Regulatory burden on UK wealth managers eases but Targeted Support and Simplified Advice adoption remain cautious

Compliance pressure on UK wealth management and financial advice firms is measurably declining, but adoption of two landmark FCA advice reforms remains tentative, and a striking 93% of firms reject the proposition that cutting the Cash ISA allowance will turn savers into investors, according to PIMFA's second Regulatory Insights Tracker, conducted across 56 member firms between February and March 2026.

The survey captures a sector in a holding pattern: costs falling, optimism about long-term reform intact, yet simultaneously more uncertain about day-to-day compliance than it was six months ago, and deeply sceptical about one of the government's most visible retail investment policies.

Timing note

This survey was conducted before the FCA published CP26/10 in March 2026, its consultation to simplify pensions and investment advice rules. That intervention directly addresses many of the uncertainties firms flagged, meaning the 36% of firms "awaiting Simplified Advice detail" before committing may already be reassessing. The next iteration of the tracker, due in the second half of 2026, will capture the post-CP26/10 shift.

What is the overall compliance picture for the sector?

Every single firm surveyed, 100% of respondents, up from 96% six months ago, reports that regulatory change is diverting time and resources away from other priorities. That figure is not improving. What is improving is the intensity: those describing the impact as occurring "to a large extent" fell from 29% to 23%, and those reporting any increase in compliance expenditure dropped from 79% to 65%. The sharpest improvement is at the top end: firms reporting a significant cost increase fell from 31% to just 13%.

The most plausible explanation is that the heaviest Consumer Duty implementation spend, which dominated compliance budgets through 2024 and 2025, has largely been absorbed. Consumer Duty is still cited by 66% of firms as the single most resource-intensive requirement, but that is down steeply from 85% six months ago.

Where is compliance attention shifting?

As Consumer Duty intensity eases, Operational Resilience and Cyber Security have doubled in prominence, rising from 13% to 25% of firms flagging them as a major compliance focus. This aligns with known FCA and PRA supervisory direction: both regulators have signalled increased scrutiny of technology and third-party risk, and the March 2025 operational resilience deadline focused board-level attention on these areas across financial services.

Customer Vulnerability has fallen significantly (from 52% to 34%) a movement PIMFA attributes to 18 months of sector-wide best practice sharing among its members. The direction of travel on this issue appears to be consolidation rather than continued escalation.

On regulatory priorities, firms have shifted their primary ask: simplified reporting and reduced duplication of data returns (52%) has overtaken clearer regulatory communication (now cited by 46%, down from 54%) as the top priority. Notably, the proportion calling for more realistic implementation timelines has risen sharply (from 23% to 39%) suggesting frustration with the pace of rule-setting is intensifying even as direct compliance costs fall.

Why are most firms still sitting out Targeted Support?

Nearly two-thirds (63%) of PIMFA member firms are not currently planning to offer Targeted Support, with only a small number committing to an April 2026 launch. The reluctance is not straightforwardly negative: 40% agree the regime will play a significant role in improving retail investor outcomes, only 4% disagree, and 57% are reserving judgment. The dominant stance is "wait and see" rather than opposition.

For wealth managers operating primarily in the full-advice segment, the commercial case for Targeted Support is structurally limited. The regime is designed to serve the mass market advice gap, retail consumers who currently receive no professional financial guidance, rather than the existing high-net-worth client bases that make up the majority of PIMFA members' books. Meaningful adoption may ultimately come from platforms and direct-to-consumer providers rather than traditional wealth managers.

Is Simplified Advice a more realistic opportunity for the sector?

The data suggests yes, with an important caveat. While 45% of firms have no current intention of offering Simplified Advice, 36% are explicitly withholding a decision pending further FCA detail on how the regime will operate. That is a meaningfully different posture from outright rejection and represents a credible near-term pipeline if regulatory clarity follows.

Simplified Advice, scoped for discrete, single-need interactions such as ISA contributions or basic pension decisions, sits more naturally alongside a holistic advice proposition than Targeted Support does. For mid-market wealth managers seeking to extend their addressable client base without building separate robo-advice infrastructure, it offers a more compatible business model extension.

However, as noted above, this survey predates CP26/10. Firms in the 36% cohort may already be moving off the fence following the FCA's March 2026 consultation.

"Simplified Advice is therefore likely to be more relevant for many firms alongside holistic advice... With proposals now published, focus will turn to building understanding with firms and the Regulator to assess how effectively they can support client outcomes and enable firms to grow."

David Ostojitsch, Director of Government Relations and Policy, PIMFA

What does the Cash ISA finding say about the retail investment agenda?

Standout finding

While 41% of firms support the government's ambition to increase retail investment in UK equities, only 7% agree that cutting the Cash ISA allowance will actually encourage UK savers to become investors. That means 93% of wealth managers, the professionals closest to retail investor behaviour, do not believe the policy instrument will achieve its stated goal.

This is a pointed industry verdict on one of the most debated elements of the government's Mansion House agenda. The logic behind cutting the Cash ISA allowance is that reducing the tax-efficient shelter for cash will nudge savers toward stocks and shares ISAs and, by extension, toward UK equity markets. The PIMFA data suggests practitioners are highly sceptical that this behavioural mechanism will work in practice.

The finding sits alongside broader support for the government's equity investment ambitions: 41% of firms back the underlying goal. The disconnect between endorsing the destination and rejecting the route is a significant signal for policymakers. It also raises the question of what combination of incentives and friction-reduction, rather than Cash ISA restriction, practitioners believe would actually shift retail allocation toward equities.

What does the compliance clarity gap mean in practice?

The most counterintuitive finding in the entire dataset is this: despite falling costs and easing resource pressure, the proportion of firms that do not feel any clearer about how to remain compliant has risen, from 46% to 56%. Firms are spending less, but navigating more uncertainty. This is a communication failure, not a workload failure, and it points to a structural gap between the FCA's rule-production pace and the sector's capacity to absorb and interpret it.

Notably, 82% of firms believe the regulatory changes they are working on will deliver significant long-term benefits for both their firm and clients, a high confidence figure that coexists with the clarity deficit. The sector is not disengaged from reform; it is frustrated by the operational complexity of implementing it.

Why this matters to FinanceX readers

Three signals in this data are directly relevant to investors and institutions tracking the UK advice market.

First, the compliance cost peak has passed for most firms, the drop from 31% to 13% reporting significant expenditure increases is a genuine shift in the sector's operating economics.

Second, the 36% of firms awaiting Simplified Advice detail represents the cohort most likely to expand into new client segments; their decision timeline is now tied to the FCA's CP26/10 process in 2026.

Third, the 7% figure on Cash ISA policy effectiveness is a direct challenge to a core plank of the government's retail investment strategy, one that fund managers, platform operators, and anyone building UK equity distribution should take seriously. The professionals who know retail investors best are telling policymakers this particular lever will not work.

By Koen Vanderhoydonk - FinanceX Magazine