Investment management and wealth

In 2026, EU and UK policymakers will continue to prioritise growth and competitiveness, recognising investment managers (hereafter “firms”, encompassing both fund and wealth managers) as critical to both objectives. New measures will aim to boost retail investments (including through private markets (PM)), encourage innovation, and continue a strong emphasis on good customer outcomes. This presents firms with a double-edged sword: significant opportunities alongside notable regulatory risks. 

Boosting retail investment 

Boosting retail investment, including increasing access to productive assets, is top of mind for EU and UK governments. Whilst regulators are supportive, their priority remains ensuring that safeguards are in place for retail investors. Initiatives such as the Financial Conduct Authority’s (FCA) Targeted Support (TS) are likely to offer retail investors access to standard products. Others, such as ongoing FCA PM reviews, aim to ensure that firms’ controls over a more complex and risky landscape and products are robust enough for retail investors. Opportunities abound, but firms will need to identify and manage the risks inherent in TS and PM to capitalise on them.

In the UK, TS, described by the FCA as a “once-in-a-generation change”, will launch this year. Aimed at fostering a retail investment culture, TS could transform market dynamics, enhance firms’ brands, broaden investor bases, and boost assets under management (AUM). 

First-mover firms are already designing their products and customer journeys and reviewing their propositions ahead of the authorisation gateway opening in March 2026. Others may take a “wait and see” approach.

To engage with this opportunity effectively, C-suite leaders must prioritise assessing commercial models, regulatory risk, data requirements, and target markets. Commercial model choices include cross-subsidising TS for free at the point of sale, relying on digital scalability, or using TS as a stepping stone to full advice. Wealth managers must also consider their strategic approach to TS-driven consolidation-partnering with major banks offers a larger client base but demands integration and cultural alignment. Robust target market assessments are crucial given TS's scale. Above all, firms must ensure end-to-end processes support Consumer Duty (Duty) outcomes, tailoring communications to promote customer understanding, engagement, and trust.

In another nod to boosting retail investment, in December 2025 the FCA proposed replacing its elective professional test with a wealth-only test for retail investors holding £10 million + in investible assets and an enhanced qualitative test for others. The latter must voluntarily request to opt-up and provide informed consent; firms can only suggest opting up if they reasonably believe the client meets the criteria. This change allows firms to offer a wider range of suitable investments to clients previously restricted by the quantitative test. However, firms must ensure opt-ups align with the Duty and record the rationale and details of the qualitative test. The FCA is also supportive of the UK’s “retail investment campaign”, a government backed industry-led initiative launching in April 2026 aimed at facilitating a move from saving to investment.

PM investments continue to grow. The amount of capital deployed in PM,¹ including private equity and private credit, has grown substantially over the last 20 years. Current estimates put assets at over $15 trillion globally.² Notwithstanding the opportunities, policymakers and industry remain concerned about increasing retail access rapidly without appropriate safeguards. Policymakers will seek to address liquidity, transparency, market stability and investor protection concerns.

In 2026, we expect continued FCA supervisory focus on PM, including valuations (following its March 2025 review of valuation practices), conflicts of interest, and good customer outcomes. While valuations and conflicts are issues affecting all investors, for PM firms entering the retail market for the first time, the Duty will be a significant and arduous uplift. 

Smaller firms are finding it challenging to meet the FCA’s valuation expectations comprehensively – they could supplement their approach by seeking external support (e.g., third-party valuers). Another challenge is determining when to trigger ad-hoc valuations. In our view, this assessment should factor in the specific industries and jurisdictions that portfolios are invested in. Any expectation or crystallisation of geopolitical risks should be a significant input into this assessment. Firms could also set tolerance thresholds based on external metrics, such as a fall in relevant benchmarks.

We expect the FCA to publish the results of its multi-firm review on conflicts of interest in H1 2026. The FCA will seek evidence that firms have robust frameworks and management information to demonstrate that they have considered all potential conflicts and can control them effectively.

Separately, in its February 2025 supervisory strategy letter for asset managers, the FCA highlighted plans to supervise PM firms’ Duty implementation as they expand retail access to their products. Strategically, firms should consider whether the commercial benefits of retail offerings outweigh compliance costs and heightened regulatory risk. Key areas that materially differ for retail investors include product governance and information needs around liquidity, asset classes, and performance horizon. 

In the EU, the Savings and Investment Union (SIU), encompassing the Retail Investment Strategy (RIS), aims to facilitate retail flows into productive assets. RIS negotiations, particularly on value for money and inducements, have been challenging, particularly with the EU’s new simplification agenda being given greater priority. Tentatively, rules may apply from 2027. Meanwhile, firms should continue work on understanding what “value” means for clients, creating frameworks and determining how the proposed concept of “benefits” compares to costs.

Figures 1 and 2 illustrate the expansion of PM into retail investment activity. 

Source: Investment Association / Opinium³

Figure 2: Growth in EU ELTIFs

Under the SIU, European long-term investment funds (ELTIFs) will be a key tool for channelling retail capital into PMs. Significant amendments to ELTIF rules became applicable in January 2024 which made the vehicle more retail friendly. This is likely to be the reason for the spike in authorisations in 2024/2025.

