Smarter Customer Segmentation for Targeted Support

With the Financial Conduct Authority’s (“FCA”) recent publication, Targeted Support: firm considerations when designing consumer segments, firms were given clearer expectations for designing consumer segments that deliver meaningful, fair and responsible outcomes. In a marketplace where personalised financial products and services are increasingly utilised, the FCA has taken a proactive approach to ensure that innovation in consumer engagement is matched by robust consumer protections.

This guidance provides practical insights for firms to segment consumers in ways that support financial well-being, reduce harm and enhance accessibility. It signals a move toward a more nuanced, data-driven approach to consumer care, ensuring that firms can provide targeted, ready-made guidance while maintaining regulatory compliance.

Understanding Targeted Support

Targeted support refers to the practice of identifying consumer groups with common needs or objectives and tailoring interventions to improve their outcomes. This could include enhanced communications, personalised service strategies or additional support mechanisms to prevent potential harm.

The FCA emphasises that firms must balance innovation and commercial objectives with the overarching duty to act in consumers’ best interests, in line with the Consumer Duty (PRIN 2A). Poorly designed segmentation can inadvertently exacerbate financial difficulties or create inequalities in service delivery.

Core Principles of Effective Consumer Segmentation

According to the FCA’s guidance, there are several principles firms should consider when building consumer segments.

Clearly Define Segments

Consumer segments should be built around shared financial needs or objectives, or common characteristics, for example, consumers with excess cash savings who want to invest, or individuals approaching retirement who need income strategies. Common characteristics must be clearly defined with concrete inclusion and exclusion criteria. But these segments must be:

- Granular enough to ensure suggestions are genuinely suitable; but
- Not too granular that they resemble full regulated financial advice.

This balance enables firms to provide ready-made and meaningful support while acknowledging complexity of individual situations and avoiding preventing potential harm.

Use the Right Data

Firms should utilise readily accessible customer data and avoid conducting overly detailed analysis across all potential data points for each individual.

Additionally, where data suggests that targeted support may be unsuitable for an individual, this must be appropriately considered.

Firms must be transparent about the data used and disclose any gaps in readily assessable data to customers. The data used should be explainable, transparent, and subject to appropriate testing and monitoring to assess potential impacts on customer segmentation and outcomes..

Using Assumptions

Assumptions can help streamline segmentation in combination with common characteristics, but only when the assumptions are reasonable, evidence‑based, and have no material impact to suitability.

Assumptions must never impact the risk of unsuitability of the ready‑made suggestion for an individual. All assumptions must be explainable and used transparently.

For example, Firms:

- Can assume that investors seek returns above inflation.
- Can NOT assume pension drawdown preferences without evidence of consumer needs.

Testing and Monitoring

Firms should treat targeted support as an evolving capability, not a one-off design exercise. Ongoing testing helps ensure that consumer segments, assumptions and messaging remain relevant and effective, while monitoring focuses on whether customers are achieving good outcomes in practice.

This includes assessing customer understanding, uptake of advice and any signs of confusion or harm. Insights gathered should feed back into continuous refinement, helping firms keep their approach aligned with changing customer needs and consumer duty expectations.

Key Takeaways

This guidance isn’t just a checklist, it’s a roadmap to customer‑centric design. Firms that align their product experiences with these principles can improve engagement through empathy and clarity and improve customer outcomes.

As the financial services ecosystem embraces targeted support, firms that truly understand how to segment with purpose will lead the way in providing customer value.

Consumer segmentation and targeted under the new FCA regime is more than a regulatory requirement, it’s a chance to craft meaningful, ready-made investment advice at scale. Firms that combine effective data with clear processes and procedures can redefine how financial guidance is delivered in the UK and take advantage of this new regime.

How Can Complyport Help?

The FCA’s guidance on targeted support and consumer segmentation sets a clear expectation that firms must design and demonstrate that their segments, assumptions and communications genuinely lead to suitable target support and good consumer outcomes. Achieving this in practice requires robust governance, well-evidenced design decisions, and ongoing assurance that segmentation models remain compliant and effective.

Complyport provides specialist regulatory support to help firms design, implement and validate targeted support frameworks in line with FCA expectations. Our experienced team can assist with:

Consumer Duty Implementation Support: Assist firms embed Consumer Duty requirements into their targeted support frameworks, ensuring segmentation, governance and customer journeys are aligned with FCA expectations and clearly evidenced in practice.
Training: Delivering tailored training programmes to ensure staff understand how to apply targeted support principles, the Consumer Duty principles, and vulnerable customer interactions.
Review of Targeted Support Frameworks: Assessing existing segmentation and targeted support models to identify gaps, improve robustness, and ensure they are appropriately designed to support suitable, evidence-based consumer outcomes.
Consumer Duty Monitoring Frameworks: Supporting the development of effective MI and monitoring structures to track the performance of consumer segments and demonstrate that targeted support is delivering positive and consistent outcomes over time.
Vulnerable Customer Assessment Frameworks: Helping firms design and implement frameworks to identify, assess and respond to vulnerability within consumer segments, ensuring that targeted support remains fair, appropriate and sensitive to customer needs.