Navigating targeted support: FCA guidance on designing consumer segments

On 23 March 2026, the Financial Conduct Authority (FCA) published new information and good and poor practice examples on how firms should design consumer segments for the purpose of delivering targeted support. The FCA is aiming to help firms navigate one of the most challenging aspects of the new regime. Building on the FCA’s policy statement (PS25/22) outlining the final rules for targeted support (which we reported on in detail here and here), the new publication offers practical examples to illustrate how firms can provide ready‑made suggestions to groups of consumers with common characteristics without tipping over into comprehensive, individualised advice.

The FCA highlights three core areas for firms to consider when designing consumer segments: defining common characteristics, leveraging existing consumer data and making reasonable assumptions. This blog post summarises the key takeaways for firms seeking to deliver targeted support in a robust and compliant manner. 

Defining common characteristics: the art of appropriate granularity 

When designing consumer segments, firms must identify groups of consumers with a shared financial support need or objective and, where relevant, common characteristics. These characteristics should include both “including” and “excluding” factors. 

The real challenge lies in achieving the right balance: segments must be granular enough to ensure a ready-made suggestion is suitable for any individual within that segment, yet not so detailed that it mirrors a comprehensive consideration of an individual's personal circumstances.

For instance, segments for consumers with “excess cash” to invest will generally require fewer and less complex common characteristics than those for consumers drawing income from a pension pot, reflecting the differing complexity of these situations. When supporting consumers with cash savings, the FCA cautions against using characteristics that would necessitate an in-depth analysis of personal finances, such as a partner's income or whether a consumer pays their credit card balance in full each month. These data points would likely go beyond what is necessary for a suitable ready-made suggestion. Similarly, when supporting consumers who may be drawing down unsustainably from their pension, pre-defining characteristics such as mortgage repayments or inheritance expectations would involve unnecessary analysis of individual cashflow positions. 

Conversely, firms may be able to pre-define common characteristics effectively by using broader categories, such as age bands (rather than segments for every age) or total pension provision. This enables firms to maintain sufficient granularity while avoiding delving into the specific features of every pension arrangement which would tip the balance towards comprehensive consideration.

Leveraging existing consumer data: utilising “readily accessible” information 

Firms are required to consider any additional information they already hold about a customer that could affect the suitability of a ready-made suggestion. At the same time, the FCA’s expectation is that if a firm has correctly established excluding characteristics and verified the consumer’s alignment with a consumer segment, there should not generally be any other information that would render a ready-made suggestion unsuitable. If, when conducting this process, the firm fails to consider certain relevant information they hold about the client, that might mean the customer’s alignment with a particular segment is flawed. 

A consideration of data held by the firm would not require detailed analysis of individual transactions or exhaustive data searches. The focus is on what is "readily accessible". The FCA clarifies that firms are not expected to process all available data or conduct detailed searches across individual transactions to capture wider information. If accessing data requires significant effort, it may not be considered "readily accessible". 

That said, firms cannot inappropriately "ring-fence" parts of the business to avoid considering relevant information held elsewhere if that information should reasonably be accessible. 

If a firm decides not to consider certain data points, it should consider communicating this to consumers, particularly where there might be a gap between what the firm has considered and what a consumer might reasonably expect. This approach aligns with requirement to clearly disclose the nature and limitations of targeted support, as well as the Consumer Duty's emphasis on supporting consumer understanding and preventing foreseeable harm. 

Making reasonable assumptions: evidence-based simplification

Firms may use assumptions to limit the number of common characteristics within a segment, provided those assumptions are reasonable and supported by evidence about the type of consumers within that segment. 

Assumptions must not be material to the suitability of a ready-made suggestion. If an incorrect assumption would pose a more than negligible risk to the suggestion's suitability, it should instead be captured as a common characteristic. For example, a firm should not assume the presence of an emergency fund if this is material to determining whether a consumer should invest. It should instead define this as a common characteristic. Similarly, assuming a consumer prefers flexible rather than fixed income from a pension would likely be unreasonable, as such preference is material to the suitability of the decumulation product and therefore should be a defined characteristic.

Examples of reasonable assumptions include assuming that consumers with "excess cash" are seeking returns that beat inflation on the basis of established industry understanding or historic consumer behaviour. Firms might also use assumptions already accepted in other forms of investment advice, such as average life expectancy when considering sustainable withdrawal rates in pension planning.

Practical implications for firms 

Firms should take a rigorous approach to designing their targeted support frameworks. Whilst the FCA’s publication does not provide a design template nor an exhaustive list of considerations for the design of consumer segments, firms would do well to assess their consumer segmentation strategies in light of the new publication, with particular focus on data‑handling practices and the assumptions underpinning their ready‑made suggestions. 

Careful consideration of the FCA’s examples will likely be helpful in designing consumer segments and in turn ensuring better outcomes for consumers. When deciding what is fair and reasonable, it is worth noting that the Financial Ombudsman Service will take the FCA’s publication into account if a customer brings a complaint regarding a firm’s targeted support service.