Source: ESMA, data correct as of 12/11/2025⁴

All firms will need to consider how innovation can support offerings. Artificial Intelligence (AI) is expected to be a key enabler in delivering TS, particularly through data analysis, market segmentation, and scaling personalised content for investors. In parallel, firms must understand and manage the risks AI exacerbates – including data and algorithmic bias – that could lead to investor harm. 

Supervisors will expect AI use in TS to be governed as a material risk, with clear accountability, explainable decisions, and robust evidence of positive customer outcomes. This will require strong data governance, proactive bias detection, transparent disclosure of AI use to retail investors, and access to a human advisor where concerns arise. Ongoing effective model testing and continuous monitoring will also be essential to ensure AI systems can identify vulnerable customers and respond effectively to changing circumstances. See our AI and data op-ed for further details. 

Finally, market momentum and increasing regulatory clarity will prompt firms to reassess their digital asset strategies in 2026. While fund tokenisation will remain a common focus, firms will increasingly explore unbacked digital asset offerings (e.g., Bitcoin). The FCA's move to allow retail investors indirect exposure to unbacked digital assets via exchange traded notes (ETNs) opens new product opportunities. Global AUM in crypto-based exchange traded funds increased from $40 bn in 2022 to $190 bn in 2024, underscoring investor appetite.⁴

However, it also marks the Duty’s most substantive move into the inherently volatile world of unbacked digital assets. A critical focus is identifying appropriate target markets. One approach is to define a “negative” target market – identifying retail customers whose needs, characteristics, and objectives are incompatible with specific products.5 Bitcoin ETNs, for instance, may not suit individuals with limited capacity to absorb financial losses. Firms should also consider their fee structures. Where fees are tied to a percentage of the underlying asset’s value, regular reviews and adjustments may be necessary. For instance, a static percentage-based fee could become disproportionate if the price of the underlying asset rises in the medium term. 

See our digital assets and payments op-ed for further details. 

Ongoing emphasis on good customer outcomes

EU and UK policymakers’ drive to reduce and simplify regulations should not be mistaken for a reduced emphasis on good customer outcomes. There will be an ongoing strong emphasis on ensuring that customers receive suitable advice, receive adequate information about risk and returns to make effective decisions, and value for money is appropriately considered.

The FCA's Consumer Composite Investments (CCI) regime, finalised in Q4 2025, aims to streamline the UK Undertakings for Collective Investment in Transferable Securities and Packaged Retail and Insurance-based Investment Products regimes but, even in its new form, is still considered onerous by the industry. 

Manufacturers face significant operational changes due to the need to design Duty-compliant disclosures without templates and revised cost, risk, and performance calculations. Challenges also include increased information sharing and distributors having to develop a communications and disclosures framework compliant with the Duty. Firms that enhance customer understanding through high-quality communications and disclosures are best placed to benefit from CCI.

Geopolitical risk 

In 2026, volatile geopolitics will mean that liquidity management will remain a priority. The FCA’s March 2025 multi-firm review highlighted how wholesale firms managed liquidity during stressed geopolitical and market events. The lessons apply to investment managers, e.g., integrating liquidity risk considerations with market, credit and operational risks, and conducting stress tests that genuinely reflect their risk exposures. 

Firms in both the EU and UK should ensure robust governance in selecting liquidity management tools suited to their investor base, asset classes, jurisdictions, and strategies. This multi-faceted approach requires continuous oversight.

More broadly, firms should consider the potential for geopolitical risk to lead to retail investor harm. European Securities and Markets Authority flagged that heightened risk environments may result in retail investors making poor trading decisions due to information overload, misinformation exacerbated by social media, or trading gamification.⁶ Firms should consider the best channels and cadence of communication to inform investors about portfolio impacts and protective measures.

Climate and nature risk

Firms also face rising climate- and nature-related risks. Policymaking on climate risk in 2026 will primarily focus on reporting and disclosure requirements. For entity-level reporting, negotiations on the Corporate Sustainability Reporting Directive (CSRD) were finalised in December 2025, with a clear direction: a significant reduction in firm scope and delayed application for those not already reporting. 

The UK Sustainability Reporting Standards (SRS) are expected to be finalised early this year, after which the FCA will consult on the application of the requirements for UK listed firms – likely specifying reporting from 2028 (for periods starting 1 January 2027). The SRS will enhance the existing Task Force on Climate-related Financial Disclosures and will cover strategy, transition plans, and financed emissions. Additionally, in 2026, firms with AUM between £5bn and £50bn will prepare their Sustainability Disclosure Requirements entity-level sustainability risk disclosures for reporting on 2 December 2026, with a crucial element being the rationale for disclosed risks.

Many firms will no longer be in scope of CSRD or will not be in the first wave of UK SRS reporters. However, given the benefits of being able to cater to stakeholders’ data requests, firms may decide to continue to invest in obtaining and providing environmental, social and governance data even though timelines for reporting are being pushed back and requirements simplified. 

Despite delays and amendments to regulations, firms need to continue to manage changing climate and transition risks in portfolios proactively. 

Final thoughts

Opportunities for firms abound as the UK and EU promote retail investment in productive assets. However, success will require demonstrating to clients and regulators that their growth ambitions are matched by robust controls and risk management.