The FCA’s planned review into wealth management consolidators is already sending ripples through the industry, raising significant questions for private equity firms that invest in this space. While the sector has been a hotbed of M&A activity, with PE firms driving consolidation at pace, the regulator’s increased scrutiny is forcing a recalibration of risk, governance, and financial resilience.

As part of our ongoing work in this sector, Annabel Evans at Amrop has been speaking to Chief Risk Officers, Chief Compliance Officers, and Industry experts working with some of these businesses to gain their insights on how these regulatory changes will reshape the industry.

In this piece we will explore:

1) The anticipated effect of regulatory change on consolidators and the investors behind them.

2) Direct feedback from market participants

3) How the roles of the CRO or CCO may change within the sector.

Their perspectives provide a crucial lens on what PE investors, consolidators, and risk professionals need to consider moving forward.

The Impact on PE Investment in Wealth Management

The FCA’s review could materially affect the valuation of wealth management firms, depending on its conclusions. For PE investors, this creates a dual reality: a potential slowdown in exits as regulatory uncertainty tempers valuations, but also new opportunities for firms that can navigate the shifting landscape effectively.

Jason Edwards, Chief Compliance Officer at Saltus, said: "The FCA is primarily concerned about client outcomes. The fear is that PE firms focus purely on maximising profit from an acquisition, either by moving clients to higher charges through the mis-selling of an in-house advice proposition or by cutting costs in back-office and support staff, weakening controls." Consolidators, he added, will need to demonstrate how they integrate acquisitions, align cultures, and maintain proper support structures proportionate to AUM growth.

Jason also noted that the FCA will expect evidence of stress testing, both in terms of risk exposure and financial sustainability. "Is the debt being financed based on an anticipated increase in revenue? Is the PE firm kicking the can down the road to a subsequent buyer? How narrow are the margins? These are the questions the FCA will be asking. “

Iain Wallace, Chief Risk Officer at True Potential, echoed this concern: "FCA’s review could materially affect the valuation of wealth firms, dependent upon its conclusions. This will provide opportunities for those PE houses looking for new/increased exposure to the sector but could also defer exit opportunities for existing investors."

Mark Sutton, experienced Wealth Management CRO, adds that “The FCA have said they are “agnostic” on consolidators and that it is all about the delivery of good client outcomes. This is encouraging for PE firms in this market to hear and recognises the value that consolidation “done well” can deliver for end customers. However, there are heightened risks in consolidator models which the FCA are attuned to and which PE firms should be clear on their response strategy.”

Ultimately, Mark believes the market is maturing, with future buyers and regulators becoming more sophisticated in assessing consolidator models. “Getting ahead of those expectations early is a very smart investment for any PE firm to secure premium valuations.”

Governance and Risk Management Challenges for Consolidators

One of the most striking insights from industry leaders is the emergence of a two-tier regulatory landscape. Firms that have undergone FCA multi-firm reviews are being held to higher standards than those that have not, creating inconsistencies in compliance expectations. The absence of clear, published industry guidance further compounds the issue, leaving firms and trade bodies struggling to navigate regulatory demands.

Jason pointed to several key risks: "Inducement and conflict of interest, AML controls for incoming clients, and the risk of legacy business contaminating the consolidator’s model." Additionally, governance frameworks must map individual accountability to key SMFs. "Who is responsible for approving new acquisitions? If it’s a collective board decision, the FCA will expect one person to be accountable in the event of failure.”

Iain added: "A two-tier system of regulation has emerged: those who have been subject to FCA multi-firm reviews with firm-specific guidance, and those that haven’t. This is skewing the competitive landscape without published industry guidance from the FCA."

Mark underscored the importance of governance and risk management: "The FCA will be keen to see that PE firms recognise the need for governance to be enhanced in step or even ahead of growth in consolidator firms. Conflicts of interest between different parts of the value chain are put under more strain in fast-growth companies, particularly where firms resource entity boards from a small pool of executives, as well as in vertically integrated propositions. PE firms need to think about safeguards to these conflicts that help to ensure good client outcomes. Additionally, the FCA’s focus on reducing reliance on the FSCS could lead to increased capital requirements, which PE firms should factor into their acquisition strategy."

