The FCA has at last launched its proposals to address the “advice gap” where, post the FCA’s Retail Distribution Review, high costs have left many consumers unable to access investment advice or guidance.

Despite this initiative being five years in the making, it does appear that there are a number of areas where further thought may be required. 

What is the FCA’s recipe for reform?

Here are the key proposals as set out in CP25/17.

Targeted support: financial advice with a group discount?

Targeted support is a new advice service, which would allow firms to provide suggestions tailored to support groups of consumers sharing common characteristics. Whilst the FCA acknowledges it is not as beneficial as bespoke investment advice, the goal set by the FCA is to achieve “better outcomes” than if the service is not provided. For many consumers the proposals will be an upgrade from the “here’s a leaflet, good luck” approach of unregulated guidance, falling short of a personal recommendation. 

The FCA proposes that targeted support is a type of personal recommendation which does not require a firm to make a personal assessment of suitability for the client. Instead, a firm can deliver a “ready-made investment suggestion” to that client in certain pre-defined scenarios on the basis that the client falls within a particular consumer segment with common characteristics. The rules work a little like a target market assessment in PROD where firms must identify the positive and negative target market for the product or service. 

Firms will need to be clear in their communications to customers: targeted support is not personalised advice. The proposals make clear that COBS 9 and 9A suitability requirements do not apply. Firms must instead have a reasonable basis for determining that ready-made suggestions are suitable for all consumers in the group, with suitability assessed by reference to the relevant common characteristics. 

Although COBS 8 and 8A client agreement rules will not apply, there are still a number of disclosure requirements which must be complied with. These include disclosing any limitations on the scope of the products considered by the firm and ensuring that the customer understands the nature of the service provided. Firms are also required, where appropriate, to signpost customers to tools or modellers that could assist them in understanding the ready-made suggestion and inform them of the availability of guidance services such as Money Helper and other types of advice. 

Certain products will not be available for targeted support (for example, consolidation of pensions, non-mass market investments, restricted-mass market investments and products covered by restrictions in COBS 22). 

Although annuities can be included in targeted support, these are subject to more restrictive requirements. Crucially, firms will not be able to recommend a named annuity as part of targeted support. Instead, they can include recommendations on annuities in a ready-made suggestion provided this is restricted to a recommendation relating to the features of an annuity. To encourage customers to shop around, firms must also comply with a break period between an annuity suggestion and the subsequent sales journey. 

Here are a few examples of how targeted support can be used.

• Consumers under-saving for retirement: Currently firms can warn a consumer that they are under-saving, but with targeted support they could also suggest an alternative pension contribution rate.
• Consumers struggling with pension access decisions: Firms could do more than just providing factual information about decumulation, including suggesting steps appropriate for their consumer group such as taking an income in a more tax efficient way (e.g. lump sum rather than drawdown, where appropriate).
• Consumers in a position to invest: Firms can shift from providing general encouragement to invest to suggesting specific investment products. No more “you might want to invest,” but “here’s something that could suit you.”
• Consumers with investment products: Firms can progress from just providing explanatory information (e.g. regarding risks) to suggesting alternative products.

Despite the FCA’s recent emphasis on streamlining the rule book, there is also degree of overlap with product governance requirements. In addition to new bespoke conduct standards, supplementary product governance requirements in a new chapter PROD 8 will also apply as well as existing product governance requirements in PRIN 2A/PROD 3/4. 

Firms may provide targeted support either free of charge or for a fee. The adviser charging rules in COBS 6.1A do not apply. However, commissions and other perks for offering targeted support remain off the menu. Under the draft rules, firms must also clearly disclose to customers how they are remunerated for providing targeted support and, for firms charging for the service, disclose the relevant charges. Whilst the FCA notes that most firms intending to offer targeted support plan to do so for free, with costs covered through cross-subsidisation, they do not appear to question if the costs of offering targeted support are worth it for firms. It also remains rather unclear how firms will navigate cross subsidisation whilst meeting fair value requirements for their other products. 

Firms will need apply for a separate regulatory permission to provide targeted support and the Government has announced that it will consult on proposed amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to create a new specified activity. This may come as a surprise to advisory firms that are already permitted to provide personal recommendations and would mean that they would need to submit a variation of permission (VOP) application to provide a more basic advisory service. The cost of the VOP may deter licensed firms from trialling the service and the proposed £500,000 minimum level of regulatory capital requirement may deter new entrants to the market. 

Notwithstanding these costs, the FCA has assessed in its cost benefit analysis that approximately 30 firms are likely to offer targeted support in the short term after the rules are introduced, and a further 50 to 100 in the first year. 

Simplified advice 

Firms offering simplified advice can continue to do so, although the FCA notes in its CP that this option has been generally unpopular with firms and take up has been poor. 

Simplified advice means a recommendation of a particular product or course of action assessed as suitable for an individual consumer, taking account of essential information relevant to a single need (as opposed to something more comprehensive such as their overall financial situation). 

The FCA envisages simplified advice where a customer has straightforward needs, or as a stepping stone to more complex or holistic advice where this benefits consumers with greater wealth or more complex circumstances.

The FCA acknowledges that there is scope to make the existing framework clearer. However, in light of the development of targeted support, the FCA has decided to shelve its previous proposals for a bespoke simplified advice regime (previously raised in December 2023’s DP23/5). Instead, the FCA will modify COBS 9/9A to make clear that simplified advice can be offered in straightforward cases with limited information. 

Consolidating, simplifying and clarifying guidance on the boundary

The FCA proposes to update its guidance on the advice boundary at the same time as setting out the perimeter guidance for firms providing targeted support. A separate consultation will be launched in early 2026 for this, following the publication of the policy statement to settle these proposals.

Key dates and next steps

The FCA’s consultation closes on 29 August 2025. The policy statement will be published in December 2025/January 2026. Further clarification of the advice boundary is expected to follow from 2026 onwards.

The government will separately confirm the process for providing feedback on the draft statutory instrument to amend RAO on 15 July 2025.