Targeted support and the advice gap: What the new regime means for pensions and investment firms
The Advice Guidance Boundary Review, a joint initiative between HM Treasury (HMT) and the Financial Conduct Authority (FCA) , represents one of the most significant reforms of the UK’s advice and guidance landscape in over a decade. Its overarching objective is to tackle the UK’s longstanding “advice gap” by enabling consumers to access more meaningful support when making decisions about pensions and investments, whilst maintaining appropriate standards of consumer protection.
The most immediate development is the introduction of the UK’s new ‘targeted support’ regime, which has been live since 6 April 2026. Targeted support creates a new regulated category of support sitting between generic guidance and full regulated investment advice. It allows firms with the relevant FCA permission to make recommendations and direct consumers towards products, or to take actions in relation to existing products, that could put them in a better position in their financial lives. Such recommendations must be aligned to a defined consumer segment with a shared financial support need or objective and, where relevant, common characteristics or circumstances.
Targeted support is not the only output from the Advice Guidance Boundary Review. The FCA has also consulted on changes to simplify the pensions and investment advice rules, with the aim of making it easier for firms to provide more proportionate forms of individualised advice to consumers with relatively straightforward needs. Those proposals remain under development, but it is important context. The policy direction is towards a broader continuum of support, ranging from generic guidance and targeted support through to simplified advice and full regulated financial advice. Regulators want consumers to have access to a broader range of support options, to help consumers be confident making decisions about their pensions and investments.
For pension providers, insurers, wealth managers, investment platforms, SIPP operators, banks and other firms with large non-advised customer bases, the targeted support regime creates a significant opportunity to engage more effectively with consumers at scale. However, firms should not mistake this for deregulation. Targeted support is a new regulated activity with its own conduct standards, permission requirements, governance expectations and complaints risk. The direction of travel is greater consumer engagement, but with clear accountability under the Consumer Duty, robust systems and controls and effective senior management oversight.
This legal article has been written by Sushil Kuner and Bhavneet Banwait.
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Sushil Kuner
Partner & Head of Financial Services Regulation
The advice gap: Why reform was needed
The reforms are a response to what is commonly described as the advice gap: the position where consumers need support to make financial decisions but cannot afford, do not wish to pay for, or cannot readily access regulated financial advice.
The origins of the modern advice gap are usually traced back to the Retail Distribution Review (RDR), a major regulatory framework launched in the UK by the Financial Services Authority and fully implemented on 31 December 2012. The RDR introduced major reforms to the retail investment advice market, including the prohibition of commission payments for most retail investment products, higher professional qualification requirements and enhanced standards around the quality and transparency of advice.
Those reforms are widely regarded as having improved standards in the advice sector and reduced conflicts of interest. However, one commonly cited consequence has been that, as a result of the higher costs of compliance following the RDR, many advisory firms increasingly focused on wealthier clients who could justify ongoing adviser fees, leaving consumers with more modest savings and investments with fewer affordable advice options.
The position was compounded by firms’ understandable caution around the boundary between guidance and regulated advice. In practice, many firms became reluctant to provide more tailored forms of support or decision-making assistance for fear of inadvertently straying into regulated advice, triggering additional regulatory obligations and potential liability. As a result, many consumers received little more than generic information at the very point they needed support in making important financial decisions.
The issue has become more acute as consumers are expected to make increasingly complex decisions about pensions, investments, drawdown and retirement income. The FCA estimates that around 23 million consumers are currently underserved by the markets for advice and guidance, with fewer than one in ten people obtaining regulated financial advice. The FCA has also highlighted that only 9% of adults received regulated financial advice in the 12 months to May 2024 about investments, saving into a pension or retirement planning, that 12.5 million people are under-saving for retirement and that most adults aged 45 and over do not have a clear plan for how to access their defined contribution pension in later life.
What’s changed?
The Advice Guidance Boundary Review examined the regulatory boundary between financial advice and other forms of support. Its core objective was to help consumers access more meaningful support when making decisions about pensions and retail investments, without forcing every interaction into the fully regulated advice model.
