The Financial Conduct Authority is set to carry out a multi-firm review into consolidation of financial advice firms.
The regulator wrote to CEOs and directors today (October 7) setting out its expectations of financial advisers and investment intermediaries.
It highlighted consolidation as being a big change in the industry in the coming years.
Lucy Castledine, director of consumer investments at the FCA, wrote: “There has been an increase in the acquisition of firms or their assets over the last two years.
“While industry consolidation can provide benefits, various types of harm can occur where this is not done in a prudent manner with effective controls to promote good outcomes.”
To address concerns in this area it will undertake multi-firm work to review consolidation in the market, the letter confirmed.
Castledine added: “Where we receive notifications from individuals or firms to acquire or increase control in regulated firms, we will assess and challenge their suitability and the financial soundness of the acquisition.
“Where acquisitions complete without prior regulatory approval, we may use our enforcement powers to object to the transaction or initiate criminal proceedings.”
The letter set out a series of expectations from firms when it comes to consolidation.
This included, notifying the FCA, ensuring the delivery of good outcomes, undertaking due diligence and holding adequate financial resources at all times.
Ongoing advice
The letter also set out concerns with ongoing advice charges, outlining analysis which shows 90 per cent of new clients are placed into arrangements for ongoing advice.
Earlier this year, the FCA wrote to a number of firms requesting information about their delivery of ongoing advice.
It said it will look to provide an update later this year on its findings and next steps.
It added: "We have concerns firms may not be adequately considering the relevance and costs of these services for all clients and that some clients are being charged for services that are not delivered."
It called on firms to "clearly confirm the details of the ongoing service" to clients along with associated charges, and how clients can cancel the service should they wish.
It also said clients should not be charged for services that are not delivered and urged firms to maintain records to ensure appropriate monitoring and demonstrate they are delivering good outcomes.
Elsewhere, the FCA said it was following up on its retirement income advice review and "carrying out further work to explore the scale of any issues identified and tackle any harms".
It expects to publish further commentary on the retirement income advice market in Q1 2025.
tara.o'connor@ft.com
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