The Financial Conduct Authority (FCA) has published a review of consolidations in the wealth management and financial advice sector, highlighting a need for "clear structure, strong governance and risk management processes".

The regulator’s review comes after an increase in consolidations in recent years, and aims to support sustainable growth in the sector through good practices.

While the FCA noted consolidation support efficiency and growth is available through resource pooling, infrastructure and long-term innovation, it stated that fast growth that is not managed effectively can result in poor outcomes.

This could include poor client service failure of business continuity and disorderly failure.

It said that firms that demonstrated well-planned acquisition strategies and thorough integration planning were more likely to deliver positive outcomes for customers.

The regulator also highlighted areas with greater potential for harm. This includes the ways in which these new groups are structured and how group debt is guaranteed.

The FCA said that its findings are not setting new expectations, but are intended to help financial firms understand measures that already exist.

It has therefore called on firms to compare its findings to their own arrangements to see if any changes may lead to increased prudential and conduct risks.

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