Compliance Matters: Week ending 13th February 2026

Hove (actually)

Here is a digest of issues that have come across my desk this week.  Where relevant, I have provided high-level summaries with hyperlinks to documents that give further detail.  The opening article did not lend itself to a hyperlink.

Easter and Tax Year End

It is worth noting that Good Friday is 3^rd April this year, meaning the tax year effectively ends on Thursday 2nd April.  Product providers will want applications in the days before that.  Some providers publish cut-off dates, but it may be worth asking if they are not forthcoming, particularly for EIS, VCT, and BR products.  It is probably a good idea to begin end of tax tear conversations with clients sooner rather than later.

This week’s digest

• Traditional portfolios are failing the pre-retirement danger zone

• Marlborough Multi Asset Monthly Commentary

• A jump in sales of annuities valued over £500k drives market growth

• New protections confirmed for Buy Now Pay Later borrowers

• FCA fines two individuals a combined £108,731 for insider dealing

Traditional portfolios are failing the pre-retirement danger zone

In a thought piece published in IFA Magazine, Paul Hogg, Head of Distribution at 8AM Global, argues that traditional portfolio models are poorly suited to the years immediately before and after retirement, leaving advisers exposed to sequencing risk, behavioural stress, and higher Consumer Duty scrutiny.  I am not saying that the issues raised are prevalent within EMET, this is meant as food for thought.

Traditional investment models are structurally failing financial advice clients in the critical years approaching retirement.  This is exposing advisers to heightened regulatory, suitability, and behavioural risk as pension pots reach record levels and client volatility tolerance collapses.

Much of the UK advice market has evolved over the past decade – with centralised investment propositions, improved compliance frameworks, stronger client communication standards and, in many areas, financial innovation.  But the core tools the industry uses to guide clients into retirement remain largely rooted in an accumulation era that is misaligned with how people retire, and what security they need after retirement.

The result is a systemic blind spot in the five to seven years before and after retirement – a period acknowledged in many quarters as the “retirement danger zone”.  A bad year at the wrong time can undo decades of careful saving.  Volatility that felt acceptable at age 45 becomes catastrophic at age 62, yet many of the solutions advisers rely on were built for multi-decade wealth accumulation, not fragile transitions into drawdown.

Retirement landscape has changed – but models have not?  Traditional glidepaths were originally constructed for a retirement model where annuity purchase dates created a neat “end point” for portfolio design.  But the firm believes that this model broke down more than a decade ago, as retirees increasingly chose flexible drawdown instead.

Glidepath logic – shifting from higher volatility assets into lower volatility ones – has not materially evolved to reflect what happens when clients continue to invest through retirement rather than crystallise at a single moment.  The issue is no longer simply that annuity assumptions are outdated.  It is that the tools used to de-risk presume time horizons that no longer exist.

Many of the underlying building blocks in “risk-off” glidepaths behave very differently over five to seven years than they do over 15 or 20, and the very volatility assumptions that make these allocations look suitable on paper break down in the window where sequencing risk is most unforgiving.  The investor often needs to invest for over 15 years to give themselves the best chance of attracting the low volatility promised by the portfolio.

Increasingly, defined contribution pots are materially larger than in previous generations, meaning that a client’s sensitivity to loss is incrementally higher.  Under Consumer Duty’s value-for-money lens, advisers must now justify not only the choice of solution but the effect of short-horizon volatility on the client’s withdrawal plan.

The advice market now has retirees with six-figure or seven-figure DC pots, no annuity plan, and a broad expectation of flexible drawdown.  Pre-retirement ramps still behave as if clients are exiting the market neatly at retirement.  They are staying invested – and volatility in that ‘danger zone’ behaves very differently than it does over multi-decade horizons.

Consumer Duty has fundamentally altered what “suitability” means in the pre-retirement zone.  Advisers must now justify not only product choice and charges, but timing, volatility, outcome uncertainty, and client comprehension.

The regulation has put a spotlight on outcomes and value.  That makes it much harder to justify exposing a client to downside market risk on the eve of their retirement, especially when the client’s tolerance for drawdown has collapsed and the maths around sequencing is unforgiving.

