Key findings from the FCA's consolidation review and what acquiring firms must do to meet regulatory expectations.
The financial advice sector has undergone unprecedented consolidation over the past five years. Private equity investment, strategic acquisitions by national consolidators, and the retirement of independent financial advisers have fundamentally reshaped the market landscape. However, this rapid transformation has not gone unnoticed by the Financial Conduct Authority.
The FCA's October 2025 multi-firm review into consolidation in the financial advice market marked a decisive shift in regulatory expectations. The era of light-touch oversight has ended. Acquiring firms must now demonstrate institutional-grade governance, robust integration frameworks, and an unwavering commitment to consumer outcomes.
The October 2025 Multi-Firm Review: Key Findings
The FCA's comprehensive review examined consolidation activity across the financial advice sector, scrutinising acquiring groups of varying sizes and business models. The findings painted a concerning picture of an industry that has, in many cases, prioritised growth over governance.
Integration Failures and Post-Deal Alignment
One of the most significant concerns highlighted by the regulator relates to post-acquisition integration. The review found that numerous acquiring firms had failed to implement consistent standards across their newly acquired businesses. This resulted in a fragmented operating environment where different advice firms within the same group operated to varying standards of compliance, record-keeping, and client service.
The FCA observed instances where acquired firms continued to operate largely autonomously for extended periods following completion, with insufficient oversight from the acquiring group. This lack of integration created regulatory blind spots and inconsistent consumer experiences depending on which legacy firm a client happened to be associated with.
Critically, the regulator noted that many acquiring groups lacked a coherent integration methodology. Deals were completed without adequate planning for how the acquired business would be brought into alignment with group standards, policies, and procedures. In some cases, this planning appeared to be treated as an afterthought rather than a fundamental component of the acquisition strategy.
Conflicts of Interest: A Central Concern
The review devoted particular attention to conflicts of interest arising from consolidation activity. The FCA identified several areas of concern that acquiring firms must address.
Adviser Remuneration and Incentives
The structure of adviser remuneration within consolidated groups came under intense scrutiny. The FCA found examples where incentive arrangements created potential conflicts between adviser interests and client outcomes. Performance-related bonuses tied to revenue generation, assets under management growth, or product sales volumes were flagged as particularly problematic where insufficient controls existed to ensure advice remained suitable and in the client's best interest.
The regulator expects acquiring firms to critically evaluate inherited remuneration structures and ensure that incentive arrangements across the group do not inadvertently encourage advisers to prioritise commercial objectives over client suitability.
Product Selection and Restricted Panels
Consolidation frequently brings changes to product selection arrangements. The FCA expressed concern about situations where acquiring groups had restricted product panels in ways that may not serve client interests. The introduction of in-house investment solutions, preferred provider arrangements, or centralised investment propositions requires careful consideration of whether such changes genuinely benefit clients or primarily serve the commercial interests of the group.
Where consolidated groups have introduced proprietary or preferred products, the regulator expects clear evidence that these recommendations are driven by client suitability rather than group profitability.
Dual-Parent Structures: Regulatory Red Flags
A notable finding from the review concerned the use of dual-parent structures, where appointed representative firms or directly authorised entities maintain relationships with multiple principals or parent companies. The FCA identified significant governance challenges associated with these arrangements.
Dual-parent structures can create ambiguity regarding regulatory responsibility, oversight obligations, and accountability for consumer outcomes. The review found instances where such arrangements resulted in unclear lines of supervision, conflicting requirements from different principals, and inadequate monitoring of adviser activity.
Firms operating or contemplating dual-parent arrangements should expect enhanced FCA scrutiny. The regulator has signalled that it will examine whether such structures genuinely serve legitimate commercial purposes or whether they create unnecessary complexity that may obscure accountability and impede effective oversight.
Consumer Duty: The Consolidation Lens
The Consumer Duty represents perhaps the most significant development in UK retail financial services regulation in recent years. For consolidated advice groups, the Duty creates specific obligations that must be addressed at both group and individual firm level.
Cross-Cutting Rules in a Consolidated Environment
The Consumer Duty's cross-cutting rules require firms to act in good faith, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives. In a consolidation context, these requirements take on particular significance.
Acquiring groups must ensure that the consolidation process itself does not cause foreseeable harm to clients of acquired firms. This includes considering the impact of integration activities on service continuity, adviser relationships, and access to ongoing support. Where consolidation necessitates changes to client arrangements, such as platform migrations or product transfers, firms must carefully assess whether such changes are genuinely in clients' interests.
The Products and Services Outcome
Under the Consumer Duty, products and services must be designed to meet the needs of a defined target market. Consolidated groups that introduce standardised propositions across acquired firms must ensure that such propositions remain appropriate for the diverse client bases inherited through acquisition.