Equally important is the due diligence process. Jason noted: "If DD is purely financial, then the focus is in the wrong place. The FCA will be looking at how firms handle vulnerable clients, annual reviews, and overall client care." Compliance and risk due diligence must be treated with equal importance as financial assessments, with clear tollgates to stop a deal if it’s not in the best interest of clients.

The Role of Regulation in Growth and Deregulation

Matthew Conway, Practice Director, Financial Services at Global Counsel provided a broader perspective on the balance between regulatory oversight and economic growth. "Regulators do not exist to promote growth. Regulators exist to stop bad things happening." This fundamental tension, he explained, is at the heart of the current landscape, where political imperatives for growth often clash with regulatory caution.

Matthew noted that while governments often turn to deregulation as a growth lever, it isn’t always executed with a coherent strategy. "A government that has no money spare, even if it thought that public expenditure was the route to driving growth... Has to look to things that don’t cost money. And this is not the first government that’s decided that slashing regulation is the right thing to do.”

He also highlighted the lack of clarity in the current government’s regulatory approach, stating, "I've heard it said that, six months in, a government should be telling its agencies what to do, not asking its agencies what to do." This uncertainty has left regulators unclear about their role in supporting growth, with Matthew adding, "Not only do they not know what to say, I don’t think they quite know how to answer the question." The FCA, for instance, has fluctuated between resistance and reluctant enthusiasm, while the PRA has maintained a more measured approach.

The Changing Role of the Chief Risk Officer

With regulatory expectations tightening, the CRO role is evolving. More than ever, firms need risk leaders who understand the intersection of compliance, governance, and business strategy. Iain observed: "The CRO needs to understand the business beyond risk, they must be able to engage with PE sponsors and M&A strategies.”

Luca Oglina, UK CRO at FNZ, added: "PE firms should be much more cautious. If firms do not have the right governance and risk frameworks, they could face regulatory sanctions or slow down growth strategies, making them less attractive." He also noted that PE firms must rethink how they structure deals, emphasising long-term financial resilience rather than short-term funding models, which could attract regulatory scrutiny.

A good CRO will add value beyond compliance. Iain stressed: "Trend analysis is essential, understanding where a risk is increasing and whether it should be tolerated with provisioning or mitigated through enhanced controls. That’s where a CRO becomes a strategic partner, not just a risk monitor."

Mark also emphasised the importance of strong CRO involvement: " Whilst consolidator firms and acquisition targets will have heads of compliance in place, CROs may be less common particularly in smaller firms where the role is not required by the SM&CR regulations. Nevertheless, PE firms should recognise early the strategic value a high quality CRO can bring and ensure they have the right person in role early in the investment period.”

He added “A top quality CRO is able to advise the Board and Executive management on forward looking risks facing the business, helping to define, challenge and agree what level of risk the Board is willing to take to achieve its strategic aspirations. An obvious example of this is around regulatory due diligence, where there will always be a degree of risk from legacy activity. A strong CRO can help quantify the risk, different potential future scenarios and what mitigating steps can be made to reduce future risks. A less obvious role is challenging the Board and executives on the maturity of governance."

What is the FCA Trying to Achieve?

The FCA's objectives remain ambiguous, with tensions between regulatory oversight and the government’s push for economic growth. Jason commented: "The FCA is conflicted by the government’s push to stimulate UK growth while also ensuring clients are protected and firms uphold high conduct standards."

Upcoming regulatory shifts may include changes to COBS, particularly around annual reviews, as well as adjustments following the Retirement Income Review. Jason warned: "The use of in-house CIPs and CRPs might come under scrutiny to ensure clients aren’t being shoehorned into an MPS that benefits the consolidator or PE firm more than the client."

Mark also commented on the FCA’s approach: "The FCA is rightly interested in the consolidator market given the level of disaggregation, the volume of M&A activity and the risk of potential client harm if consolidators don’t put the interests of their clients first. They also can see the potential benefits for clients of increased economies of scale from consolidation – so long as these are passed to clients. The FCA will likely have the perception that PE firms see this first and foremost as a financial opportunity for high returns without being incentivised to invest for the long-term benefit of clients. However, I believe there will be an increasing alignment of interests as this market matures. PE firms are rightly focused on their ultimate exit strategies and increasingly this will mean demonstrating a high-quality, sustainable business, laser-focused on client outcomes, to maximise exit multiples. Future buyers of these businesses will also be increasingly savvy about what they buy and crucially what the FCA expects, and so getting ahead of those expectations early is a very smart investment for any PE firm to secure premium valuations."

