FCA's guidance on targeted support in consumer segment design: considerations for firms

As discussed in our article, ‘FCA publishes consumer understanding good practice and areas for improvement’, the FCA continues to emphasise compliance with the consumer duty across its guidance, including in targeted support for consumer segment design. This extends to firms’ proactive and responsible use of customer data to ensure effective, informed design.

The FCA advises that if common characteristics are relevant in defining a consumer segment, including and excluding characteristics must be included. Importantly, defining a consumer segment must be done in a sufficiently detailed way to enable a firm to determine the suitability of a ready-made suggestion without conducting an all-encompassing determination.

The type or amount of common characteristics is likely to be indicative of a situation’s complexity. Firms are advised that the more complex a situation is, the higher the likelihood that a greater amount or more granular set of common characteristics will be needed to formulate ready-made suggestions and vice versa.

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Firms must rely on information of which it is privy to that indicates a ready-made suggestion may or may not be appropriate for a consumer. Secondly, firms are not obliged to ingather client information during a targeted support journey beyond that which is required for them to provide targeted support.

Firms may rely on reasonable assumptions to simplify consumer segments provided they are grounded in evidence and are immaterial to the suitability of a ready-made suggestion.

The FCA provides the following helpful formula when considering its requirements for firms: (i) firms should have regard to the information which is readily accessible to them as regards the particular business area providing targeted support; (ii) firms are expected to pre-define a wide set of common characteristics to determine individuals’ suitability in a group; (iii) as part of fulfilling their duty to clearly disclose the nature and limitations of targeted support, firms may wish to disclose the information which it has not considered.