The FCA has published a number of guideline examples for financial firms designing the consumer segments for Targeted Support.
The regulator said the guidelines would be taken into account when a complaint about Targeted Support is raised against a firm.
Targeted Support will be introduced by the regulator from April and is designed to provide limited financial guidance to groups of consumers with common characteristics. The aim is to increase the availability of financial guidance to more consumers.
The regulator said: “There are many ways firms can comply with our rules and the examples below are not a template for the design of targeted support models, neither is this an exhaustive list of the things firms should consider when designing their segments.”
It said that after consulting with the Financial Ombudsman Service, it was agreed that: “When deciding what is fair and reasonable in all the circumstances of a complaint, this publication will be one of the things that it will take into account if a customer brings a complaint against a firm regarding their targeted support.”
The document says that when firms are creating a consumer segment and defining common characteristics, they should consider the following in particular:
- A consumer segment is a group of individuals in a situation involving a shared financial support need or objective and, where relevant, common characteristics.
- To the extent that common characteristics are relevant to the definition of a consumer segment, they must include both: including characteristics; and excluding characteristics.
- When defining common characteristics of a consumer segment, firms should have regard to what would make a suggestion suitable or unsuitable for an individual within the consumer segment.
- Consumer segments must be defined at a level of detail that is sufficiently granular as to enable firms to assess whether a ready-made suggestion would be suitable for an individual within that segment.
- Consumer segments must also not be defined at a level of detail that a firm in the business of providing investment advice would reasonably associate with a comprehensive consideration of a consumer’s characteristics or circumstances.
The FCA said firms have to judge how to design consumer segments, “at a sufficiently granular level while not comprehensively considering the consumer’s circumstances or characteristics.”
It said the complexity of a situation is likely to be relevant to the type and/or number of common characteristics needed to ensure that segments are sufficiently granular to ensure a ready-made suggestion is suitable for an individual in the consumer segment.
It said if a firm can’t define a suitable suggestion without undertaking a comprehensive consideration of a consumer’s circumstances or characteristics, it’s likely that the consumer will be in a situation that can’t be addressed through Targeted Support.
The guidelines include 11 examples showing a level of detail that would likely be associated with a comprehensive consideration of a consumer’s circumstances or characteristics.
The full guidelines, including the examples, can be read here.