The key outcome of the Advice Guidance Boundary Review is the introduction of the targeted support regime, a new regulated activity that allows firms to provide ready-made suggestions to groups of consumers with common characteristics or circumstances. It enables firms to provide more meaningful support without undertaking a full individual suitability assessment for every customer.
Targeted support is now a live regulatory regime. The FCA confirmed the final rules on 26 February 2026 , applications for permission opened on 2 March 2026 and the regime came into force on 6 April 2026. Firms wishing to provide targeted support must obtain the relevant FCA permission before doing so.
The regime comes with its own conduct standards and consumer protection framework. In particular, firms must:
Define and validate the customer segments to which targeted support will be provided, specifying ‘including’ and ‘excluding’ characteristics
Ensure that ready-made suggestions are suitable for the relevant segment
Have controls to prevent customers receiving suggestions that are inconsistent with information the firm already knows about them and including within a ready-made suggestion any investment product that is subject to marketing or distribution restrictions (e.g. Non-Mass Market Investments and Restricted-Mass Market Investments)
Provide clear disclosures explaining the nature and limitations of the service
Maintain appropriate governance, monitoring and oversight arrangements; and
Comply with the Consumer Duty and other applicable regulatory requirements
Importantly, targeted support is distinct from regulated investment advice. The FCA and HMT have deliberately created it as a separate regulated activity with its own permission regime and conduct framework, rather than simply relaxing the rules applicable to financial advice.
One area of significant industry debate during the development of the regime was how firms would communicate targeted support to consumers in practice. A number of respondents raised concerns that data protection and direct marketing rules could limit firms’ ability to engage consumers proactively, potentially undermining some of the intended benefits of the regime. In response, the FCA and the Information Commissioner’s Office (ICO) published a joint statement aimed at providing greater clarity on how firms can communicate targeted support within the existing legal framework. While firms will still need to consider data protection, Privacy and Electronic Communications Regulations (PECR) and other marketing requirements carefully, the regulators have sought to reduce uncertainty in this area.
What is targeted support?
The new regulated activity involves using information about an individual to align them with a consumer segment whose members share similar characteristics, circumstances, or both and then providing a ready-made suggestion presented as suitable because the individual falls within that segment. Unlike regulated advice, the recommendation is not based on a comprehensive assessment of that individual's circumstances and must be accompanied by prescribed disclosures explaining the limitations of the service. In particular, firms must make clear that the recommendation is not based on a comprehensive consideration of the consumer’s individual circumstances, is not specific to that consumer and is based on their alignment with a pre-defined consumer segment. The common characteristics of the consumer segment with which the firm has aligned the consumer must also be disclosed.
A key feature of the regime is the concept of a consumer segment. The FCA expects firms to identify groups of consumers who share a common financial support need or objective and then develop suitable ready-made suggestions for those consumers. Where common characteristics are relevant to defining a segment, the new rules require firms to specify both ‘including characteristics’ (features by reference to which an individual may be aligned with the segment) and ‘excluding characteristics’ (features by reference to which an individual will be excluded from the segment). Firms should use those characteristics to help determine whether a ready-made suggestion is likely to be suitable for individuals within the segment. For example, a segment designed for consumers holding excessive cash balances may include customers above a defined cash threshold, whilst excluding customers where the firm knows they are likely to require immediate access to those funds. Consumer segments must be sufficiently granular to enable firms to assess whether a ready-made suggestion would be suitable for an individual within that segment.
In practical terms, targeted support is designed to be more useful than generic guidance, but less personalised than regulated financial advice. It is intended to give firms more confidence to support customers who may otherwise receive no meaningful help at all.
A central tenet of the regime is that targeted support should be designed to put consumers in a better position than if they had not received the service. Firms should therefore be able to evidence why the relevant ready-made suggestion is expected to improve the position of the intended consumer segment and address the shared financial support need or objective that the segment was designed to meet.
