The Financial Conduct Authority (FCA) has placed FCA wealth manager AI risks alongside fees, fair value and financial crime at the top of its supervisory agenda, issuing fresh warnings to a sector that manages almost £1tn of retail client assets. The regulator’s intervention arrives at a moment when the broader AI regulatory environment is also shifting beneath firms’ feet.
What the FCA survey found
The FCA’s latest Wealth Management Survey, covering around 400 firms that collectively support more than 5.5 million retail clients, called on businesses to strengthen standards across several fronts, according to Money Marketing. Lucy Castledine, director of consumer investments at the FCA, acknowledged that most firms were already acting in their clients’ interests. ‘Most firms are already doing the right thing for their clients, and there is a lot to welcome in the progress being made,’ she said. The regulator none the less identified fee transparency, fair value assessment and financial crime controls as areas requiring further attention.
Castledine framed the challenge in terms of opportunity rather than mere compliance. The UK wealth management sector had a ‘real opportunity’ to help more people invest with confidence, she said, but firms needed to build on progress already made. For DIY SIPP holders and clients in drawdown, that framing matters: a sector under closer scrutiny over fees is one where negotiating and benchmarking charges becomes increasingly worthwhile.
FCA wealth manager AI risks and the new regulatory clock
The timing of the FCA’s warning on AI is harder to ignore in light of a parallel development in European regulation. From 2 August 2026, the EU AI Office’s enforcement powers over providers of general-purpose AI models switched on, prohibited AI practices became enforceable, and the transparency obligations in Article 50 of the AI Act began to apply, according to analysis by Sidley Austin LLP. UK-regulated firms with cross-border operations or technology partnerships in the EU will need to understand where these obligations apply to their third-party AI providers.
That external pressure coincides with growing internal scepticism about AI’s near-term value. Dynamic Planner chief product officer Rowan Whittington told Money Marketing that enthusiasm within financial advice firms had moderated after a period of intense interest. ‘I think people are finding that the reality of using AI tooling is costly. It’s not quite scalable,’ she said. For portfolio managers weighing capital allocation across technology investment, this is a sequence-of-returns problem in a different register: committing budget to AI infrastructure before the technology matures may erode operational capacity rather than enhance it.
The savings inertia problem and what it means for advisers
Hargreaves Lansdown estimates that British savers could be leaving £12bn a year in interest on the table by failing to switch cash accounts. The figures sit alongside FCA data: more than 15 million Britons hold more than £10,000 in cash, representing around £930bn in savings, yet only 34% moved their money in the past 12 months. Simon Belsham, chief client officer at Hargreaves Lansdown, observed that ‘doing nothing might be the easy option, but inactivity often leads to poor returns.’
For advisers, the data underlines a recurring tension in client management. With 64% of Britons having stayed with their main bank for more than a decade, the behavioural barriers to switching are substantial, even when the financial incentive is clear.
IHT, pensions and the 2027 deadline
One development that is concentrating minds in estate planning circles is the extension of inheritance tax (IHT) to unused pension funds from April 2027. Ansons Law and Depledge Strategic Wealth Management have reported a rise in estate and succession planning enquiries in response. Under the new rules, pension funds previously outside IHT will be brought into scope, with the effective tax rate potentially reaching 67% in some circumstances. Depledge managing director Andrew Day said early planning would be key to helping families put the right legal structures in place before the changes take effect. Strategies under consideration include gifting, beneficiary pensions, life cover, wills and trusts. For clients in or approaching drawdown, the April 2027 date represents a concrete and time-bounded planning catalyst.