Mismatch with centralised investment propositions.  Most centralised investment propositions (CIPs) and model portfolio services (MPS) are designed for accumulation.  They assume volatility management over longer time horizons and that standard long-only portfolio theory is suitable beyond retirement.  Pre-retiree psychographics share none of these characteristics.  But such portfolios end up being used by default – not because they are fit for purpose, but because alternatives generally do not exist within the CIP.

This creates tension between what the client feels, what the regulator expects, what the portfolio delivers and what the CIP is designed to support.  This tension is where regulatory risk, behavioural risk, and suitability risk collide.

Why this matters now

The scale of the problem is growing rapidly because:

• the UK’s retiring population is expanding

• DC pots are materially larger than in previous generations

• defined benefit schemes have declined sharply

• flexible drawdown has replaced annuities as the default

• Consumer Duty is raising the evidentiary bar

• platform-based CIPs are now a dominant distribution channel

The demand for precision in the danger zone has never been higher, and the industry’s tools have never been more outdated for that task.

A call for industry acknowledgement.  Solving the danger zone will require the industry to recognise that non-traditional volatility mitigation should not be an optional extra reserved for esoteric products or niche strategies – it must be core to retirement planning.  Advisers do not need new buzzwords or speculative asset classes.  They need tools that behave predictably, map cleanly to advice processes, and reflect the lived reality of clients approaching drawdown.

Marlborough Multi Asset Monthly Commentary

The Marlborough Group has published its monthly Multi-Asset commentary for February 2026.  It states, the year began constructively, with broadly positive returns across major asset classes in January, although performance varied significantly depending on investment type and region.  Global equities delivered a strong start to 2026, with stock markets outside the US – particularly emerging markets, Asia Pacific, and Europe – generally outperforming large companies in the US.  Value stocks and companies more exposed to the economic cycle led gains, as, after a strong run by the US technology giants, stock market performance broadened out to a wider range of companies.

A jump in sales of annuities valued over £500k drives market growth

An article published by FT Adviser explores data from the ABI that a 54% increase in the sale of annuities valued at over £500,000 helped the market grow by 4% in 2025,  There is evidence that clients are looking to fix guaranteed income following years of drawing income from their pension funds flexibly.  It is also the case that some clients want the security of guaranteed income from a combination of their State Pension, DB benefits, and an annuity from DC provision to allow them to drawdown from pension pots for ‘lifestyle’ spending with the knowledge that essential spending is covered. 

For clients decumulating assets whether from pension, GIA, or ISA, we need to carry out a cashflow analysis annually to confirm they will not run out of money too early.

New protections confirmed for Buy Now Pay Later borrowers

The FCA has announced that buy now pay later (BNPL) borrowers will benefit from stronger protections from 15^th July 2026, following the Government's decision to bring the sector under the FCA's regulation.

BNPL will be subject to the Consumer Duty and consumers will benefit from:

• Clear information: consumers will get clear, upfront details about their agreement, including when payments will be due, amounts, and what happens if they miss a payment.

• Affordability checks: lenders must carry out proportionate checks to make sure customers can afford to repay what they borrow before offering BNPL.

• Support when needed: lenders will need to offer support to customers in financial difficulty, and, where appropriate, direct them to free debt advice.

• Complaints and compensation: if something goes wrong, consumers will be able to complain to the Financial Ombudsman Service.

FCA fines two individuals a combined £108,731 for insider dealing

A reminder that we need to be vigilant about financial crime.  In a press release the FCA confirmed it has fined Dipesh Kerai and Bhavesh Hirani for insider dealing in shares of Bidstack Group Plc..  Mr Kerai has been fined £52,731, and Mr Hirani has been fined £56,000.

In December 2021, Mr Hirani was the interim Chief Financial Officer at Bidstack, a company that placed advertising inside video games.  This meant he had access to inside information about a major upcoming deal between Bidstack and a large video game publisher.

Before it was announced to the public, Mr Hirani passed this confidential information to Mr Kerai.  Mr Hirani then opened a trading account in Mr Kerai’s name and, with his help, bought 1.3 million Bidstack shares in advance of the announcement while in possession of inside information.