That said, targeted support should not be presented internally or externally as a low-risk workaround to advice. It is a regulated activity. Firms need specific permission to provide it, must design the service carefully and must be able to evidence how the relevant customer segments, ready-made suggestions, communications and governance arrangements are consistent with the applicable rules and the Consumer Duty.
How does targeted support differ from regulated advice?
Regulated investment advice involves a personal recommendation presented as suitable for the individual customer, based on an assessment of the customer's individual circumstances and attitude to risk. Targeted support, by contrast, is based on the customer being aligned to a consumer segment with common characteristics or circumstances. While recommendations firms make will be personal to the consumer, they will not involve a comprehensive consideration of that individual’s characteristics or circumstances. Rather, it is built around limited information, defined consumer segments and ready-made suggestions.
The FCA and Financial Ombudsman Service (FOS) have, in their joint statement on targeted support, confirmed that targeted support is different from other forms of investment advice and is not subject to the suitability requirements in COBS 9 and COBS 9A. Instead, firms assess suitability at the point where they specify the ready-made suggestion for the relevant consumer segment. Suitability is therefore assessed at segment level, not individual customer level and targeted support is not intended to involve ongoing suitability assessments.
However, this does not mean firms can ignore individual information they hold. A firm must not provide a targeted support suggestion if it is aware, or ought reasonably to be aware, of information indicating that the ready-made suggestion with which the consumer has been matched may be unsuitable for that customer.
The key distinction is that regulated advice assesses suitability at the level of the individual customer, whereas targeted support assesses the suitability of a ready-made suggestion for a defined consumer segment and relies on customers being correctly aligned to that segment.
Where does simplified advice fit?
Simplified advice is different from targeted support. Targeted support is a new regulated activity based on ready-made suggestions for groups of consumers with common characteristics or circumstances. Simplified advice, by contrast, remains a form of regulated advice. The FCA’s current work is focused on simplifying and clarifying aspects of the existing advice framework so that firms have greater confidence to offer more focused, proportionate and accessible advice services.
The FCA’s proposals in CP26/10 are therefore important, but they are not yet in force. The consultation closed on 22 May 2026 and the proposals remain under development. For firms, the key point is that targeted support and simplified advice may serve different customer needs. Some consumers may only need a ready-made suggestion designed for a relevant customer segment. Others may need an individual recommendation, but not a full holistic financial planning exercise. More complex cases will continue to require full regulated advice.
Firms should therefore think strategically about how different support models could fit together within their customer journeys, risk appetite and governance framework.
Which firms are most likely to be affected?
The reforms are particularly relevant to firms with large non-advised customer bases and access to customer data. That includes pension providers, life insurers, wealth managers, platforms, SIPP operators, fund managers, banks, building societies and workplace pension operators.
For workplace pension providers and pension scheme operators, the reforms are particularly significant. Pension freedoms have left many consumers needing to make complex decisions about pension access, consolidation, drawdown and retirement income, often without advice. Targeted support could allow firms to intervene earlier and more effectively, provided they have the right permissions, data, governance and communications controls in place.
Interaction with Consumer Duty
The targeted support regime should be viewed through the lens of the Consumer Duty, but the Duty does not require firms to provide targeted support. The key point is that, where a firm chooses to provide the service, it will need to evidence that the model is designed and delivered in a way that avoids foreseeable harm, supports consumer understanding and delivers good outcomes.
The policy objective is not simply to reduce regulation or make it easier for firms to avoid advice requirements. Rather, the reforms are intended to allow firms to provide more useful and timely support while remaining accountable for consumer outcomes.
For targeted support, this means firms will need to consider whether their customer segments are properly defined, whether the relevant ready-made suggestions are appropriate for those segments, whether communications are clear and whether the customer journey enables consumers to understand the nature and limitations of the service.
This is where the Consumer Duty becomes particularly important. Firms will need to evidence that the targeted support model is appropriately designed and controlled. That evidence will need to cover not only the content of the ready-made suggestion, but the design of the wider journey, the data used to align customers to segments, the disclosures given to customers and the monitoring undertaken after launch.
