The FCA is seemingly letting asset managers pay risk takers more. Is that good for consumers and can firms actually get it right?
On 14 July 2026, the FCA published CP26/27, its long-awaited overhaul of the remuneration rules for solo-regulated firms. Strip away the detail and the direction of travel is clear: three separate codes, the AIFM (Alternative Investment Fund Managers), UCITS (Undertakings for Collective Investment in Transferable Securities) and MIFIDPRU remuneration codes all collapse into one. Prescriptive rules give way to an outcomes-focused framework, and CP26/27 loosens or removes several of the hard guardrails that have defined regulated pay since the financial crisis.
Most of the commentary so far has welcomed it as a sensible bit of simplification. I think it’s more interesting, and more difficult than that. Two questions are worth sitting with before firms rush to respond
Does paying risk takers more actually serve consumers?
It’s worth remembering why the deferral, malus and clawback machinery exists in the first place. The entire post-2008 remuneration architecture was built to break a specific link: the one between short-term reward and long-term risk. Pay people large, immediate bonuses for this year’s numbers and you incentivise exactly the behaviour that blew up in 2008, chasing near-term performance while the risk crystallises on someone else’s watch, and someone else’s money.
CP26/27 relaxes that. The FCA’s preferred approach to deferral is now principles-based: apply it to material risk takers (MRTs) if the management body deems it appropriate. Guaranteed variable remuneration, the buy-out, the golden hello, becomes permissible in defined circumstances. The practical effect is that firms can pay their risk takers more, sooner, with a weaker mechanical tie to how those decisions play out over time.
The FCA’s logic is defensible. Asset managers are not banks. They don’t run the same balance-sheet risk, and much of the current code was imported wholesale from banking regulation that never fit the business model. Proportionality is a legitimate goal, and the UK’s competitiveness objective is real.
But here’s the tension nobody is quite naming. We are loosening the pay-to-long-term-outcome link at the same time as Consumer Duty demands that firms put good client outcomes at the centre of everything they do. Deferral was, in effect, a structural expression of that principle, it forced a portfolio manager’s personal financial interest to age alongside the client’s. Weaken it, and you’re asking firms to hold the line on consumer outcomes through culture and governance alone, rather than through mechanical pay design that forces some compliance for firms.
That can be done well. It can also be done badly. Those firms with poor governance and compliance culture are precisely the ones who may, with the discretion handed to them, be likely to fail, cause client detriment and in turn become section 166 candidates.
Can firms actually get outcomes-based regulation right?
This is the part I’d push back on hardest against the ‘simplification’ framing. Outcomes-focused regulation is not easier than rules-based regulation. It’s harder. It just moves the difficulty somewhere less visible.
Under a prescriptive code, compliance is clear and measurable. Firms know what’s expected, and regulatory obligations are easier to evidence, defend and consistently apply. You defer 40% for three years, you apply the ratio, you document it, you’re done. Right or wrong, everyone knows what ‘compliant’ looks like.
Under a principles-based code, the burden shifts onto the firm’s judgement and the management body’s ability to make, evidence and defend that judgement. That defence is often made to a supervisor applying hindsight to a decision taken in real time.
‘We concluded deferral wasn’t appropriate for our MRTs’ is a perfectly valid answer under the new code. It is also a sentence you may have to justify years later. If the outcome has gone wrong by then, you’ll be explaining it to a regulator who already knows how the story ended. The certainty of the bright-line rule is exactly what protected firms from that conversation. Remove it, and you don’t remove the work — you replace box-ticking with something that demands genuine governance maturity, proper record-keeping, and senior managers under the Senior Managers and Certification Regime (SM&CR) who can articulate why, not just what.
Larger firms with real remuneration committees will cope. My concern is the small and mid-sized manager that reads ‘simpler and more proportionate’ and assumes the burden has lifted. They quietly do less, when what the regime actually asks is that they do something considerably more sophisticated. The reform rewards firms that treat it as an invitation to think harder. It will punish firms that treat it as permission to think less.
Where does this leave firms?
None of this is an argument against the reform. The three-code structure was genuinely duplicative, and a single, proportionate code is the right destination. But two things follow.
First, the consumer-outcome question doesn’t disappear just because the deferral rule does; it migrates into your governance framework, where it’s harder to see and easier to get wrong. If you loosen deferral, you need a positive, documented account of what now protects the alignment between how your risk takers are paid and how your clients actually fare.
Second, ‘outcomes-focused’ is not a synonym for ‘lighter touch’. Firms that hear the second thing when the FCA says the first are setting themselves up for an uncomfortable supervisory conversation down the line.
The consultation closed on 16 September 2026, with final rules expected in Q1 2027. There’s plenty of time left to welcome the simplification, rather less to build the governance that makes it safe to rely on. We hope firms navigate the path ahead now that the guardrails have been removed.
How fscom can help
fscom Compliance Maturity Specialists™ helps asset and wealth managers build and evidence the governance that CP26/27 now relies on, from remuneration policy design and MRT identification to board-level reporting and challenge.
Our Asset Management team can review your existing remuneration framework, benchmark it against what we’re seeing across the sector, and help you build the documented judgement trail that principles-based regulation now demands.
If this has given you pause to think again, get in touch with our team.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
