As the Financial Conduct Authority (FCA) begins its latest review of the consolidation market, it could be argued that there has rarely been a more attractive time to invest in UK wealth management firms.
A key driver of this is the government’s broader focus on economic growth. In response to this agenda, the FCA has pointed to its work on the advice guidance boundary review — highlighted in both its December 2024 update and its 2025 correspondence with HM Treasury.
When the new rules take effect, more clients are expected to receive support in making investment decisions. This, in turn, should lead to a greater proportion of client cash being invested — and this is precisely where the wealth management sector plays a central role.
More clients are expected to receive support with investment decisions, which should lead to a greater proportion of client cash being invested
Beyond the growth agenda, several other factors make wealth management firms appealing investment targets. Among them is the FCA’s recent thematic review of ongoing advice. While some commentators had feared the review would trigger mandatory past business reviews, the FCA has taken a more pragmatic stance. This suggests that the potential liability surrounding ongoing advice is materially lower than initially feared.
For years, a key conduct risk in acquiring a wealth management firm was the potential liability related to Defined Benefit (DB) pension transfers. This was significant for two reasons. First, FCA thematic reviews had identified a high proportion of unsuitable transfers, raising redress concerns across many books of business. Second, the average redress amount for unsuitable DB transfers was reported to be over £40,000.
However, the FCA has expressed satisfaction with the marked improvement in DB transfer advice quality, having not conducted a thematic review in this area since 2019. At the same time, rising interest rates have led to much lower redress amounts in cases where advice is deemed unsuitable — and in many instances, no redress is due at all. Together, these factors have significantly reduced the potential liability associated with DB transfers compared to previous years.
The FCA has committed to being less intrusive towards firms that demonstrate a clear intention to operate responsibly
Another point in favour of acquiring wealth management firms is the delay to the FCA’s proposed ‘Polluter Pays’ rules. Under the original proposal, firms might have been required to hold more capital based on the make-up of their business books.
However, the FCA has deferred any new rules until later this year and has suggested that such rules may not be introduced at all. If this remains the case, consolidators won’t need to set aside additional capital, which in turn frees up more capital for further investment.
Adding to the appeal is the FCA’s newly released five-year strategy, which reaffirms its goal of becoming a smarter, more efficient regulator. As part of this approach, the FCA has committed to being less intrusive towards firms that demonstrate a clear intention to operate responsibly. Other measures include streamlining its communications with firms and retiring older publications, such as Dear CEO letters issued before 2022.
The FCA’s growth-focused stance create a favourable climate for those looking to invest in UK wealth management
At the time of writing, global markets are undergoing a significant correction. Periods like this reinforce the importance of financial advice, as clients seek reassurance and guidance. Corrections also present investment opportunities: both the FTSE and S&P have hit record highs in the past year, and market downturns can offer entry points for long-term investors.
Against this backdrop, the FCA’s growth-focused stance and broader economic conditions create a favourable climate for those looking to invest in UK wealth management. In addition, the FCA’s ongoing thematic work will continue to provide practical guidance — both good and bad — that should further support investors and acquirers seeking clarity as they assess potential opportunities in the sector.
David Boyhan is technical director at TCC
