Investment and Asset Management

The UK investment and asset management sector is highly diverse, with the Financial Conduct Authority (FCA) tailoring its supervisory approach to the specific risks posed by different business models. We work across the range of investment and asset management activities, dealing with both retail and institutional clients.

Traditional and Institutional Asset Managers

Firms managing mainstream mutual funds, segregated mandates, and pension assets for institutional clients. Key regulatory challenges include:

Governance: The FCA continues to focus on whether asset management firms have robust governance in place, in particular in relation to investment selection. Firms with prominent, influential founders and/or fund managers attract the most attention.
Operational Resilience: Meeting heightened FCA expectations around data resilience, cyber security, and the rigorous oversight of material third-party technology and cloud providers.
ESG and Sustainability Disclosures: Complying with the UK’s Sustainability Disclosure Requirements (SDR), adhering to strict anti-greenwashing rules, and aligning reporting with global frameworks like the ISSB.
Market Integrity and Settlement: Adapting trading operations, systems, and liquidity management to global market infrastructure changes, including the rapid transition to T+1 accelerated settlement cycles.
Market Abuse and Surveillance

Alternative Investment Fund Managers (AIFMs)

Firms managing private equity, hedge funds, real estate, and private credit (Private Markets) need to address regulatory issues including:

Private Market Governance: The FCA is scrutinising internal valuation practices, leverage risks, and the effective management of complex conflicts of interest (including ethical barriers between private and public markets teams).
UK AIFMD Reform: Navigating the ongoing simplification and modernisation of the UK’s alternative fund manager regime, which will affect scope, thresholds, and reporting requirements.
Retailisation of Private Assets: Ensuring strict adherence to Consumer Duty standards when expanding alternative, illiquid investment products to retail or high net worth individuals (HNWIs).

Wealth Managers and Private Banks

Firms providing bespoke discretionary or advisory investment services to HNWIs and ultra high net worth investors (UHNWIs).

Consumer Duty and Value for Money: Demonstrating that complex fee structures are transparent, justified, and consistently deliver fair outcomes without causing foreseeable consumer harm.
Client categorisation changes: Compliance with FCA updates to professional “opt-up” criteria, which include the alternative £10m wealth route and refined qualitative assessments.
Financial Crime and AML: Strengthening anti-money laundering frameworks and fraud defences to satisfy data-led FCA supervision and protect client assets.

Retail Fund Managers (UCITS / OEICs)

Firms offering standardised, regulated collective investment schemes to the mass market need robust Consumer Duty frameworks, as well as liquidity risk management:

Fair Value Assessment: Conducting rigorous annual value assessments to satisfy the FCA’s focus on funds that persistently offer poor value relative to their ongoing charges.
Disclosure and Transparency: Redesigning investor communications to align with the Consumer Composite Investments (CCI) regime, ensuring retail investors can make fully informed decisions.
Liquidity Risk Management: Upgrading frameworks for open-ended funds to ensure robust liquidity under stressed market conditions, thereby preventing systemic transmission risks.

Digital Wealth Platforms and Robo-Advisors

Technology-first platforms providing algorithm-driven portfolio management or execution-only trading need to meet stringent operational risk / third party risk management regulation, and address Consumer Duty demands for evidenced compliance:

Vulnerability and Support: Designing digital-only customer journeys that can effectively identify, monitor, and support vulnerable customers without relying on traditional face-to-face interactions.
Off-Channel Communications: Implementing robust surveillance and compliance controls over digital communication channels to prevent market abuse and unauthorised advice.
AI and Technology Governance: Balancing rapid innovation with the FCA’s expectations for safe AI adoption, ensuring adequate human oversight remains where algorithms drive client outcomes.

Key Regulatory Issues for the Sector

Overall, the significant regulatory focus on investment and asset management firms falls into the areas of:

Consumer Duty implementation and evidence of meaningful measurement and follow up.
Operational resilience and third party risk management (TPRM), including material third party arrangements.
Market abuse, including ethical walls and surveillance arrangements.
Governance, including roles and responsibilities across the different lines of defence, the operation of controls in the first line of defence and investment governance and reporting arrangements.

If firms are updating business and operating models, engaging with regulators, looking to review existing frameworks or undertaking remediation, we work with them to ensure that systems and controls are adequate, effective and sustainable.

Our Approach

In addition to macro systems and controls assignments, we’ve helped firms understand:

Consumer Duty areas:
- Consumer Duty implementation: with specific requirements on firms that engage in the retail markets and asset managers that manufacture instruments for distribution to the retail market.
- Customer vulnerability and engagement: including the communication of risks to the retail market, the nature of instruments available to different customer segments and customer engagement during the trading process.
- Suitability and appropriateness: including the customer need analysis and targeting of products and services at onboarding and analysis and response to changes in customer circumstances.
- Fees and charges: the reasonableness of the fees charged to customers and how they are communicated, from the marketing of services to the provision of customer statements.
- The impact of monetary policy, inflation and interest rates: considering the firm’s products and services and the impact macroeconomic events have on markets and the performance of customer portfolios as well as the volatility of investment funds.
- Adequacy and effectiveness discretionary portfolio management arrangements: including stock selection, trade execution, investment research arrangements and ability to ensure that portfolios are constructed and managed in line with customer risk profiles.
Operational Resilience and Third Party Risk Management: ensuring that the operation resilience plan and arrangements are robust. Testing and remediation can be evidenced.
Oversight of ARs: firms working through AR networks will need to demonstrate and evidence effective control and oversight of their ARs. Firms are held responsible for the missteps of their ARs.
Custody and back office arrangements: both in terms of client money and asset arrangements and systems and controls for the processing of corporate actions, dividends and other administrative functions, critical to the administration of portfolios.
The adequacy and effectiveness of surveillance: including roles and responsibilities, alerts handling, resourcing, the robustness of technology and the management and escalation of suspicions.
Management information: how MI is used to inform the firm’s governance of risks and issues from broking activities.
Oversight and remuneration of staff: how supervision is operated, potential conflicts of interest and the balancing of remuneration between compliance and performance.

We can provide the support and advice firms need whether they’re embarking on a significant project, are subject to some element of specific regulatory scrutiny or are looking for an evaluation of their systems, controls or governance.