In practice, the question will not simply be whether the firm avoided giving full regulated advice. It will be whether the firm can demonstrate that its targeted support model was properly designed, governed, communicated and monitored.
Governance and oversight requirements
Firms intending to provide targeted support will need specific permission to do so. HMT has described the permission requirement as an important consumer safeguard, allowing regulators to assess whether firms satisfy the relevant Threshold Conditions for providing targeted support.
The FCA has confirmed that firms can apply for targeted support permission through Connect and that its Pre-Application Support Service (PASS) is available for firms planning to apply. PASS allows firms to discuss proposals with the FCA before submitting a formal application and is intended to support higher quality applications.
From a governance perspective, firms will need to evidence how they design and approve targeted support journeys, how they identify customer segments, how they test ready-made suggestions and how they monitor whether the service remains consistent with good outcomes.
The FCA intends to leverage existing product governance requirements and the Consumer Duty. Firms providing targeted support will need to review their targeted support service regularly and ensure it remains consistent with delivering good outcomes, rather than continually monitoring every individual customer outcome.
Key governance issues are likely to include:
Segment design and validation
Design of ready-made suggestions
Disclosure of the nature and limitations of targeted support
Customer journey design and testing
Data quality and customer alignment
Vulnerable customer treatment
Management information and outcome monitoring
Complaints analysis
Escalation to full advice where appropriate; and
Senior management accountability
Senior management accountability will be important. Firms will need to consider who owns the targeted support proposition, who approves the segmentation methodology and ready-made suggestions and how risks are escalated, challenged and remediated. This should be considered through the lens of the Senior Managers and Certification Regime, including clear allocation of responsibility and effective oversight by relevant senior managers.
Potential use of technology and AI
Technology and AI are likely to play an important role in targeted support. For many firms, the commercial case for targeted support will depend on the ability to identify customer cohorts, facilitate digital customer journeys, tailor communications and monitor outcomes at scale.
AI and automation could assist firms in analysing large datasets to identify customers with common characteristics, for example by detecting potential under-saving or unsustainable pension withdrawal patterns, supporting customer communications and helping firms monitor outcomes across customer journeys.
However, this should not be treated as a purely technological issue. It is a governance, conduct and accountability issue.
The FCA's approach to AI remains technology-agnostic, principles-based and outcomes-focused. Firms using AI or automated tools in targeted support will need to evidence how the technology supports good outcomes, how outputs are reviewed and controlled, how bias and model drift are managed and how human oversight operates where customer harm could arise.
The FCA has also highlighted that AI may require greater focus on testing, validation, explainability, strong accountability principles, transparency, operational resilience and risk management.
The same broad point will be relevant as the market develops more simplified advice propositions. Technology may help firms deliver more proportionate advice services, but it will not remove the need for clear governance, effective controls and appropriate accountability.
Liability and complaints risk
Targeted support may reduce some of the barriers associated with full regulated advice, but it does not eliminate liability or complaints risk.
The FCA and FOS joint statement confirms how complaints relating to targeted support will be considered. The FOS will determine complaints independently, based on what is fair and reasonable in all the circumstances, taking account of relevant FCA rules, guidance and standards.
While targeted support is not subject to the COBS 9 or 9A suitability requirements, firms may nevertheless face complaints and redress exposure where the segment design is flawed, the customer is incorrectly aligned to a segment, disclosures are unclear, the customer misunderstands the service as full advice, or the firm provides a suggestion despite knowing information that indicates it may be unsuitable.
The risk profile is therefore different from full advice, but not necessarily simple. The focus will be on whether the firm can evidence that its controls, customer segmentation and delivery model complied with the applicable rules and consumer protection framework.
Simplified advice will raise a different risk profile. Because it remains regulated advice, firms will continue to need to comply with applicable suitability requirements. The FCA’s proposed simplification of those requirements may make it easier for firms to offer more focused advice services, but it will not remove the need for firms to define the scope of the service clearly, gather sufficient information, assess suitability and manage customer expectations.
