FCA’s section 165 request signals strategic shift

The Financial Conduct Authority (FCA) has issued a new section 165 (s165) information request to firms across the financial advice and wealth management sectors. This isn't just another regulatory formality, it’s a clear signal of the FCA’s evolving supervisory approach. The regulator is moving toward a more data-driven, market-wide model that prioritises client outcomes and proactive oversight.

Under section 165 of the Financial Services and Markets Act 2000, the FCA has the power to compel firms to provide information or documents it deems necessary for its regulatory functions. These requests are mandatory, and failure to respond accurately and on time can lead to further regulatory scrutiny.

This latest request builds on previous data-gathering exercises, such as last year’s surveys on customer support and the treatment of vulnerable customers. The FCA is using these tools to identify behavioural trends, spot outliers, and assess where firms may lack robust governance or reliable metrics.

What the FCA wants to know

The 2025 survey reflects a shift in focus from regulatory capital to client outcomes. It asks firms to provide detailed information across several key areas:

• Employment and remuneration demographics: the FCA wants to understand how firms structure their workforce and reward systems, particularly in relation to diversity and inclusion
• Client numbers and demographics: this helps the regulator assess whether firms are serving a broad and representative client base, and how that aligns with their stated target markets
• Nature of advice and services provided: firms must outline the types of advice they offer and how these align with client objectives, ensuring suitability and relevance
• Product types and distribution channels: the FCA is examining how products are delivered and whether distribution methods support good client outcomes
• Target market characteristics: this ensures firms are clear about who their services are designed for and that they’re not inadvertently exposing unsuitable clients to risk
• Marketing and promotional strategies: the regulator wants to see whether firms’ marketing aligns with their advice models and avoids misleading or overly optimistic messaging
• Oversight arrangements, including file reviews: strong internal oversight is essential – The FCA is looking for evidence of regular file checks, management information reviews, and governance processes
• Adjustments made for vulnerable customers: firms must show how they identify and support clients with vulnerabilities, tailoring services and communications accordingly
• Changes made in response to the FCA’s Retirement Income Thematic Review: the survey asks firms to demonstrate how they’ve responded to recent findings and whether they’ve made meaningful improvements
• Business model and future plans: the FCA is interested in how firms plan to evolve, particularly in light of regulatory developments and shifting consumer needs

This level of scrutiny reflects the FCA’s desire to ensure firms aren't only compliant, but also actively delivering good outcomes in line with the Consumer Duty.

A window into future policy

This survey isn’t just about oversight; it’s also a tool for shaping future regulation. Firms are being asked for their views on simplified advice, echoing themes from discussion paper 23/5 (DP23/5), and the more recent consultation paper (CP25/17). These papers explore how to close the advice gap by rethinking the boundary between advice and guidance.

The inclusion of questions on model portfolio services (MPS) suggests the FCA is gathering insights ahead of its upcoming multi-firm review of MPS governance and investor outcomes. There’s also a question about the potential impact of amending regulatory returns to reduce reporting burdens, hinting at a more streamlined future.

Vulnerable customers: the FCA’s litmus test

One of the most telling aspects of the survey is its focus on vulnerable customers. According to the FCA, this is the lens through which Consumer Duty compliance will be assessed.

Firms are expected to:

• identify characteristics of vulnerability – this includes financial, physical, emotional, or situational factors that may affect a client’s ability to make informed decisions
• tailor services and communications accordingly – adjustments should be made to ensure vulnerable clients receive appropriate support and clear, accessible information
• monitor outcomes for these clients – firms must track whether vulnerable customers are achieving good outcomes and intervene where necessary
• use data to drive continuous improvement – the FCA expects firms to learn from their own data and refine their processes over time.

Firms that fail to demonstrate meaningful action in this area, especially those that report no adjustments without a clear rationale, may face increased scrutiny.

What happens if firms don’t comply

Non-compliance with the s165 request can lead to serious consequences. Firms that fail to respond, submit incomplete data, or appear as outliers may be subject to:

• a risk management programme (RMP): this involves close monitoring and the implementation of remedial action plans
• a section 166 skilled person review: an independent third party may be appointed to assess the firm’s systems, controls, and governance.

However, the FCA’s 2025 regulatory strategy also aims to reduce unnecessary burdens. Unless systemic issues are uncovered, the regulator may limit the use of section 166 reviews in favour of more targeted interventions.

What firms should do now

Rather than viewing this as a regulatory hurdle, firms should treat the s165 request as a chance to strengthen their operations and demonstrate leadership in the sector. Firms should:

• review data governance and reporting capabilities by ensuring systems are in place to collect, validate, and report accurate data efficiently
• strengthen oversight mechanisms through regular file reviews, MI dashboards, and governance forums being up to date and well-documented
• revisit approaches to vulnerable customers and assess whether current processes are fit for purpose and aligned with FCA expectations
• document changes made in response to FCA guidance by keeping a clear audit trail of improvements made following thematic reviews or regulatory feedback.

The FCA is looking for firms that aren't only compliant but that also proactively use their data to drive better outcomes and embed a culture of accountability.

To find out more about the FCA’s data expectations or how this request could impact your firm, get in touch with David Morrey, or Jonathan Charles.

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