The direction of travel in the advice sector is becoming evident as we move away from a single, comprehensive advice model towards a more segmented, multi-layered ecosystem of support, writes Tom Nelson of adviser support company Lifetime Financial Management.
The FCA’s continued focus on Targeted Support (which was launched this week), alongside consultations on simplified advice and proposed changes to ongoing suitability requirements, signals a fundamental shift in how advice firms are expected to deliver value to different types of clients.
For many years, firms have operated within a relatively structured framework of full regulated advice, underpinned by detailed suitability assessments and annual reviews. While robust, this model has also contributed to the well-documented advice gap, leaving large segments of the population underserved.
Targeted Support introduces a new middle ground. However, it is critical that firms do not misunderstand its purpose. Targeted support is not a “light-touch” version of advice, but a distinct, regulated service requiring clear governance, defined client groupings and demonstrable outcomes .
At the same time, the FCA’s work on simplified advice is designed to revitalise a part of the market that has existed for some time but remains under-utilised. By clarifying suitability expectations and allowing firms to rely on “sufficient” information rather than exhaustive data gathering, the regulator is encouraging firms to deliver more proportionate, accessible advice to consumers with less complex needs.
Alongside this, proposed changes to ongoing advice, including the removal of mandatory annual reviews in favour of periodic suitability assessments, further reinforce the shift towards flexibility. This could create an opportunity for firms to design more tailored service models but it also introduces an undeniable challenge.
Consumer Duty requires firms to demonstrate fair value and ongoing suitability. Moving away from structured, regular reviews places greater reliance on firms to evidence that clients continue to receive an appropriate level of service, rather than simply reducing the frequency of interaction. This sort of flexibility can risk diluting a service that is already not able to help the general population, case in point being the notorious “advice gap.”
However, these developments point to a more nuanced market structure. In practical terms, firms will need to operate across three distinct service layers:
1. Targeted support for groups with shared characteristics
2. Simplified advice for individuals with straightforward needs
3. Full holistic advice for more complex Financial Planning
Each layer carries its own regulatory expectations, cost base and operational model.
The opportunity for firms is significant. Those who invest in clearly defining these propositions can extend their reach, engage new client segments and build more scalable business models.
However, the risks are equally clear. Attempting to blur the lines between these services, or treating targeted support as a shortcut to advice, will expose firms to regulatory challenge under Consumer Duty. Ultimately, this is not about simplifying advice, but about structuring it more intelligently.
The future of the sector will depend on whether firms can balance innovation with discipline as well as flexibility with accountability.
Tom Nelson is head of compliance and pension regulation at adviser support and corporate financial wellbeing company Lifetime Financial Management.