By Rachel Aldridge, Managing Director, UK Regulatory and Compliance Solutions
In a welcome shift, the UK’s financial regulator is now prioritising market growth. What does this mean for smaller players looking to break into the market?
When regulators start talking about facilitating growth rather than simply enforcing rules, the industry takes notice. The Financial Conduct Authority (FCA)’s new five-year strategy, announced in March 2025, represents precisely this kind of pivotal shift.
After years of focusing primarily on consumer protection and market integrity, the FCA has explicitly committed to:
- Becoming “a smarter regulator; predictable, purposeful and proportionate”
- Supporting sustained economic growth
- Helping consumers navigate their financial lives
- Fighting financial crime
The emphasis on supporting growth marks a significant departure from the regulator’s recent stance. But what practical opportunities does this create, particularly for smaller firms and new market entrants?
The new approach
Recent statements by FCA Chief Executive Nikhil Rathi suggest a sincere commitment to aligning with the UK government’s broader growth agenda. In speeches throughout late 2024 and early 2025, Rathi has repeatedly emphasised facilitating innovation while maintaining necessary oversight.
The FCA is already making tangible changes, including:
- Streamlining the notoriously complex FCA handbook
- Withholding names during active investigations to protect reputations
- Retiring outdated portfolio letters that created additional regulatory burden
- Deregulating aspects of mortgage access
These changes reflect a broader global trend, where regulators are reconsidering rigid frameworks to accommodate innovative business models and start-up or scale-up firms.
The AR regime: A vital tool for growth
For smaller asset managers and investment advisers, the Appointed Representative (AR) regime may represent the most valuable path to market under this new regulatory approach. But the regime is primarily focused on the retail sector – of the 34,000 AR firms in the UK, less than 3% of them are in asset management or wholesale markets.
The AR framework allows firms to operate under a principal firm’s regulatory umbrella, creating three distinct advantages:
- Speed to market: Direct FCA authorisation typically takes 9-12 months, while a regulatory host can establish AR status in weeks
- Cost efficiency: The AR regime is significantly less burdensome than building compliance infrastructure for direct authorisation, allowing firms time to scale
- Focus on core business: Entrepreneurs can concentrate on growth and innovation rather than regulatory processes, but investors can take comfort in the oversight and monitoring being provided
Thousands of small UK firms have successfully used the AR regime as a springboard to growth. Often, they will launch under a principal to validate business models, develop an investor base and gain practical regulatory experience, before transitioning to direct FCA authorisation once they are well established.
Even sophisticated overseas private markets firms often use the AR regime when entering the UK market, demonstrating its value across the financial services spectrum.
Regulatory challenges and new opportunities
The FCA has previously expressed concerns about oversight within the AR regime, calling for greater scrutiny of principal-AR relationships. But the regulator’s new growth mindset creates an opportunity to refine rather than restrict the regime, particularly when considering institutional rather than retail-focused ARs.
By allowing institutional-grade principals to flourish, the FCA can create a more supportive environment for growth while maintaining appropriate safeguards. This approach would align perfectly with the UK’s current economic priorities, as AR regulatory hosts play a crucial role in generating a healthy pipeline of new financial services businesses. The best principal firms provide the necessary oversight to ensure compliance and help AR firms build their infrastructure. This balance of freedom and supervision creates an ideal environment for sustainable growth.
The future is bright for UK-centric growth
The FCA’s strategic shift toward growth creates a highly favourable environment for firms looking to enter or expand in the UK. For firms ready to capitalise on this opportunity, partnering with an established regulatory host delivers the expertise needed to navigate this evolving landscape while maintaining a focus on long-term growth.
Click here to learn more about how our AR regulatory hosting services can accelerate your firm’s growth while ensuring compliance.
