The FCA published the findings from its multi-firm review of consolidation in the financial advice and wealth management sector on 31 October 2025. It sets out good practice, areas for improvement, and reiterates regulatory expectations.
The FCA’s review builds on a recent increased focus on prudential regulatory issues at change in control across the sector, and highlights good practice and areas of increased risk across six themes: group debt, group risk management, group structure and prudential consolidation, acquisition and integration, governance and resourcing, and conflict management. It urges immediate self-assessment against existing obligations, including the Internal Capital Adequacy and Risk Assessment (ICARA) Process and Consumer Duty expectations, to support resilient growth and minimise the risk of challenge at change in control.
In this article
What does this mean?
The FCA’s review examined groups acquiring independent financial advice (IFA) and wealth management firms, covering debt structures, organisational structure, approach to regulatory consolidation, treatment of group risk, overall risk management including conflicts of interest, governance and resourcing, and acquisition and integration.
Overall findings
The FCA found consolidation can support efficiency and growth where groups have clear structures, strong governance and risk processes, and where entities are well- resourced and resilient, despite debt elsewhere in the structure. The FCA found increased risk where prudential consolidation is not applied (limiting oversight of group debt and goodwill), that group debt arrangements can weaken the resilience of regulated entities (e.g. cash upstreaming or guarantees/security), and where governance and oversight arrangements have failed to scale with rapid growth.
Group debt management
The review highlighted that funding equity investments through debt (double leverage) can create pressure to upstream cash from regulated entities; this risk increased where regulated entities guaranteed group borrowings or provided security over their assets. Consolidated financial statements also often relied upon intangible assets for balance sheet solvency.
The FCA found reliance on short-term borrowing and limited stress testing at group level amongst consolidators. The FCA also observed heavy dependence on cash from regulated firms and the build-up of intra-group receivables, that may not be realisable in stress, to service group debt. The FCA observed good practice where boards closely monitored group debt, financing was sustainable, and security arrangements protected regulated firms and clients.
Group risk management
The FCA found that shared clients, revenues, control frameworks and back-office functions created interconnected exposures. The review highlighted good practice where there was comprehensive coverage and explicit quantification of capital and liquidity needs from risks relating to group membership within the ICARA, including for entities outside any Investment Firm Group (IFG). It also highlighted examples where firms promptly deauthorised dormant firms. Areas for improvement included under-recognition of group risk and resource needs.
Group structure and approach to prudential consolidation
For investment firms, the FCA found that applying MIFIDPRU prudential consolidation, by treating relevant undertakings below the top UK parent as a single entity, improved visibility and resilience. It also emphasised its expectation that purchased goodwill is deducted from own funds on consolidation.
The review highlighted that dual-parent and offshore structures can limit consolidation, making these structures more difficult to supervise. Inserting an offshore entity does not change the underlying risks consolidation is designed to mitigate. Good practice included bringing connected entities into an IFG; areas for improvement included holding goodwill outside the IFG.
Acquisition and integration
The FCA highlighted good practice where pre-acquisition due diligence was robust, challenged and understood, where groups had clear, tailored integration plans focussed on client outcomes and clear acquisition strategies. Areas for improvement included “tick-box due diligence”, and a failure to enhance risk and compliance frameworks pre-acquisition.
Governance and resourcing
Findings showed that rapid growth required risk and compliance capacity that kept pace, robust systems and controls, actionable management information and senior leadership experienced in managing greater scale and complexity - with independent challenge at committee/ board level. Areas for improvement included systems and control frameworks that did not scale, inexperienced leadership teams, a lack of autonomy for regulated entity boards and a lack of independent challenge over decisions.
Conflicts management
The review identified conflict risk where incentives encouraged particular client decisions (e.g. steering advised clients into group products), especially in vertically integrated models. The FCA observed good practice where outcome-linked incentives were removed, clients had genuine choice with a broad range of options, and onboarding/suitability/monitoring were robust; areas for improvement included explicit or implicit incentives to use group products and under-developed mitigation in conflicts registers.
What do firms need to do?
Reassess existing group structures and debt arrangements against the observations in the review, making changes where necessary to ensure all relevant undertakings are captured within an IFG, where appropriate.
Ensure that governance and control functions are fit-for-purpose and scale with growth, ensuring robust management information, independent challenge and clear decision-making within regulated boards.
Strengthen acquisition and integration processes through enhanced due diligence and a greater focus on Consumer Duty obligations, at each stage of the acquisition.
The FCA stated that the review is not setting new expectations, but designed to help firms understand those that already exists. It expects firms to recognise that consolidation brings increased complexity and heightened regulatory scrutiny. It reinforced that the Consumer Duty applies throughout the acquisition lifecycle, from due diligence to integration and beyond.
Boards and Senior Managers must take ownership of the risks associated with acquisitions. Firms should revisit their consolidation strategies in light of these findings, ensuring that:
- Risk appetite reflects growth ambitions and capabilities.
- Acquisition decisions are informed by data, client impact analysis and regulatory expectations.
- Post-acquisition reviews are conducted to evaluate integration effectiveness and address any harm.
Firms should reassess group and financing structures, consolidation perimeters, governance capacity and integration plans now, and evidence board engagement and remediation.
This should include updates to group risk mapping and the ICARA to capture exposures beyond the IFG perimeter and to quantify liquidity dependencies. Where reliance on regulated entities’ cashflows exists, firms may want to model severe but plausible scenarios and pre-agree governance for contingency actions that protect regulated entities.
Firms may wish to consider whether upgrades are required to their M&A due diligence based on these findings, including a back-book review and cultural fit checks.
“These findings reinforce a number of key areas of challenge we have seen from the FCA to the sector over recent months. Whilst the FCA has stated these are not new expectations, there is a lot here for firms to consider and take action against to minimise the risk of challenge and delays during future change in control applications.”
David Croker
Partner, PwC
Next steps
The FCA will continue to scrutinise firms with active acquisition strategies and may take further action where it identifies consumer harm. It expects firms to reflect on the findings now and proactively assess whether their current and planned integrations meet regulatory standards.
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