The Model Office Blog

When it comes to regulations, the saying ‘no road stays the same’ springs to mind. This year’s Model Office MO® Regulatory Horizon scan provides a review of the main FCA regulatory directives that will influence retail intermediary firms in the year ahead.

1) Consumer Duty becomes the default supervisory test

The FCA continues to stipulate that it wants the Consumer Duty to do more of the heavy lifting (rather than layering on new, prescriptive rules). That means 2026 supervision will increasingly focus on whether you can evidence good outcomes through MI, governance and demonstrable changes (not just policy documents). This syncs with Model Office’s mantra ‘if you do not have the data, it didn’t happen and if you have the data, it better have happened’!

We also have the FCA reviewing two high growth sectors under the Consumer Duty umbrella:

• The Consolidator review which focuses on three key areas, risk and governance, debt management and compliance and governance frameworks. Read more here. 
• The Managed Portfolio Service Review and how MPS firms are implementing the Consumer Duty and ensure the four outcomes are applied well. Read CP25/3

Key actions to take:

• Refresh your client outcomes framework so it clearly links: target market → client journeys → foreseeable harms → controls → outcome MI → board, committee, compliance support actions.
• Build “closed book/legacy” monitoring into the same cadence as open products (sludge practice and value drift is often where firms get caught out).
• Treat vulnerability as a service design input (comms, support and digital channels), not just an operational issue.
• Ensure annual Consumer Duty Board Reports are data driven, evidence governance, risk and compliance strategy and activities across all requirements.
• If you are a product co-manufacturer, then engage with the FCA on their overview of this sector as they conduct a review for clearer guidance for firms where and when the Duty applies to all parties involved in product co-manufacturing
• If a consolidator, ensure your financial, cyber and operational resilience structures, Governance, risk and compliance strategies are robust

2) Advice–guidance boundary: targeted support goes live and “simplified advice” follows

For advice firms wanting to offer targeted support, the biggest structural change is the move to targeted support as a new regulated framework intended to help close the advice gap. The FCA says firms should be able to apply for targeted support permissions from March 2026, with rules expected to take effect from 6 April 2026.

The FCA also flags a consultation in early 2026 on COBS9B; simplifying and consolidating investment advice rules and guidance. So, it’s a watch this space thing!

What to do if you are undertaking targeted support:

• Map your current “guidance” journeys (including website tools, call scripts, triage, service nudges) to where targeted support could sit—and where it could ‘accidentally’ become personal recommendation.
• Prepare a permissions and governance plan: who owns the regime, how you test communications, and how you monitor outcomes for each supported “consumer group”.
• Get ahead on complaint handling: the FCA notes joint work with the Financial Ombudsman Service and the ICO around targeted support context and communications.

4) Culture, Competence and Conduct

The three ‘C’s bring increased FCA focus on core accountability and responsibility issues across:

• The Senior Manager and Certification Regime (SM&CR) has seen much speculation with rumblings that the government will recommend relaxing some of the supervision requirements, across areas such as the 12-week rule relaxation, reduced certification roles and regulatory referencing timeframes, extending criminal record checks validity and directory updates
• Non-Financial Misconduct will be introduced for all non-banking regulated firms, introducing a new behaviour rule COCON 1.1.7FR covering bullying, harassment and violence

How to prepare

• Review SM&CR processes, identify areas that can benefit from the reforms
• Update policies across disciplinary, investigation, training and competence and HR to include NFM and integrate into risk management processes

3) Advice suitability and ongoing services: evidence-based practice and file reviews must improve

In 2025, the FCA reviewed whether advisers were delivering ongoing advice services paid for, focusing on the delivery of ongoing suitability reviews. It found reviews were delivered in around 83% of cases, and in fewer than 2% firms had not attempted to conduct a review (which the FCA expects to be put right).

This matters for 2026 because the FCA is increasingly using multi-firm work and section 165 data requests to test whether “ongoing” fees align to delivered services and outcomes. The fact that mandatory annual reviews are ‘under review’ is irrelevant here, this issue is core to the Consumer Duty outcome two; Price and Value.

