Overview so far: the expected regulatory hot topics of 2025

What happened?

TCC’s regulatory specialists hosted a series of compliance forums throughout 2024, and this overview draws together the issues raised as the topics most likely to matter for financial services compliance in 2025.

The FCA’s concerns include the financial resilience of firms and the adequacy of their wind-down plans, alongside the continued reliance of UK consumers on short-term credit, which points to unresolved arrears and vulnerability issues. Fines issued during 2024 showed that firms are often preoccupied with business as usual at the expense of proper controls and control testing.

Consumer Duty outcomes remain under scrutiny too, particularly product price and fair value in areas such as Discretionary Commission Arrangements, ongoing advice services and self-invested personal pensions, where the FCA has noted that fees and commissions are not always consistently aligned with the Duty.

Why does it matter?

The FCA is expected to challenge senior management and boards more directly to explain how they discharge their duties and why problems occurred on their watch. Training and competence, often treated as a tick-box exercise, is likely to come under similar pressure.

Firms that leave known risk areas unaddressed face a cumulative effect: the longer a weakness persists, the more customers are likely to be affected by it, and the greater the risk of regulatory intrusion that is costly, stressful and disruptive to individual careers as well as the firm.

Who is affected?

These themes apply broadly across wealth management, pensions, banking, lending, insurance, motor finance and payments firms, particularly those managing short-term credit, ongoing advice services, self-invested personal pensions or products where commission arrangements affect customer outcomes.

Key risks

• Cumulative risk: unresolved weaknesses compound the longer they are left unaddressed.
• Perception risk: the regulator increasingly questions how and why senior management allowed risks to materialise.
• Culture risk: the actions a firm takes, and fails to take, reflect its culture, with dominant personalities or groupthink among the most damaging behaviours.
• Systems and controls risk: controls should be proportionate to complexity rather than fitted around budgets.
• Corporate governance risk: committees, the three lines of defence and conflicts of interest all need to be clearly defined and evidenced.

Actions to take

1. Review systems and controls around known risk areas, including price, value, Discretionary Commission Arrangements and ongoing services.
2. Benchmark the firm against its peer group to identify strengths, comparative weaknesses and any outlier positions.
3. Assess evidence of cultural and conduct metrics against the firm’s stated risk appetite.
4. Review monitoring and audit plans for key systems and controls to strengthen control effectiveness.
5. Evaluate corporate governance arrangements, including committee structures and SMCR accountability, against best practice.

Wider implications

Be proactive. Don’t wait for us to intervene, we expect our firms to lead from the front.

That message from the FCA sets the tone for 2025: firms are expected to identify and address weaknesses themselves rather than wait for supervisory action.

Recommendations

TCC offers an unbiased review and strategic advice to help firms meet their compliance objectives, alongside outsourcing solutions and specialist resourcing that draws on a network of more than 5,000 pre-vetted subject matter experts.

Where appropriate, TCC combines this expertise with technology from its sister company, Recordsure, to help firms drive operational efficiencies and evidence outcomes to the regulator’s satisfaction.