A one-size-fits-all approach to product and service design is unlikely to meet regulatory expectations. Acquiring groups should demonstrate how they have assessed the suitability of group propositions for different client segments and what flexibility exists to accommodate clients whose needs fall outside standard parameters.
Price and Value Considerations
The Duty's price and value requirements present particular challenges for consolidated groups. Where acquisitions result in changes to fee structures, platform charges, or product costs, firms must evidence that clients continue to receive fair value.
The FCA has indicated that it will examine whether consolidation-driven changes to pricing genuinely reflect efficiency savings being passed to consumers or whether they represent margin enhancement for the benefit of shareholders. Groups that have increased fees or charges following acquisition should expect requests for evidence demonstrating that enhanced value has been delivered to justify any cost increases.
Enhanced Regulatory Scrutiny in 2026
The publication of the multi-firm review findings in late 2025 presaged a more interventionist regulatory approach. Throughout 2026, acquiring firms should anticipate significantly enhanced FCA engagement.
From Light-Touch to Institutional Standards
The financial advice consolidation sector has, historically, operated with relatively limited direct regulatory intervention. Many acquiring groups, particularly those backed by private equity, brought governance frameworks more suited to portfolio company management than regulated financial services.
This approach is no longer tenable. The FCA now expects consolidated advice groups to demonstrate governance standards comparable to those required of established financial institutions. This means comprehensive board oversight of conduct risk, embedded compliance functions with genuine authority and resource, and systematic monitoring of consumer outcomes across the group.
Supervisory Expectations
Acquiring groups should anticipate more frequent and more detailed supervisory engagement. This may include requests for information regarding integration progress, thematic reviews of specific risk areas, and skilled person reviews where the FCA has concerns about governance or control effectiveness.
Firms that have grown rapidly through acquisition without commensurate investment in governance infrastructure may find themselves subject to intensive supervision or formal regulatory action. The cost of retrospectively building appropriate frameworks significantly exceeds the cost of implementing them contemporaneously with acquisition activity.
Best Practice for Acquiring Groups
In light of the FCA's findings and enhanced expectations, acquiring groups should consider the following priorities.
Pre-Acquisition Due Diligence
Regulatory due diligence must extend beyond traditional compliance health checks. Acquiring groups should assess the cultural alignment of target firms, the quality of client records and documentation, and the extent of remediation that may be required post-completion. Due diligence should also consider whether the target firm's client base is appropriate for the acquirer's proposition and operating model.
Integration Planning and Execution
Integration planning should commence prior to deal completion and should encompass all aspects of bringing the acquired firm into alignment with group standards. This includes technology integration, policy harmonisation, adviser training, and client communication.
Groups should establish clear integration milestones and accountability for delivery. The FCA expects to see evidence of systematic integration activity rather than informal or ad hoc approaches.
Governance Framework Enhancement
Consolidated groups should ensure that governance frameworks scale appropriately with growth. This means regular review of board composition, committee structures, and reporting lines to ensure that oversight remains effective as the group expands.
Particular attention should be paid to conduct risk governance. Groups should establish clear accountability for consumer outcomes at board level, with regular reporting on conduct metrics and emerging risks.
Ongoing Monitoring and Assurance
Effective consolidation requires ongoing monitoring to ensure that acquired firms remain aligned with group standards. This should include regular compliance assurance activity, quality assessment of advice files, and monitoring of complaints and client feedback.
Groups should also establish mechanisms for identifying and escalating emerging risks across the portfolio of acquired firms.
Looking Ahead
The consolidation of the UK financial advice sector shows no signs of abating. Demographic pressures, regulatory costs, and strategic imperatives will continue to drive acquisition activity. However, the terms of engagement have fundamentally changed.
Acquiring groups that approach consolidation as a purely financial exercise, without genuine commitment to regulatory compliance and consumer protection, will find an increasingly hostile environment. The FCA has made clear that it will use its full range of supervisory and enforcement powers to address firms that fall short of expectations.
Conversely, groups that embrace the challenge of building genuinely client-centric, well-governed advice businesses have an opportunity to differentiate themselves in a market where trust and professionalism are increasingly valued.
The message from the regulator is unambiguous: consolidation must deliver better outcomes for consumers, not merely better returns for shareholders.
How MEMA Consultants Can Help
Navigating the enhanced regulatory expectations for consolidated financial advice groups requires specialist expertise and practical experience. MEMA Consultants provides comprehensive support for acquiring firms at every stage of the consolidation journey.
Our services include regulatory due diligence for prospective acquisitions, integration planning and execution support, governance framework design and implementation, and ongoing compliance assurance. We work with private equity investors, national consolidators, and growing advice firms to build regulatory capability that supports sustainable growth.
Whether you are planning your next acquisition, managing a complex integration programme, or responding to regulatory concerns, our team of experienced consultants can provide the guidance and practical support you need.
Contact MEMA Consultants today to discuss how we can support your consolidation strategy whilst meeting the FCA's evolving expectations.
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