Rethinking investor engagement: targeted support and its regulatory implications
Targeted support is being positioned as an ‘outcomes focused, flexible and future proof’ solution to the advice gap. For the industry, however, it introduces uncertainty and blurring of regulatory boundaries at a time when expectations around foreseeable harm and evidencing good outcomes are high under the Consumer Duty.
Firms willing to navigate that tension may unlock new ways of engaging underserved consumers, strengthen customer relationships, and gain competitive advantage. Those that do not risk being left with only two options: either full advice, or execution‑only services.
This article compares the regulatory boundaries under which firms can engage retail investors and considers the legal and governance challenges posed by targeted support.
Background
As part of its wider strategic agenda to enhance UK financial services, the Financial Conduct Authority’s (FCA) targeted support regime came into force on 6 April 2026. Under the new regulated activity to ‘provide targeted support’, the permission aims to enable financial services firms to make pension and investment-related suggestions where a consumer aligns to a designed set of common characteristics.
Following consultation in CP25/17 and CP25/26, the FCA published PS25/22, confirming the final framework for targeted support. Firms may apply for new authorisation or seek a variation of permission, but must carefully assess whether targeted support is appropriate and feasible within their existing operating models. Early indicators suggest a cautious industry response; as reported by FT Adviser on 8 April 2026, only seven firms had applied to offer targeted support as at 26 March, despite wider engagement through the FCA’s Pre‑Application Support Service.
This limited initial uptake demonstrates the complexity of the regime and the degree of analysis firms are undertaking before committing to implementation.
Comparing options for engaging retail investors
Historically, the line for providing advice was very clear. However, the targeted support regime blurs those lines and provides a new method of engaging with retail investors. It asks firms to help shape consumer outcomes through structured suggestions, nudges, and filtering, while remaining on the ‘right’ side of the advice boundary and Consumer Duty. The below table provides a high-level comparison of three options to engage with investors and potential considerations for each.
| Execution only
Non-advised service |
Targeted support
New regulated activity |
Personalised service
Regulated advice |
|
| Example retail customer journey | 1. Customer signs up to investment platform.
2. Customer undertakes appropriateness test. 3. Customer selects investments, with no suggestion or recommendation. 4. Customer places orders. |
1. Customer uses banking or investment platform.
2. Information is collected on financial goals, attitudes to risk, time horizon etc to support segmentation. 3. Ready-made suggestions are given, aligning to the consumer segment. 4. Customer may or may not take the suggestion.
|
1. Customer engages financial adviser.
2. Suitability information collected on assets, goals, attitude to risk, ability to bear loss, knowledge and experience etc. 3.Bespoke personal recommendation given to the customer. 4. Customer may or may not take the recommendation, and the adviser may present alternative options. |
| Key regulatory considerations | 1. Clear, prominent, and appropriate risk warnings.
2. Best execution and dealing standards. 3. Limited obligation to influence outcomes.
|
1. Consumer segmentation and cohort design.
2. Maintaining the boundary between support and advice. 3. Ongoing monitoring of consumer outcomes.
|
1. Suitability assessment and evidencing.
2. Adviser competence and certification. 3. Ongoing review of advice and client circumstances. |
| Opportunities for firms | · Lower conduct and liability risk.
· Reduced compliance burden. · Scalable, low-cost model. |
· Differentiated service offering.
· Possible to charge for support. · May attract underserved consumers. · Scalable alternative to full advice. |
· Strong customer relationships.
· Higher fee potential. · Clear regulatory framework. |
| Limitations and risks | · Minimal customer engagement.
· Limited scope to influence outcomes. · Increasing Consumer Duty scrutiny. |
· Evolving regulatory and supervisory expectations.
· Significant investment and implementation efforts. · Risk of providing de-facto advice. · Potential regulatory capital impact (minimum of £500k holding). |
· Higher conduct, suitability, and liability risks.
· Greater compliance and operational costs. · Growth may prove difficult in an increasingly digital world. |
Having a clear understanding of the options to support investors is important so that firms may determine what best aligns to their business and growth plans, especially in a post-Consumer Duty environment.
Targeted support creates regulatory asymmetry where firms are expected to influence consumer outcomes more actively, without the certainty and protections associated with full advice. Successfully navigating that asymmetry will require robust governance, clear operational boundaries, careful management of conflicts of interest, alignment under SMCR, and an auditable decision‑making framework. The question for most firms is whether targeted support can be delivered at scale without creating disproportionate regulatory or conduct risk.
Next steps
As the targeted support regime comes to life, firms should resist viewing it solely as a regulatory permission to be obtained. Instead, senior management should assess if targeted support ultimately fits within their distribution strategy and business plans, Consumer Duty, governance, and risk appetite. Early cooperation between legal, compliance, product and finance, and marketing teams is key to determining whether targeted support is an opportunity worth pursuing, or a service best avoided.
For further discussion on the regulatory and operational considerations arising from targeted support, please contact Teja Picton-Howell or Kristina MacPherson.