What to do now

• Tighten your service definitions: “ongoing” services should have a clear minimum service strategy, eligibility rules, and a “no contact/no review” escalation path.
• Upgrade suitability Q&A beyond templated checklists:
  • test assumptions (capacity for loss, objectives, time horizon),
  • test product/portfolio fit,
  • test reasonable alternatives considered,
  • test client understanding (especially for complex/risky features),
  • test ongoing drift (material change triggers, charges at or post-retirement).
  • Ensure Q&A sampling is also risk-based (higher risk clients/products, vulnerable customers, high charges, complex strategies) and track remediation to completion.
• Ensure client file’s pass the litmus test of evidencing relevant supporting documents, suitable recommendations based on client needs and objectives.
• Take head of FCA Discussion Paper 25/3: Expanding Consumer Access to Investments covering two themes:
  • clearer, more consistent rules across similar products and channels, and
  • stronger expectations that firms use data to evidence consumer understanding and good outcomes

4) Vulnerable customers: design for foreseeable harm then evidence outcomes

The FCA keeps linking vulnerability to online harm, promotions and complaints. Under the Consumer Duty, the bar is effectively: identify foreseeable harm, design it out where possible, and show MI that it worked. 

What actions should you take

• Embed vulnerability into client journeys (fact finding, product sales, disclosures, support) and test comprehension and friction.
• Run root-cause analysis on complaints and “near misses” as formal MI.
• Ensure the firm’s training and competence policy addresses vulnerability and vulnerability policies are up to date.

5) Appointed Representatives (ARs): oversight, MI and “who is allowed to do what” in 2026

AR oversight remains a supervisory pressure point; governance and oversight controls have now been strengthened and enforced and regarding the advice, guidance boundary, targeted support is not something firms should assume ARs can deliver at rollout (the regime is being staged, and this will be reviewed by the FCA). 

Areas for focus

• Tighten AR onboarding, monitoring MI, annual reviews, and termination controls.
• Evidence AR outcomes using the same Consumer Duty MI you use for directly authorised business. 

6) “Polluter pays” and redress liabilities: priorities shift, expectations don’t

The FCA has decided not to take forward the capital deduction for redress (CDR) proposals for personal investment firms, citing wider changes affecting the advice market. But it continues to emphasise that firms must address redress liabilities under existing rules (including the Duty) and expects robust handling of liabilities in book transfers. Read the FCA redress liabilities statement for more. 

Key strategies to consider

• Treat redress provisioning and legacy-book risks as a board-level Duty issue.
• Build redress risk checks into acquisition/transfer due diligence and file sampling plans.

7) Changes to investment regulations

• Crypto assets: Given this asset is considered more mainstream than many adviser firms may like to think, the FCA are scoping crypto asset regulation. CP25/40 covers the key areas including increased governance and oversight, CP25/36 covers client categorisation and streamlined regulation for professional clients, for example with exemption for clients with £10M assets
• Consumer Composite Investments (CCI) The CCI regime will replace the Packaged Retail and Insurance-based Investment Products (PRIIPs) regime and the Undertakings for Collective Investment in Transferable Securities (UCITS) disclosure requirements with a single framework tailored for UK consumers and markets. The rules take effect from 8^th June ‘27 with a lead in starting 6^th April ’26. You can read more on PS25/20 here.
• Private Markets and Long term asset funds are also now under regulatory scope. The FCA see this (along with streamlining the handbook) as a potential to support the Labour Governments growth agenda. The regulator’s primary focus is on private market valuation practices which you can read more on 

The FCA’s mortgage rule review programme is aimed at simplifying rules while encouraging firms to use Consumer Duty flexibility to support access *without* weakening standards.

Key regulatory focus for 2026 includes:

• continued focus on responsible lending and advice quality, including multi-firm reviews looking at second charge mortgages (responsible lending, advice quality, fees/charges).
• a forward-looking later life lending market study, with terms of reference expected in the first quarter (per FCA communication).
• ongoing emphasis on using flexibility in stress testing (the FCA previously reminded firms of the flexibility and noted impacts on borrowing capacity).

What to focus on

• Treat mortgage advice file reviews as “Duty evidence packs”: show the client’s needs, options considered, affordability rationale, and why the recommendation is good value and suitable.
• For later-life and interest-only: refresh vulnerability and foreseeable-harm assessments (e.g., retirement income changes, health issues, dependency).
• For second charge/debt consolidation: be ready to evidence fees/charges fairness, alternative solutions considered, and communications clarity.

9) Insurance: product governance, fair value and premium finance land on boards in 2026

The FCA remains openly critical of weak PROD 4 product oversight and governance in GI and pure protection, including poor fair value evidence and distributors not fully understanding remuneration/value responsibilities.

