The results of the FCA’s multi-firm review of consolidation in the wealth management and advice sector, published on 31 October 2025, were eagerly awaited by buyers and sellers of financial advice businesses alike.
Buyers wanted clarity on the regulator’s key concerns; sellers were watching for anything that might affect the market – and, inevitably, price expectations.
It was also an opportunity to see how the FCA’s approach in this sector may be shaped by its high-profile re-focus on growth, innovation and a more balanced acceptance of risk.
The FCA explicitly acknowledges that consolidators have a role to play in supporting sustainable growth in the advice sector, and – importantly – that debt has a legitimate role in funding multiple acquisitions.
Having set out that stall, the FCA then provides further detail – partly through “good practice” and “bad practice” examples – on how firms should manage the risks that accompany fast-growth models.
The review signals clearly that the FCA sees prudential group consolidation as a key risk mitigant
Unsurprisingly, the regulator’s focus is on behaviours that create pressure on the regulated entities within consolidator groups and may, as a result, lead to poor client outcomes.
On group debt, the FCA accepts that it will often be serviced by cash generated from regulated trading businesses, but appears to draw a firm line at regulated entities providing direct guarantees for that debt or security over their assets.
The review also signals clearly that the FCA sees prudential group consolidation as a key risk mitigant. It notes that some offshore structures currently fall outside full prudential requirements despite posing similar risks to onshore groups – and the direction of travel here seems obvious.
The FCA also highlights the risks associated with deal structures that reward sellers when clients subsequently transfer into group products. This mirrors recent market experience, where such incentives have already begun to fall out of favour.
Change-in-control applications remain the FCA’s primary route for raising many of these issues, and this is certainly being seen in practice.
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In transactions structured as asset sales – where firms make Principle 11 notifications rather than change-in-control submissions – the regulator is now treating those notifications in a very similar way, asking the same types of questions.
Governance and resourcing form another major area of focus. The FCA wants evidence that fast-growing firms are building internal and group structures capable of managing that growth responsibly, and that unregulated group companies are not exerting inappropriate influence over their regulated counterparts.
This includes ensuring sufficient independent scrutiny at board level and bringing in more experienced leaders where necessary.
Overall, the review appears to have been reasonably well received. Many firms in the sector have already encountered these supervisory themes directly, so few of the findings came as a surprise.
Still, a clear statement of the FCA’s priorities is helpful and will no doubt feature heavily on consolidator board agendas in the months ahead.
Shortly after the review was published, I came across an FCA speech at the launch of the Chief Risk Officer Network, centred on “rebalancing risk for growth” – a recurring theme under the new government.
Actions will matter far more than rhetoric, and only time will tell whether this ‘rebalanced approach truly takes hold
The FCA does appear to be making genuine efforts to strike this balance, but I couldn’t resist noting one particular extract:
“In March, we launched a new five-year strategy. We want to deepen trust, rebalance risk, support growth and improve lives.
“It has four key priorities: we want to be a smarter regulator, support growth, fight financial crime and help consumers navigate their financial lives. That’s down from the 13 we had in our previous strategy – a prime example of how we’re reducing red tape.
“The strategy puts growth at the heart of what we do. It’s mentioned 30 times in a 22-page document. Innovation, a driver of growth, is mentioned 15 times. That’s deliberate.”
Yet, without wanting to be a party pooper, reducing the number of stated priorities or mentioning innovation more often is not an achievement in itself.
As ever, actions will matter far more than rhetoric, and only time will tell whether this “rebalanced” approach truly takes hold.
Alan Hughes is a partner at Foot Anstey
