Governance, risk and compliance (GRC) frameworks are becoming central to how UK financial advice firms’ networks and support services demonstrate accountability. For FCA directly authorised firms, restricted advice firms and principal firms overseeing appointed representatives (ARs), regulatory expectations increasingly require structured governance supported by clear oversight and independent internal audit.
The traditional “three lines of defence” model remains a useful reference point. Business operations form the first line, risk and compliance functions represent the second line, and internal audit provides the third line of defence. The challenge for many advice firms is not understanding this structure but implementing it in a way that produces credible and auditable evidence of compliance.
A number of regulatory and legislative developments are increasing expectations in this area.
The FCA’s Senior Managers and Certification Regime (SM&CR) already places clear responsibility on senior individuals to demonstrate effective governance, systems and controls. The regime requires firms to show how senior managers discharge their responsibilities and how oversight is exercised across the organisation. From September 2026 the FCA’s strengthened non-financial misconduct rules will further extend these expectations, making clear that conduct relating to harassment, discrimination and other serious behaviour issues can fall within the scope of regulatory action. Firms will therefore need governance frameworks capable of identifying, monitoring and evidencing conduct risks as part of their wider compliance arrangements.
Oversight expectations are also increasing across distribution chains. The ongoing review of the appointed representative regime by HM Treasury and the FCA places greater responsibility on principal firms to demonstrate effective supervision of AR networks. Principals must show they have appropriate monitoring, governance and reporting arrangements across their AR firms, supported by reliable management information and clear audit trails.
Wider legislative developments are also reinforcing the importance of governance and accountability. The Economic Crime and Corporate Transparency Act 2023 broadens corporate attribution rules and strengthens enforcement powers relating to economic crime. Senior leadership and boards are increasingly expected to demonstrate that effective internal control frameworks are in place.
Further proposals are expected through the Crime and Policing Bill anticipated in 2025, which is likely to extend “failure to prevent” offences to additional areas of economic crime. This will further increase the need for firms to evidence that appropriate policies, monitoring and governance arrangements are operating effectively.
Alongside this, the Data (Use and Access) Act 2025 introduces new expectations around the responsible use of organisational data and improved access to information across systems. For financial advice firms, this reinforces the need for structured data governance and the ability to produce reliable, traceable records of monitoring, decision making and oversight.
Taken together, these developments signal a clear direction. Regulation is becoming increasingly data led. Firms must demonstrate not only that governance frameworks exist, but that they are actively monitored, tested and evidenced.
This is where governance, supervision and regulation technology is becoming essential.
Digital audit and compliance platforms allow firms to embed structured control frameworks across regulatory obligations. Automated internal audits can assess policies, operational processes and client-file evidence against FCA handbook requirements, producing consistent scoring and structured reports supported by underlying data.
For principal firms supervising AR networks, technology enables scalable oversight. Automated monitoring helps identify governance gaps, track supervisory activity and maintain consistent oversight across multiple firms, while creating digital audit trails that demonstrate how supervision has been exercised.
Data-driven reporting also strengthens the third line of defence. Internal audit functions can move beyond periodic manual reviews towards continuous monitoring supported by structured datasets. This allows audit findings to be presented as evidence-based reports rather than narrative assessments.
For FCA regulated advice firms, the direction of travel is clear. Governance frameworks must be supported by systems capable of monitoring activity, assessing risk and evidencing oversight across the organisation and its wider distribution chain.
Strong governance is no longer defined solely by documented policies. It increasingly depends on the ability to demonstrate, through data, audit trails and structured reporting, that those policies are operating effectively in practice.
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