS proposals only cover suggestions relating to investments and pensions. TS for wider products such as mortgages or pure protection insurance would not be permitted. The FCA has also proposed that high risk investments should be excluded.
Appointed Representatives (ARs) are not expected to be permitted to provide TS.

How TS will work

The key components of the targeted support regime

The key building blocks of the regime are as follows:

Fundamentals
Customer ‘situations’	The FCA has not prescribed specific situations to be met by providing TS. However, firms would need to pre-define situations for customers involving their needs or objectives, for which to specify ready-made suggestions. Multiple consumer segments may reference the same situation.
‘Better outcomes’ test	Firms will need to satisfy themselves there are reasonable grounds that providing TS would achieve a 'better outcome' for the client.
Consumer segments	Segments are groups of individuals in a common situation with a common need or objective, and where relevant, sharing common characteristics. Firms will need to pre-define consumer segments before they deliver TS, allocating each segment to a ready-made suggestion.
Ready-made suggestions	Consumers can receive ready-made suggestions where the firm has aligned them with a consumer segment and the suitable associated ready-made suggestion has been specified. A significant challenge for firms will be the process of identifying alignment of consumer segments with ready-made suggestions, based on information held or collected.
Other key considerations
Disclosures and consumer understanding	The FCA is no longer prescribing specific consumer touchpoints in the TS journey. However, in addition to relying on the Consumer Duty, new TS-specific disclosure requirements will touch on: The nature of TS provided, including that it is not individualised advice The characteristics of the segment the consumer has been allocated to and noting that the ready-made suggestion was designed for the segment Any limitations of the scope of products considered by the firm, including disclosing that a firm has only considered its own product range (or those of a connected firm) when designing a ready-made suggestion How the firm will be remunerated for providing TS In addition, firms would need to test the understandability of TS communications and allow consumers to opt-out of receiving ready-made suggestions at any point.
Application of existing requirements	There is a wide interplay between the TS-specific requirements and the application of existing FCA rules that will apply in the same manner as usual. Firms will need to consider how the PRIN and SYSC requirements apply (e.g. on conflicts), the application of the Consumer Duty, as well as any implications for SM&CR arrangements. There will not be TS-specific qualification requirements, but the FCA is proposing broader competency requirements that would apply to TS. Firms will also need to consider to what extent that TS falls within the scope of requirements under MiFID or the Insurance Distribution Directive, and may wish to respond to the FCA’s proposals on prudential requirements and the proposed approach to the application of the direct marketing rules.
Costs and charges	The FCA expects that most firms will not charge explicit upfront fees for TS, but firms may charge for it if they wish. The FCA will not prescribe how firms fund or recover the cost of providing for TS. Cross subsidies will be permitted but good outcomes must be delivered, and remuneration through commissions will be prohibited.
Complaints and redress	TS would fall under the jurisdiction of FOS and FSCS. Specifically, the FCA is clear that complaints against authorised firms providing TS would fall within the FOS’s Compulsory Jurisdiction (CJ) and that complaints would be subject to the existing complaints handling rules under DISP. The FCA emphasises that it will work closely with the FOS on the interpretation of the FCA’s TS rules.

Risks for consideration

TS will create a wide range of opportunities for firms that could deliver better outcomes for consumers. A range of practical examples for TS opportunities can be found in paragraph 2.40 of the FCA’s consultation.

However, the regime will also introduce several risks that will need to be managed to truly deliver better outcomes. Some of the key challenges relate to:

The ‘better outcomes’ test: The highly subjective nature of the test and what ‘better’ means in practice will require careful judgement. Bold approaches could risk delivering fewer benefits to consumers along with higher charges.
Pre-defining consumer segments: The key challenge for firms will be determining the appropriate level of granularity at which to define the consumer segment, so that it is not too broad and not overly individualised.
Conflicts of interest: There is a risk that firms’ selection of products under TS could be biased, potentially leaning towards suggesting products from their own range. This could be exacerbated if firms do not charge for TS.
New vs existing customers: It will likely be less risky to provide TS to existing customers, given that more information will be held about them. For new customers there is potentially a higher risk of being mis-sold the right product because insufficient or incorrect data is gathered.
Double the boundaries to worry about: Firms will need to ensure that information and guidance does not stray into TS and that TS does not stray into advice. Under TS, firms will need to avoid providing judgement, ensuring that outcomes are driven by clients’ choices.
The impact of digitalisation: The TS proposals are ‘channel-neutral’. Firms will need to be vigilant that TS solutions do not disadvantage vulnerable customers and consider how they will maintain adequate records where TS is delivered on the phone or face to face.

Next steps for firms

Firms can take concrete steps to prepare to deliver services under TS and to seek authorisation once the FCA provides the relevant forms. Key preparatory steps include:

Strategic product implications

Start by reviewing the existing range of products and services offered, to identify areas where TS could deliver better outcomes for consumers.
Assess the current customer base and consider their alignment with initial consumer segments that could be developed, considering the various needs and preferences of consumers within the segments.

Building the proposition

Begin considering the design of the framework that will deliver the fundamentals of the regime across situations, segments and ready-made solutions. Initial thought can also be given to the ‘better outcomes’ test.
Consider the commercial approach to TS, especially where cross-subsidisation is envisaged.
Explore AI and technology possibilities to scale any TS proposition at low cost while continuing to deliver good outcomes.
Begin thinking about the disclosures that would need to be made to TS clients, and where and how these would be delivered.

Developing conduct considerations

Identify potential conflicts of interest and assess how they can be mitigated.
Draw on lessons learned from Consumer Duty to date and how these should be factored into the TS proposition.
Map the interplay between existing rules with the TS proposition to understand all compliance obligations.

Timeline

The FCA’s consultation is open until 29 August.
The FCA will consult on any revisions needed later this year and aims to publish a policy statement with final rules by the end of 2025.
The government will consult on changes to FSMA to create a new specified regulated activity for TS. This will be launched on 15 July.
The FCA will open its pre-application support service (PASS) in October 2025 for TS and will open the authorisations gateway in March 2026.
The FCA’s follow-up consultation on simplifying and clarifying the advice guidance boundary will be launched in January 2026.

How can we help?

KPMG in the UK has significant experience in the impacted sectors and has specialists for designing/delivering and reviewing advised and non-advised propositions and customer journeys. We have also worked extensively on supporting firms to implement and embed the Consumer Duty.

More specifically, we can assist with:

Strategy and business model: helping firms focus on big picture opportunities aligned to customer needs.
Competition economics: analysis of market data to inform opportunities.
Regulatory insights: supporting firms with pragmatic and insight-led guidance determining an appropriate balance between commercial and good customer outcomes.
Customer: embedding customer-centricity through segmentation, behavioral economics, journey mapping and voice of customer insights.
Technology, data and tooling: embracing digital, revisiting data strategies, leveraging automation and exploring AI to implement approaches efficiently and effectively.