Have you seen the FCA’s recent review into consolidation across the advice and wealth management sector?
It certainly highlights the opportunities presented when businesses come together. Consolidation can create efficiency, better client service and long-term sustainability.
But what about the risks? Poorly executed, consolidation can cause instability, disrupt service and ultimately lead to poor consumer outcomes.
Here, I’m focusing on ways to continue to support good outcomes, even through times of considerable change.
Let’s unpack the key compliance considerations for advice firms navigating consolidation.
One of the biggest risks when firms are acquired is the loss of key people and their institutional knowledge.
Advisers, paraplanners, compliance, operational managers and administrators often carry the DNA of how a business serves its clients. When they leave, valuable insight can go with them.
Successful consolidators recognise this and plan ahead to retain expertise through engagement, transparent internal and external communication, and cultural alignment.
Verve compliance tip: Put structure around people and process risk well ahead of consolidation with systems and controls treated as the living, breathing centre of the business.
Every firm’s proposition to their clients is unique, having normally grown organically over many years to be the perfect fit for firm and clients alike.
…with its own tech preferences woven into its advice and support processes. Integration can be complex, especially when the acquiring group brings its own technology stack at odds with an existing set-up.
Rushing that transition can create gaps, inefficiencies and risk to data quality. The most effective integrations start with clear mapping of existing processes, careful planning of data migration, and open dialogue about the right balance between standardisation and continuity.
Verve compliance tip: During migration (and always!), maintain robust audit trails and prioritise data integrity and governance.
High-quality data is the foundation of good advice and sound compliance, but across smaller firms, data governance remains a challenge thanks to limited resources, inconsistent controls and fragmented systems.
Better data oversight supports regulatory expectations under Consumer Duty, and helps acquirers gain a clear view of the client base they are taking on.
Verve compliance tip: Implement proportionate data governance frameworks to ensure data is accurate, secure and creates good client outcomes.
The FCA’s recent data collection highlighted weaknesses in how some firms oversee advice quality: file checking, peer review and record-keeping vary widely.
Whatever lifecycle stage your business is at, having a structured and independent review process becomes essential. It’s about compliance, but also about giving advisers confidence (and evidence) that client outcomes remain at the heart of their service.
Verve compliance tip: Use structured, independent file checking and monitoring solutions.
Lots of firms have made progress in documenting their systems and controls, but oversight and monitoring can still be patchy.
Building a simple but effective governance framework can ensure clarity of roles, accountability and regular testing. That helps demonstrate control to regulators and acquirers alike.
Verve compliance tip: Don’t overcomplicate it. Effective oversight is all about making compliance practical and proportionate.
Arguably the most important step is getting the culture right.
Every acquisition is also a meeting of two cultures: systems, preferences, ways of working and long-established relationships. Where different structures don’t quite fit together, risk lives.
When the focus is solely on synergies or efficiencies, it’s easy to underestimate how hard it can be to align ways of working, but taking time to create a joined-up compliance culture is what sustains good advice and good outcomes long after consolidation.
Verve compliance tip: Don’t forget that winning hearts and minds takes time and intent. Create practical, shared standards and make them a core part of day-to-day business.
As well as bringing opportunity, consolidation is a true test of how well firms manage risk, culture and oversight.
The FCA’s recent review can serve us a reminder that good outcomes don’t happen by chance. They’re the result of thorough planning, structure and attention to governance.
If you need help with any of that, our Compliance team is on hand to help. We work alongside firms to help them navigate change more confidently – and compliantly - and we’re always happy to share our insights.
Need to chat it through? Drop us a line today and we’ll be right back in touch.
Darren is chief commercial officer at Verve, with an extensive background in finance as a sales director, financial planner and T&C supervisor.