Practical steps firms should be taking now
Firms considering targeted support should start with a strategic assessment of whether the regime fits their business model, product set, customer base and risk appetite. Not every firm will want or need to provide targeted support, but those that do should take note of the following key practical steps:
Firms should identify whether targeted support could help address customer harm, under-engagement or poor outcomes within their existing pensions or investment customer base.
Firms should consider whether different customer needs are best met through guidance, targeted support, simplified advice or full regulated advice. Escalation routes between those support models will be important.
Firms wishing to provide targeted support must obtain the relevant permission. Applications can be submitted through Connect, and firms should consider using the FCA's PASS process before applying.
Firms should identify customer segments with shared financial support needs or objectives and, where relevant, common characteristics, in order to deliver suitable ready-made suggestions. Potential use cases may include, for example, under-saving for retirement, unsustainable pension withdrawals, customers holding excess cash, or customers approaching retirement without a clear access plan.
Firms should define the common characteristics or circumstances that justify a ready-made suggestion and document why those characteristics are relevant to the support being provided.
Ready-made suggestions should be tested against the needs, objectives and foreseeable risks of the relevant consumer segment, with clear controls to identify customers who should not receive the suggestion. Firms should comply with applicable product governance requirements and ensure that targeted support is based on information sufficient to align a customer to an appropriate consumer segment, rather than a comprehensive assessment of the individual's characteristics or circumstances. Firms must also act with due skill, care and diligence when establishing whether a customer aligns with a particular consumer segment.
Customers must understand the nature and limitations of targeted support, including that the recommendation is not based on a comprehensive assessment of their individual circumstances and is not full regulated advice. Firms must test their disclosures to ensure consumer understanding.
Firms should review targeted support journeys against the Consumer Duty outcomes, particularly consumer understanding, consumer support, foreseeable harm and vulnerable customer treatment.
Firms should decide whether targeted support will be explicitly charged for, funded through other business lines, or provided without a separate customer charge. They will also need to ensure customers understand what they will pay and that remuneration arrangements are consistent with fair value under the Consumer Duty.
Firms should consider how targeted support communications interact with data protection and direct marketing requirements. The FCA has published a joint statement with the ICO on how firms can communicate with consumers in the context of existing direct marketing rules.
Firms should maintain clear records of segment design, customer alignment, disclosures, decision logic, testing, governance approvals and outcome monitoring. These records may be critical if complaints arise.
Where AI or automation is used, firms should review explainability, data quality, bias, model drift, human oversight, vulnerability controls, operational resilience and SMCR accountability.
Conclusion
Targeted support is a major development in the UK's financial services regulatory framework. It has the potential to help millions of consumers receive more meaningful support with pensions and investments, particularly where they are unlikely to access fully regulated advice.
However, the reforms should not be interpreted as a move to lighter-touch consumer protection. Targeted support is a new regulated activity, firmly anchored in authorisation, conduct standards, Consumer Duty, governance and complaints accountability.
The broader Advice Guidance Boundary Review also points to a more fundamental shift in how firms and regulators think about consumer support. The FCA is seeking to move the market away from a binary choice between generic guidance and full regulated advice, towards a broader continuum of support that includes targeted support, simplified advice and full regulated advice.
For firms, these reforms create both opportunity and risk. Those best placed to benefit will be firms that can use data, technology and customer insight to provide more meaningful support at scale, whilst maintaining robust governance and consumer protection standards. If delivered well, targeted support has the potential to deepen customer engagement, build trust, improve consumer outcomes and drive sustainable growth. In that sense, it is about more than closing the advice gap. It represents a significant opportunity for firms to strengthen customer relationships and support better financial decision-making, while demonstrating that innovation and consumer protection can work hand in hand.
If you are considering offering targeted support or would like to discuss how these reforms could impact your business, please contact Sushil Kuner, Partner and Head of Financial Services Regulation.
We would be delighted to discuss your plans and how we can help.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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