Alongside this, premium finance remains a major affordability and fair value focus. The FCA’s premium finance market study highlights concerns about fair value and competition, with a final report expected (the FCA has said it aims to publish a final report early next year). You can read more in TR24/2

Also notable: in late 2025 the FCA finalised changes to simplify insurance rules, including moving from a fixed minimum product review frequency to a risk-based approach tied to potential customer harm (and requiring recorded rationale).

Where to focus

• Make fair value “audit-ready”: document value components, distribution chain remuneration, expected loss ratio/claims performance, and actions taken when value drifts.
• For distributors/intermediaries: show how your remuneration interacts with the overall value assessment and what you do if it doesn’t stack up.
• If you touch premium finance: start preparing now for 2026 conclusions—stress test customer outcomes, pricing transparency and “avoidable harm” in communications.

10) Financial promotions and scams: expectations keep rising (especially for vulnerable audiences)

The FCA continues to intervene heavily in financial promotions and has been explicit about problem areas (including claims management, debt solutions and the role of social media). This also applies to crypto assets as above. 

What to do now

• Treat approvals, monitoring and withdrawal as an end-to-end controlled process (not a one-off sign-off).
• For advice and insurance firms: check that “guidance-style” content doesn’t become an implied personal recommendation.
• Use data to spot harm: complaint themes, call listening, abandonment rates, churn, and vulnerable-customer flags should feed your comms testing programme.

11) AI in 2026: the FCA expects you to use it to improve outcomes—without outsourcing accountability

The FCA’s message is clear: it wants to support safe and responsible AI adoption, does not plan to introduce extra AI regulations given its comprehensive handbook, and thus expects firms to apply existing frameworks (Consumer Duty, governance/SM&CR, etc.) to AI use cases.

It also describes how it is using AI internally such as web scraping to protect against cyber criminals, experimentation with LLMs to build handbook focused chat bots (MO® our compliance chatbot is also a resource that can be used in this vein) while keeping humans responsible for judgement.

The FCA are actively encouraging innovation in AI across the industry with their sandboxes, (including a supercharged sandbox with Nvidia) tech sprints, AI spotlights and testing initiatives. Read the AI and the FCA Approach for more

How AI should support good client outcomes

• Advice quality: AI-assisted file review triage (flag missing suitability rationales, inconsistencies, high-risk product clusters, fee outliers) — with human QA owning decisions.
• Comms and support: readability testing, vulnerability-sensitive rewriting suggestions, and call summarisation to reduce friction and improve support outcomes.
• Insurance value monitoring: AI-driven MI to identify claims handling delays, complaint spikes, value drift, and distribution chain anomalies.
• Financial Promotions compliance: detection of non-compliant language, unbalanced risk/benefit presentation, and influencer content monitoring.
• Client file reviews: Adopting a rules and generative based AI structure to assess client file reviews across missing documents, poor structured compliance templates, benchmarking documents against regulations.
• Advice suitability reports: Writing suitability reports which will require a human four eyes sense check

Firms should ensure they have AI Non-negotiable strategy in place across:

• Documented model governance (ownership, change control, testing, bias/error monitoring, audit trail).
• Clear “human-in-the-loop” controls for any customer-facing decisioning.
• Outcome testing aligned to Consumer Duty outcomes.

12) The FCA rule review initiative and streamlining the handbook: why it matters to your 2026 compliance plan

The FCA’s Rule Review Framework explains how it monitors and reviews how rules work in practice, including three main review types: evidence assessments, post-implementation reviews and impact evaluations. It also provides a feedback tool to submit evidence on rules’ effectiveness. (

For firms, this matters because the FCA’s direction of travel is towards:

• removing redundant requirements where possible, while
• sharpening expectations on outcomes evidence where harm persists.
• accurate data reporting to FCA section 165 data information requests

12) Planning tools for 2026: use the Regulatory Initiatives Grid dashboard like a control room

If you’re not already using it, the FCA’s Regulatory Initiatives Grid dashboard is one of the best practical tools for a 2026 change calendar: it allows filtering by sector, authority and expected impact, and links to underlying data.

Utilise RegTech tools that can help you benchmark your firm’s compliance performance against the regulations, gain AI driven tools to meet the regulatory challenges above such as assessment of business culture, risk management, training and competence, client file review content and compliance document and template quality.

What to do now

• Build a single “regulatory delivery roadmap” that links: initiatives → impacted products/journeys → policy/process change → training → QA changes → MI → board reporting.
• Use it to pre-book resourcing for likely pinch points (targeted support go-live, mortgage review phases, premium finance outcomes, PROD/value work).

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