Major changes on the horizon for financial services organizations

By Marc Maxfield, Financial Services Expert at sound advice

The Chancellor has outlined his plans for the future of the UK’s financial services (FS) sector, in the biggest piece of FS legislation in more than two decades. But what are the key takeaways and, as we look to further iterations, what should companies focus on?

The FS & Markets Bill has high ambitions to position the UK as a world leader in FS, outlining the key reforms the government believes will be needed to achieve this. In a bold move, growth and competitiveness are set to become official goals for regulators – a clear message that they must now shape, lead and deliver for the sector.

The response from the financial services sector has been positive, in particular due to the emphasis on growth, international competitiveness and significant changes in terms of regulators’ objectives and the regulatory framework.

Future regulatory framework and objectives

A key driving force, the bill contains sweeping powers for regulators to amend or reformulate retained EU legislation and directives with specific UK regulations. This is both a huge opportunity and a huge challenge – especially when it comes to ensuring that regulators have enough time and adequate resources to do so.

Encouragingly, the UK is already showing leadership in policy areas not governed by previous EU regulation, such as climate change. This can be helpful in charting a course for how government and regulators can approach an overhaul of this scale. It is essential that the future framework supports the sector in achieving its long-term objectives.

Insurance is likely to be an area where the sector will see change first, with the recently completed government consultation on the reform of prudential regulation of the insurance sector. This is seen as a first test of what competitiveness will mean under the new regulatory framework. The government is keen to increase the potential for additional private investment in long-term infrastructure and green projects. The Prudential Regulation Authority (PRA) has recognized a “once in a generation” opportunity to reshape UK insurance regulation, but also the need to balance wider investment with investor protection.

For this to work effectively, there will need to be an effective government response to its consultation indicating how it structures infrastructure projects to enable investments that balance capital standards.

There are other areas of the financial services regulatory framework where companies are likely to want to see change quickly. These include the “advice vs advice boundary” and overhauling the current regulatory regime to allow them to provide more personalized advice to their clients without providing advice.

Another area is in customer disclosure, where removing prescriptive EU requirements on the form and content of disclosure can encourage companies to provide more personalized communications to make it easier for customers to understand.

Consumer protection and access to financial services

With the cost of living crisis tightening its grip, consumer protection has never been more important. It is a positive development that the bill includes a provision to protect access to cash for those who continue to need it. CAF Financial Lives survey found that 10% of UK adults rely on cash for almost all their daily purchases and that many of these people are vulnerable. He also said his work on access to cash reflects a broader intention to support financial inclusion more broadly.

As a result, businesses could see the FCA take a more interventionist approach to consumer protection and financial inclusion, potentially using regulatory tools like the new Consumer Duty as a basis for action. Businesses should be aware of this and ensure that when preparing their consumer obligation implementation plans, they include the prevention of harm caused by poor access to products and services under the achieving good results for customers.


The UK wants to be the world leader in crypto-assets, with the bill planning to introduce regulation of cryptocurrency and in particular stablecoins as a means of payment. This is an important development and the main challenge for government and regulators will be to balance proper initial regulatory oversight with investment attractiveness, while being able to scale as innovation in cryptocurrencies and developments in central bank digital currencies continue.

For financial services firms, this means that the developing regulatory framework will seek to address a range of risks identified from crypto-assets, including financial crime, consumers buying unsuitable products or suffering losses, and stability. financial. However, regulators and the UK Treasury recognize the potential benefits, as illustrated by the fact that the FCA offers potential support for crypto asset proposals through its Innovation Hub.

Preparing for anticipation

Financial services companies need to understand that they are facing a time of significant regulatory change, consultation and uncertainty. This will require them to keep abreast of developments, adopt a flexible approach and understand when action is needed.

It is important for businesses to be aware of the FCA’s focus on financial inclusion and access as part of the next consumer obligation – they will need to demonstrate unequivocally that they have roadmaps and clear plans to achieve a fundamental culture shift – moving from a mindset of preventing poor conduct, to proactively prioritizing good outcomes for customers.

The bill promises to be effective in several key areas, but competitiveness does not happen overnight, the industry must do its part and help influence a fit regulatory environment for the future. The regulator and government depend on hearing from companies, now is the time to speak up.