Money Covered: The Week That Was - 28 February 2025

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The third episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team discusses developments that we expect to see in 2025 in relation to Financial Services and Accountants is now available. 

To listen to this and all previous episodes, please click here.

Headline development 

FCA publishes new Dear CEO Letter to Assets Management & Alternatives sector

On 26 February 2025, the FCA published a Dear CEO letter for those in the Asset Management & Alternatives portfolio sector setting out 3 supervisory priorities for 2025:

• Supporting confidence investing in private markets;

• Building firm and financial system resilience against market disruption; and

• Securing positive outcomes for consumers

Linked to these priorities, the letter confirms a variety of intended actions by the FCA and expectations for firms.  These include confirmation that the FCA will shortly be releasing the results of its multi-firm review of Private Market Valuation Practices and Unit Linked Funds, plans to undertake 2 new multi firm reviews this year on "conflicts of interest at firms managing private assets" and Model Portfolio Services.

The letter also encourages firms to read and take on board the findings of the FCA's joint report with the Bank of England regarding risk management for increasingly frequent market disruptions, known as the System Wide Exploratory Scenario.

The news of a review into Model Portfolio Services and conflicts of interest will be closely followed.  The Dear CEO letter raises no specific concerns with the use of Model Portfolio Services.  It may just be an example of the FCA making sure its on top a product that consumers are increasingly adopting. 

To read the full portfolio letter, click here.

Delivery of suitability reviews

On 24 February the FCA announced that the majority of financial advisers are providing customers with suitability reviews where ongoing advice fees have been charged.

The FCA collected data from firms which saw that in 83% of cases suitability reviews had been delivered to clients. 15% of cases showed clients either declining or not responding to review offers, and the remaining 2% of cases showed a failure by firms to deliver the reviews.

The FCA will be asking firms to consider the findings in order to understand whether regulatory standards and contractual requirements have been met. 

The FCA will continue to regularly consider the approach for these review services as well as confirming that they are focused on developing the financial advice market to provide clients with adequate support in this area.

The outcome is no doubt a relief for the sector where there was a concern that the FCA may find failings and require action in response.

To read more please click here.

Accountants 

FRC tightens ‘going concern’ guidance – what directors should know

The Financial Reporting Council (FRC) has updated its guidance on going concern reporting, encouraging company directors to take a broader, long-term view of financial risks. Whilst not mandatory, the changes aim to improve transparency, boost investor confidence and help businesses access capital.

The update pulls together requirements from company law, accounting standards, auditing rules, and the UK Corporate Governance Code into one place. It applies to most UK companies, except small and micro-entities, and calls for clearer, company-specific disclosures on principal risks, including solvency and liquidity.

A key focus is proportionality—disclosures should be tailored to the company’s size, complexity, and risk exposure. Directors are also expected to assess whether adopting the going concern basis is appropriate and consider if extra disclosures are needed to give a true and fair view.

With more scrutiny on financial reporting, businesses should take this as a prompt to review their approach and ensure their disclosures are up to scratch.

To read more, please click here.

Regulatory Updates for FCA Regulated Entities

FCA removes requirement for firms to have a Consumer Duty Champion 

The FCA have announced that from 27 February 2025, firms will no longer be required to have a Consumer Duty board champion. The role of the 'board champion' was to be a board member appointed to advise other board members on the implementation of the consumer duty before it came into force. However, as the consumer duty has now been in force since 31 July 2023, firms should be fully versed on the FCA's expectations regarding the management discussions, processes and policies. 

The FCA's update is an attempt to reduce the burden on firms and to promote greater flexibility for governance arrangements. It has been left open for firms to continue having a board champion if they wish do to so. We will have to wait and see the removal of board champions has any impact on the ongoing implementation of the consumer duty within firms and the complaints that may follow. 

To read more, please click here.

FCA warns firms to check PI cover

The Financial Conduct Authority (FCA) has found that nearly 10% of principal advice firms lacked adequate professional indemnity insurance (PII) cover and has urged firms to check their policies. The FCA reviewed the PII documentation of 269 firms and found cases where the coverage was inadequate, specifically not including the activities of appointed representatives. In some instances, business activity was temporarily halted until compliant PII was put in place.

Jane Savidge from the FCA emphasised that while most policies were appropriate, many principal firms were leaving themselves and their customers vulnerable due to coverage gaps. Principal firms are responsible for ensuring their PII covers both current and former appointed representatives. PII is crucial for consumer protection, helping to prevent insolvency and excessive reliance on the Financial Services Compensation Scheme.

The FCA began highlighting this issue in 2023 and reminded firms about their insurance requirements in a 2024 regulatory newsletter.

To read more, please click here.

FCA's bold push for growth

Financial Conduct Authority (FCA) CEO Nikhil Rathi emphasised the regulator's willingness to take bold action to support economic growth. 

Speaking at the Association of British Insurers roundtable, he stated the FCA wants to streamline processes, eliminate duplication, and work alongside the Labour government’s ambitions. 

Rathi acknowledged differing views on the speed of reforms and stated that the FCA was willing to be creative with timings. However, his cautious approach drew criticism, with some arguing the FCA have responded in a lukewarm matter to the government's aim to boost growth. 

Rathi reaffirmed that growth initiatives would not come at the cost of primary regulatory objectives but includes measures around mortgages and removing the expectation that firms should appoint Consumer Duty board champions.

To read more, please see here.

With thanks to this week's contributors: Lauren Butler, Heather Buttifant, Hattie Hill, Melanie Redding, Alison Thomas, Kristin Smith, Eleanor Jones and Kerone Thomas.