Consolidation: Balancing ambition with regulatory discipline

What happened?

The FCA has completed a multi-firm review of consolidation in the financial advice and wealth management sector, examining how acquiring firms govern, integrate and oversee their growing groups.

In a Q&A session, TCC Group’s Chief Product and Commercial Officer, Garry Evans, and Technical Director, David Boyhan, unpacked the review’s findings. The headline message is that there are no new regulatory requirements, but the FCA is reinforcing long-standing expectations around control, oversight and governance.

The regulator also highlighted good practice across the market and confirmed its commitment to supporting consolidators in delivering strong customer outcomes and sustainable growth.

Why does it matter?

The broader environment remains favourable for consolidation, supported by government and regulatory initiatives to increase UK participation in investment markets and structural trends such as the shift towards drawdown in retirement.

Historically significant redress liabilities, particularly for defined benefit transfers, have also materially declined as interest rates have risen, adding to a positive picture for continued consolidation.

Even so, the FCA expects consolidators to demonstrate that they understand exactly what they are buying, that systems and controls scale appropriately, and that group-wide risk management genuinely covers every acquired entity.

Who is affected?

Consolidators and acquiring firms in wealth management and financial advice, along with the target firms they acquire, are directly affected by the review’s findings.

Key risks

• Group risk management frameworks that do not properly capture every entity within the group.
• Systems and controls that fail to scale in line with growth.
• Board effectiveness gaps as organisations expand without matching skills, experience or challenge.
• Due diligence that stops at a tick-box exercise rather than truly understanding advice quality, culture and potential liabilities.

Actions to take

1. Be explicit about risk appetite, the types of firms to acquire and the strategic rationale for each transaction.
2. Assess cultural alignment alongside technical strength before completing an acquisition.
3. Carry out high-quality regulatory due diligence that identifies issues, understands their implications and acts on findings.
4. Evolve boards and committees as the group grows, whether through training or recruiting specialist expertise.
5. Plan integration well before completion, covering onboarding, technology migration, training and resourcing.

Wider implications

Technology is playing an increasingly important role in evidencing compliance across distributed adviser populations, with centralised investment in systems supporting consistency and regulatory confidence more effectively than fragmented local decisions.

Firms that treat governance and integration as central to their acquisition strategy, rather than an afterthought, are best placed to meet the FCA’s expectations while continuing to grow.

Recommendations

TCC has supported consolidators for over 20 years across acquisition, due diligence, integration, governance and remediation, and combines this with Recordsure’s AI-enabled compliance technology to help firms build scalable, regulator-ready consolidation models.

Firms should seek independent input on how the FCA’s findings apply to their specific business and how to manage regulatory and operational risk throughout the consolidation process.