The FCA has published its Wealth management survey report 2026, providing one of the clearest pictures yet of the regulator’s view of the UK wealth management sector. The scale of the market is significant. Firms within the FCA’s wealth management portfolio support more than 5.5 million retail clients and manage almost £1 trillion of assets, while the number of portfolio management clients has increased by 20% since 2022.
Growth, however, is only part of the story.
The report identifies several areas where practices remain inconsistent or where evolving business models are creating new risks. These include financial crime controls, fair value, vulnerable customers, outsourcing, artificial intelligence (AI), consolidation and governance. For wealth managers, the report should therefore be viewed as more than a market survey. It provides a useful indication of the areas against which firms should be benchmarking their own compliance frameworks.
What has the FCA said?
The FCA describes a wealth management sector undergoing considerable change. Client numbers are increasing, firms are consolidating, digital channels are becoming more important and the use of AI is beginning to accelerate. The regulator is broadly supportive of this development. Its message is not that firms should avoid growth or technological innovation, but that controls must develop at the same pace as the business. This is particularly relevant given that 41% of surveyed firms plan to acquire another firm, increase revenue or grow their client base by more than 25% over the next two years. The FCA warns that poorly controlled growth can result in deteriorating client service, business continuity weaknesses and, in more serious circumstances, disorderly failure.
Several regulatory themes stand out.
- Financial crime remains a significant area of weakness
Perhaps the most striking findings relate to financial crime. The FCA reports improvement in periodic KYC reviews, with all firms surveyed now confirming that they refresh KYC information. However, weaknesses remain in the underlying information firms collect and maintain.
For example:
-
- 26% of firms do not collect expected transaction frequency;
- 13% do not record expected investment amounts;
- around 10% do not verify source of wealth;
- around 6% do not conduct PEP screening; and
- around 7% do not carry out sanctions screening.
The significance of these figures extends beyond individual deficiencies. They suggest that some firms may still have customer due diligence frameworks that function as an onboarding exercise rather than as an ongoing, risk-based control.
A client file may contain identification documents and still provide insufficient information to enable a firm to understand whether subsequent activity is consistent with what it knows about that client.
- Consumer Duty is moving from implementation to evidence
The report also reinforces the FCA’s continuing focus on Consumer Duty outcomes, particularly fair value, consumer understanding and support for vulnerable customers. The FCA acknowledges that firms are conducting fair value assessments, but identifies inconsistent practices. In particular, it highlights the potential impact of fixed fees on clients with smaller portfolios and notes that firms should consider whether the frequency of trading within portfolios is producing good outcomes. This is important. A fair value assessment should not simply establish that a charging structure exists and has been approved. Firms need evidence demonstrating that the relationship between price and benefits remains reasonable across different client groups. The FCA also points to its Financial Lives 2024 survey, under which 17% of adults with investible assets exceeding £100,000 who used a named wealth management firm expressed concerns that fees were high, hidden or complex. For firms, this places renewed emphasis on the quality of management information underpinning Consumer Duty assessments.
- Vulnerability needs to be identified throughout the client relationship
There has been encouraging progress on vulnerability. In 2024/25, 83% of portfolio management firms reported identifying at least one client with characteristics of vulnerability, compared with 68% in the first survey. However, the FCA notes that policies, processes and training remain inconsistent. The important compliance point is that vulnerability should not be treated as a question asked during onboarding and then forgotten. Circumstances can change through bereavement, illness, declining capability, financial difficulty or other life events. Firms therefore need mechanisms through which vulnerability can be recognised, recorded and acted upon throughout the client lifecycle.
- AI governance is becoming a live compliance issue
AI adoption in wealth management remains relatively early-stage, but the direction of travel is clear. At the time of the survey, 13% of firms were already using in-house or third-party AI tools. When firms considering adoption during the following 12 months are included, that figure rises to 45%. The FCA itself acknowledges that actual adoption may already be higher given the pace at which the technology is developing. AI may support client communications, fraud detection, decision-making and control processes. But those applications can also introduce regulatory risks involving data quality, cyber security, fraud, inappropriate decision-making and client harm. Firms should therefore avoid treating AI solely as an IT issue. Compliance, risk and senior management should understand where AI is being deployed, the decisions it influences, the information it uses and the extent of human oversight.
- Outsourcing does not outsource regulatory responsibility
More than 92% of surveyed firms outsource some part of their business, particularly technology, trade execution, assurance and oversight. This level of dependency makes third-party risk an increasingly important governance issue. Outsourcing may improve efficiency and provide access to specialist expertise, but the regulated firm remains responsible for the service delivered to its clients. Firms should consequently be able to demonstrate appropriate due diligence, contractual controls, ongoing monitoring, performance assessment, escalation arrangements and contingency planning. The FCA’s findings are particularly relevant as firms increasingly depend upon interconnected technology providers and outsourced operating models.
Why does it matter?
Individually, none of these themes should surprise wealth management firms. Financial crime, Consumer Duty, outsourcing and governance have all featured prominently in FCA supervision. What makes this report particularly useful is the combination of those themes with sector-level data. The FCA now has an increasingly detailed benchmark against which individual firms can be compared. If, for example, a firm cannot demonstrate sanctions screening, does not routinely establish source of wealth or has weak vulnerability identification arrangements, the survey provides the FCA with evidence that these practices fall behind much of the wider market.
That changes the compliance question from simply:
“Do we have a policy covering this?”
to:
“Can we demonstrate that our controls operate effectively and produce outcomes consistent with regulatory expectations and reasonable industry practice?”
That distinction is likely to become increasingly important as the FCA continues to develop its data-led supervisory approach.
Key implications for wealth management firms
There are five areas that firms should particularly consider following publication of the report.
- First, financial crime frameworks should be tested rather than assumed to be effective. Firms should assess whether customer risk assessments, source of wealth and source of funds checks, PEP and sanctions screening, adverse media searches and ongoing monitoring work together as an effective control framework.
- Second, Consumer Duty evidence should become more granular. Fair value assessments should consider different portfolio sizes, charging structures and client cohorts rather than relying exclusively on firm-wide conclusions.
- Third, governance should keep pace with growth. Firms undertaking acquisitions, increasing client numbers or expanding services should assess whether compliance resources, operational capacity, systems, business continuity arrangements and management information remain appropriate.
- Fourth, technology governance should extend beyond traditional IT risk. AI systems and other digital tools capable of influencing client communications, investment decisions or control processes should sit within an appropriate governance and oversight framework.
- Finally, third-party oversight should reflect the importance of outsourced services. Where critical parts of the client proposition depend upon external providers, firms should be satisfied that monitoring and contingency arrangements are sufficiently robust.
How Complyport can help?
- conducting targeted compliance healthchecks and gap analyses against FCA expectations and sector benchmarks;
- reviewing financial crime frameworks, including customer risk assessments, KYC/CDD, source of wealth, sanctions, PEP screening and ongoing monitoring;
- assessing Consumer Duty frameworks, including fair value, vulnerability, consumer understanding and outcomes monitoring; and
- reviewing governance, outsourcing, operational resilience and technology controls, including the governance arrangements surrounding AI and other emerging technologies.
Contact Us
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