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Wealth Management: A year in review

20 January 2021
0022 Financial Services WT
2020 was a year that most want to forget. Before doing so, our financial services regulatory specialists have written a review of the big issues in wealth management to help capture lessons learned and prepare for the year ahead.

In our first annual review of the Wealth Management sector and its regulatory environment, our team of sector specialists (lawyers and consultants, from various practice areas) have come together to report on the big issues and themes impacting Wealth Management over the last year, and to identify issues likely to top the FCA's - and firms' - agendas in the year(s) to come.

2020 was the year of COVID – viewed here through the lens of operational resilience and non-financial (mis)conduct. With Brexit having less impact on wealth managers than more international businesses, we've looked instead in depth at the potential impact of – rarely - highly relevant case law and what that might mean in terms of 'regulatory change'.

It's too early to say what – if any – impact Brexit will have but firms are already dealing with the impact of various 'scandals' in retail investments; most notably DB pension transfers and mini-bond mis-selling.  COVID– and critical reports just before Christmas into regulatory failures – will increase the incentive (and political pressure) for the FCA to come out fighting in 2021 and beyond.  We have therefore included commentary from specialists in contentious investigations and Enforcement work.

The current climate means we're inevitably seeing some smaller firms failing, plenty of restructuring and an uptick in consolidation and M&A activity.  There will be further challenges in the year ahead; from macro factors like continued lockdowns and the economic impact of COVID, to the regulatory agenda across financial services, and more micro issues like crystallised regulatory risk and the numerous ways in which firms'  - and their senior managers' - resilience is being tested.

Please contact the authors or editors if you want to discuss anything of particular interest or relevance.

Download the review

Further updates:

Storing up trouble – analysing the Court of Appeal's decision in Carey Pensions
The Court of Appeal (CoA) has now handed down its judgment in Carey, overturning the first instance decision. The implications of this decision could be far reaching for firms that deal with unauthorised introducers or are themselves unauthorised. To read our latest update analysing this and the impact on the wealth management market, click here.

What to expect



The deal struck on Christmas Eve includes little information and even less detail regarding the Financial Services sector and unfortunately does not include any provisions for reciprocal market access for UK firms to access the EU through positive equivalence determinations. Therefore, wealth management firms remain in much the same position as they were prior to the end of 2020. 

In our brief review, we summarise the impact to financial services and what is likely to come. 

Culture and non-financial misconduct in the midst of a pandemic: the FCA's stance

Culture and non-financial misconduct in the midst of a pandemic: the FCA's stance

The FCA's warning in 2018 that 'non-financial misconduct is misconduct, plain and simple'  continues to ring true. Since Covid-19, we have seen the FCA focus increasingly on non-financial misconduct. 

In our review, we discuss what should firms be doing in order to demonstrate that they are taking steps to promote a positive culture and tackle all forms of misconduct.

Defined Benefit Transfers

Defined Benefit Transfers

The Defined Benefit Pension Transfer suitability review, prompted by the British Steel 'scandal' and concern about clients making bad choices about their 'pension freedoms', seems to have been going on for an age, especially for those higher risk firms caught in the eye of the storm.  Yet, for most, the saga has barely begun and if the FCA keeps setting the bar so high, many are going to be found wanting.

In our discussion, we summarise the DB Transfer Review and how to deal with the fallout, including commentary on PI insurance and possible corporate restructuring.

FCA Enforcement – key trends and themes

FCA Enforcement – key trends and themes

The enforcement data published with the FCA's Annual Report 2019/2020 makes grim reading for those subject to enforcement action; longer, more expensive cases and not even a hint at relaxing the approach to enforcement as a 'diagnostic tool'.

In our review, we cover the key points from the Annual Report, enforcement outcomes and predictions for 2021.

The Appointed Representative regime: Principals lacking principles?

The Appointed Representative regime: Principals lacking principles?

The FCA has had concerns about the effectiveness of the Appointed Representative / Principal model over many years. Starting with the IFA networks, FCA reviews have found shortcomings and some significant weaknesses in the control and oversight of ARs by many Principals. 

In our review, we summarise the FCA supervisory work undertaken during 2020, as well as comment on how to incorporate a robust AR control framework.

Overhaul of the UK Financial Promotions regime

Overhaul of the UK Financial Promotions regime

The 'FinProm' regime in the UK shares a number of similarities to the historic Data Protection framework, prior to the introduction of the GDPR in 2018. New and innovative ways of marketing new and innovative products and services present risks in today's world, that aging regulation was not able to foresee.

In our review, we assess the existing 'FinProm' regime and discuss the HM Treasury consultation and hopes for its conclusion.

The Senior Managers and Certification regime

The Senior Managers and Certification regime
The SMCR was extended to a further 47,000 solo-regulated firms in December 2019, replacing the Approved Persons Regime (APER). Having just passed the 12-month anniversary of the implementation, we reflect on each of the three strands to the regime and key learnings in relation to each aspect, and practical guidance for firms implementing the SMCR.

2020 case law update – Carey and Avacade



Further Reading