The UK government has unveiled a comprehensive package of reforms aimed at recalibrating the regulatory environment, unlocking productive capital, and reinforcing the country’s status as a global financial hub. For asset managers, these changes present new opportunities and potentially a more agile landscape for growth and innovation. The reforms are structured around four key pillars:
- Rolling Back Over-Regulation
- Targeted Changes Leveraging UK Strengths
- Reforming Capital Requirements
- Boosting Retail Investment
Key Proposals for Asset Managers
Major Regulatory Reforms
A number of key regulatory reforms have been proposed, including:
- Regulatory processes are being streamlined, with new targets for the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) to expedite authorisations and approvals. This will be welcome for new entrants to the market.
- The FCA is also reviewing the impact of the Consumer Duty to ensure it does not unduly affect wholesale activities and hamper growth. This will benefit asset managers marketing products to retail investors (which has been an increasing market for asset managers).
- Additionally, the Senior Managers and Certification Regime will be simplified, reducing compliance burdens by 50% and significantly shortening approval timelines – enabling firms to attract and onboard talent more efficiently. This will be helpful for firms although the introduction of rules on non – financial misconduct will have an impact in this area – see our post here.
- Whilst less relevant for institutional asset managers, a significant overhaul of the Financial Ombudsman Service (FOS) is proposed, including a ten-year limit for claims and a reduction in the interest rate applied before decisions. These changes will expedite consumer redress and reduce financial burdens for firms.
Driving Innovation
The government is futureproofing the regulatory regime for asset managers, with draft legislation expected in early 2026. Sustainable finance remains a priority, but rather than implementing a rigid green taxonomy, the government will collaborate with regulators through the Transition Finance Council to unlock the £200 billion opportunity in the global transition to net zero. Recognizing the UK’s leadership in Fintech – with nearly half of Europe’s Fintechs based in the UK – the PRA and FCA are launching a scale-up unit to support innovative firms, particularly in payments, ensuring the UK remains a magnet for financial technology investment.
The reforms also advance the UK’s position in digital assets, with initiatives to develop blockchain technology, tokenised securities, stablecoins, and an ambitious new digital gilt instrument. These steps are designed to place UK financial services at the forefront of digital asset innovation.
Another notable feature is the introduction of a new “concierge service” by the Office for Investment, launching in October. This tailored service will support firms – especially new entrants and innovative businesses – through the FCA authorisation process, making the UK’s regulatory environment more accessible and attractive for investment and competition. Whilst less relevant for asset managers directly this may be helpful for portfolio companies.
Empowering Savers and Retail Investment
Of particular interest for asset managers looking to target retail capital, the reforms include measures to broaden retail investment, such as permitting Long-Term Asset Funds (LTAFs) within stocks and shares ISAs and further enhancements to ISA rules in the coming months. The government is committed to improving outcomes for UK savers and the economy, working with the FCA to introduce targeted consumer support ahead of the new financial year. A campaign to promote the benefits of retail investment will launch next April, and a review of risk warnings is underway taking into account that we are too focused on highlighting the risks of investments without highlighting the benefits -– recommendations are expected in January.
This drive by the UK government is accompanied by the FCA’s announcement in July that it will consult on its client categorisation rules giving the market the opportunity to shape the rules to ensure that they remain proportionate for firms dealing with wealthy and very experienced investors. The timing of the consultation has not been announced and firms should keep an eye on any development in this area over the next half of 2025. Any changes to the client categorisation system will be welcome to asset managers who are increasingly accessing broader pools of capital, including from high-net-worth individual investors.
Conclusion
These reforms represent a decisive commitment to growth, innovation, and competitiveness in UK financial services. For asset managers, they potentially offer a more flexible regulatory framework and expanded opportunities to drive value for clients, attract retail capital and the broader economy.