Will Deregulation Deliver Growth?

Deregulation is often framed as a means of stimulating investment, but its effectiveness depends on execution. Matthew warned: “Changing things at the margins won’t make a huge deal of difference. It’s the stuff that resonates all the way through that does."  Structural reforms, such as updating consumer credit legislation or shifting regulatory attitudes towards risk, could have a significant impact. However, piecemeal changes or politically motivated rollbacks are unlikely to drive meaningful economic expansion.

The government finds itself in a balancing act: pushing for growth while maintaining financial stability. As Matthew concluded, "A regulatory system which is not giving firms the certainty they need to make rational commercial decisions is failing the purpose for which that regulatory framework was designed."

Will Stricter Oversight Dampen the IFA Roll-Up Trend?

There is growing concern that heightened regulation could slow the roll-up model that has dominated wealth consolidation. One PE professional warned: "If the regulatory environment makes rapid expansion less viable, the economics of consolidation may become less attractive." Iain added: "If firms can’t scale at pace while maintaining compliance, the appeal of roll-ups could diminish for PE investors.”

Louis Petherick, Group CRO at Brooks Macdonald, shared his perspective: "There is still a large opportunity for consolidation in the UK given the number of small firms that currently exist. Having fewer, larger organisations can have a positive impact on consumers and the market as a whole. However, it must be driven with governance and integration in mind and taking into account consumer needs, not with a view to simply acquire revenue or assets."

What Comes Next?

The FCA is likely to impose stricter capital requirements or mandate a minimum period before acquired firms can be de-authorised. Jason observed: "Most consolidators want to move clients away from acquired firms into the consolidating entity quickly, to reduce costs and risk of consumer harm through duplicated or complicated processes. But the FCA may require firms to stay authorised for longer or hold PI run-off for extended periods." Another possibility is requiring consolidators to sign a Deed Poll, transferring responsibility for legacy advice indefinitely.

Mark noted “It may not be a one-way street for regulation over the next 5 plus years. Some argue that the FCA’s secondary objective around competition, is simply not compatible with increased consumer protection. However, it would not be advisable to bank on a significant shift in regulatory tone any time soon, rather ensure you have an executive team that are well plumbed into the nuances of the regulatory environment and the risk strategies which consolidator Boards should be discussing to avoid both falling behind or indeed getting too far ahead of what’s expected.”

For PE firms and consolidators, this is a moment to reassess risk frameworks, governance structures, and leadership capabilities. Those that invest in strengthening these areas will not only align with regulatory expectations but also position themselves as attractive, long-term investments in an increasingly regulated market.

The FCA's consolidator review represents more than just a warning, it signals a shift toward sustained regulatory oversight. The firms that thrive in this new environment will be those that embrace compliance as a strategic enabler, rather than a box-ticking exercise.

How Amrop Can Help

Amrop is a global executive/non-executive search & leadership advisory firm operating in 57 countries worldwide. We have extensive experience supporting founder-owners in financial services as their businesses transition to private equity ownership. These moments often involve navigating significant changes in leadership structure, governance, and strategic focus while ensuring the founder’s vision and legacy remain central to the business’s future.

Our work spans executive and non-executive search, leadership advisory, and board evaluation, helping to build and develop leadership teams and boards equipped to drive growth and manage the demands of a private equity-backed environment. With a deep understanding of the financial services sector and the complexities of these transitions, we have established a strong track record of delivering results for both founders and investors, particularly in the holistic wealth management sector.

With two decades of experience in the Financial and Professional Services industries, Annabel executes C-suite Corporate Functions assignments across Financial and Professional Services, Technology, and Private Equity. She is adept at effectively managing executive search assignments, successfully placing top-tier professionals in challenging and evolving industries, with a keen interest in aiding clients within fast-paced, high growth companies.

We are offering a free consultation to discuss your leadership needs. If you would like to explore how we can support your executive hiring or board development strategies, feel free to reach out. Let’s ensure your leadership is ready to meet the evolving demands of the wealth management sector.