The FCA is set to open the door to widespread adviser charging for targeted support, the new type of guidance it hopes will reach millions more people.

Targeted support is set to be allowed from as early as next Spring and is intended to give millions more consumers access to lower cost financial guidance.

It is aimed at those who may be unable to afford full cost Financial Planning advice but need some significant support with pensions, investments and other areas.

The latest proposals may give more adviser firms an incentive to offer targeted support by updating the FCA handbook to include paid targeted support guidance.

The FCA says in its its latest consultation paper, CP25/26, that it will allow several forms of payment for targeted support including allowing firms to offer targeted support cross-subsidised by other revenue generating advice elsewhere in the business.

The latest consultation paper proposes a number of amendments to the FCA handbook to provide specific rules on targeted support. The FCA is asking for comments on its latest Consultation Paper by 17 October.

The FCA is proposing three major changes to its handbook. It wants to:

•        Ensure that its proposed targeted support framework interacts effectively with existing rules, such as those relating to pension choices

•        'Refine' some of the proposals it set out in CP25/17 (its earlier consultation paper on targeted support), such as those around commissions and charging

•        Ensure that the proposed new targeted support activity aligns with the wider regulatory framework, such as reporting requirements.

In its latest proposals the FCA says: “In CP25/17 we said that our proposed rule against commissions would not prevent a firm from accepting payments made by or on behalf of a client. We are refining this proposal to clarify that permitted payments include those that facilitate the payment of a charge for the provision of targeted support.”

The regulator says it proposes to allow firms to, “offer targeted support without an explicit charge in a commercially viable way”. This could be done by allowing firms to use cross-subsidisation to, “recover the costs of providing targeted support.”

The watchdog says some firms may choose to structure their targeted support arrangements so that the costs of providing it are recovered through a combination of an explicit charge and cross-subsidisation.

The FCA added: “We are also clarifying that a firm can meet the costs of providing targeted support through the firm’s other business lines and through other legal entities in the firm’s group.”

The FCA said that introducing targeted support should help close the ‘advice gap.’

It said: “The advice gap means that millions of people could be missing out on the longer-term benefits of investing and making better decisions about their investments and pensions.”

Targeted support will allow firms to provide suggestions to groups of consumers with common characteristics, to help them make financial decisions.

In its initial consultation paper CP25/17 on targeted support the FCA received 116 responses with “broad support for our proposals.” It plans to respond to feedback in a Policy Statement in December.

The FCA said that it does not expect all firms will offer targeted support but wants to help those who do want to provide it to get ready quickly.

Its pre-Application Support Service (PASS) has opened to firms planning to apply for targeted support permissions. This is a voluntary support service and is distinct from applying for a permission itself, the FCA said.

It will help firms prepare high quality applications ahead of the gateway opening in March. More details can be found on the FCA website.