Without clear guidance from the FCA and the Financial Ombudsman Service firms face the risk of 'hindsight regulation', the CEO of Quilter has warned as the regulator’s consultation on Targeted Support ends.

The regulator’s consultation into its new Targeted Support proposals closes today (Friday).

Steven Levin, CEO of Quilter, welcomed the potential that Targeted Support could bring.

He said that it could help narrow the advice gap but warned that without a framework built on clear rules, workable processes and a regulatory environment that provides both advisers and providers the confidence to engage, firms may hold back from engaging.

He said: “A critical enabler is the creation of a genuine safe harbour for firms delivering Targeted Support.

"Without clear and consistent alignment between the FCA and the Financial Ombudsman Service on how these journeys will be assessed, firms face the risk of hindsight regulation. This uncertainty can stifle innovation, limit access and deter firms from engaging fully.

“Safe harbour protection would give firms the confidence to innovate, make proportionate recommendations, and focus on good customer outcomes without fear of retrospective challenge. It is essential that the regulator sets out transparent assessment criteria so firms can operate with certainty from day one.”

He added that Targeted Support cannot work in isolation but when paired with Simplified Advice and greater access to financial education, it could help narrow the advice gap.

The Targeted Support proposals have been broadly welcomed by financial advisers.

Half (48%) of financial advisers expect the more relaxed regulatory framework brought about by Targeted Support to be an opportunity to attract new clients in the next 18 months, according to a report from Nextwealth and Aegon.

The proposals in Consultation Paper CP25/17 are part of the regulator's plans to bridge the advice gap and will enable change to the advice-guidance boundary.

In its proposals published in June, the FCA said:

• “We are proposing a new form of support – targeted support – in pensions and investments, which would enable firms to provide suggestions designed for groups of consumers with common characteristics to help them make important decisions."
• “Targeted support also has the potential to act as a stepping stone to simplified or more comprehensive investment advice where consumers want or need more personalised advice."
• “We are also proposing to conduct further work on simplified advice, and clarify further how guidance can be given."
• “Our proposals taken together allow firms to provide a sustainable continuum of support to help their customers at different times of their life, as their needs and circumstances change.”

The FCA said the reforms should set the framework for the next 20-30 years, to support consumers now as well as future generations.