FCA: sets new regulatory benchmark as Private Equity shapes the future of UK Wealth Management

The FCA's announcement last Friday (31/10/2025) outlined a significant and evolving regulatory stance on the UK wealth management sector, specifically highlighting the growing role of private equity ownership and consolidation trends within this industry.

The FCA published a multi-firm review emphasising that while private equity has been instrumental in modernising wealth management, improving operational discipline, technology, and client choice, it has also brought risks due to rapid growth without commensurate governance and financial resilience.

The FCA identified major concerns in private equity-backed wealth management consolidation, including high leverage at the holding company level, cash upstreaming from regulated firms to meet debt servicing, fragmented governance with insufficiently independent boards and risk oversight, integration challenges causing client disruptions, and conflicts of interest relating to adviser incentives and product sales that may breach Consumer Duty.

These issues prompt a regulatory expectation that private equity sponsors must now meet institutional standards of financial discipline, governance, and consumer protection to continue consolidation activities.

Key FCA expectations for private equity investors and wealth management consolidators include:

• Keeping acquisition debt isolated at the holding company level, avoiding guarantees or funding from regulated subsidiaries to ensure prudential resilience.
• Strengthening governance through independent directors, dedicated risk committees, and consolidated management information to monitor adviser network risks.
• Treating post-deal integration as a regulatory obligation, requiring demonstrable alignment of systems, remuneration, and consumer outcomes within a short time frame after transactions.
• Ensuring Consumer Duty adherence throughout acquisition and integration processes, including client communications, suitability reviews, and fee harmonisation.
• Eliminating product-based incentives and ensuring transparency and fair value assessments to manage conflicts of interest.

The FCA clarified it is not closing the market to private equity consolidation but is setting a clearer, stricter framework to govern growth.

Sponsors with robust capital structures, experienced leadership, and disciplined operational integration will continue to be approved and attract capital, whereas those relying on high leverage and weak governance will face slower deal execution and lower valuations.

This marks a turning point, as compliance and governance quality become central pillars of investment value in wealth management.

The review signals a short adjustment period as the FCA enforces these expectations, followed by renewed deal flow from credible operators.

This regulatory development is seen as a positive shift by serious investors, providing certainty and raising the bar for consolidation in wealth management.

The FCA's intervention formalises what was emerging through supervisory practice across 2025 and aligns with a broader strategic move towards data-driven and forward-looking regulation.

In summary, the FCA’s announcement underscores that private equity's influence in UK wealth management is now subject to more rigorous scrutiny focused on leverage, governance, integration, and consumer outcomes. This creates both risks and opportunities.

Private equity firms must elevate financial and operational discipline while embedding strong governance and compliance cultures to succeed in this evolving market landscape.

Citation:​

1. https://www.regulatoryandcompliance.com/2025/10/fca-review-on-consolidation-in-the-financial-advice-and-wealth-management-sector/
2. https://www.ropesgray.com/en/insights/viewpoints/102lqlx/fca-review-of-uk-wealth-management-ma
3. https://www.investmentweek.co.uk/news/4521205/fca-warns-poor-advice-consolidation-practices
4. https://www.amrop.com/uk/en/news-insights/articles/the-fca-consolidator-review-a-turning-point-for-private-equity-in-wealth-management/
5. https://www.fca.org.uk/markets/short-selling/notification-disclosure-net-short-positions
6. https://www.pehub.com/fca-wealth-management-review-warning-shot-for-pe-says-proskauer-msp-ma-picks-up-drake-star-finds/
7. http://www.fca.org.uk/publication/consultation/cp25-28.pdf
8. https://www.fca.org.uk/publications/multi-firm-reviews/private-market-valuation-practices
9. https://www.investegate.co.uk/announcement/rns/ct-private-equity-trust--ctpe/total-voting-rights/9208570
10. https://financefeeds.com/fca-flags-risks-in-wealth-management-boom-warns-on-debt-and-oversight-gaps/