UK FCA Launches Targeted Support Framework to Boost Investment Guidance

The UK's Financial Conduct Authority (FCA) has introduced near-final rules for a new "targeted support" framework aimed at enhancing financial guidance around pensions and investments for up to 18 million people over the next decade. This regulatory approach allows financial firms to make specific product recommendations to consumer groups with common characteristics, bypassing the need for comprehensive individual financial assessments required under traditional advice. The FCA highlights a significant gap in investment participation, with around 7 million UK adults holding substantial cash savings yet not investing, and fewer than 10% accessing regulated financial advice. This regulatory change responds to the comparatively low UK retail investment participation rate, which stands at 19% of household financial assets, trailing behind the 38% in the EU and 56% in the US. The FCA's policy aims to stimulate greater retail investment engagement, complementing recent efforts like a consumer tool to assess firm legitimacy following a rise in investment scams. The targeted support system segments consumers based on shared financial profiles, allowing firms to offer pre-defined, group-focused recommendations while ensuring clear communication of product limitations and firm-specific offerings. Several constraints govern the new framework: it prohibits recommendations on pension consolidation and specific annuity products, which require more personalized advice, and excludes high-risk, marketing-restricted products like CFDs. Firms may guide consumers towards whole-of-market annuity brokerages but cannot endorse particular annuities. The regime also enforces a ban on commissions, with a limited exception for referrals to annuity brokerages, and places a strong emphasis on compliance with the FCA's Consumer Duty to ensure fair value and outcomes. Financial firms offering stocks and shares ISAs stand to benefit under the new rules, as the framework supports broader access to investment products through simplified, yet regulated, group recommendations. The FCA plans to authorize firms to apply for permission to provide targeted support services starting in March 2026, anticipating the regime to go live shortly after pending necessary government legislation. This framework represents a significant evolution in balancing consumer protection with more scalable guidance models, potentially increasing investment participation and financial wellbeing in the UK market. Overall, the FCA's targeted support framework introduces a novel regulatory model that can enhance investor engagement at scale, while maintaining necessary product restrictions and transparency requirements. Its success will depend on firms' adherence to the Consumer Duty and the regulatory ecosystem's ability to monitor outcomes, ensuring these group-based recommendations serve client interests effectively without the need for individualized advice.