Compliance Matters: Week ending 27th February 2026

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. 

• Sequencing risk – the silent threat to retirement plans

• A smarter approach to communicating the FCA’s regulatory priorities

• Influencers fined for issuing unauthorised financial promotions

Sequencing risk – the silent threat to retirement plans

Sequencing risk, or sequence of returns risk, is the danger of experiencing poor investment performance early in retirement, when the client starts withdrawing income.  If markets fall early on, we will sell assets at low prices to meet our client’s income needs, which can significantly shorten the longevity of the portfolio, even if average returns are good.  It is a critical, often silent, threat that can deplete savings prematurely.

Some of the more common methods of tackling sequencing risk include:

• Living off natural income or yield.  Clients use the interest, dividends and income generated by their fund and withdraw this each year.  The obvious disadvantage is that income is likely to vary year by year.

• Fixed percentage of the fund.  A variation is to take a fixed percentage of the fund value each year (as opposed to a fixed percentage of the initial fund value).  Again, income can rise and fall from year to year.

• Rising equity glide path.  This involves starting with a low exposure to equities, usually between 20-40%, rising over time to between 40-80%.  However, if markets rise during the early years, there is an opportunity cost.

• Cash bucket.  A further approach is to hold a cash buffer.  This usually involves dividing the fund into sub-funds or ‘buckets,’ typically cash, bonds, and equities.  The cash bucket might equate to 2-3 years income to ride out market falls.

Each of these can be effective, but all may come at a price.  This could be lower exposure to equities or holding significant cash reserves.  Alternatively, income might fluctuate from year to year (which may not be practical).  An article by Fidelity International goes into more detail.

A smarter approach to communicating the FCA’s regulatory priorities

Some of you are familiar with the Dear CEO letters periodically issued by the FCA.  Not many of us have spotted that they have disappeared as a method of communication by the FCA.

In a recent newsletter, the FCA launched its new Regulatory Priorities Reports starting with the insurance sector.  This marks a new approach from the FCA that will help to transform the its supervision and streamline regulation.

The FCA expects regulated firms to follow its rules and stay informed about any changes.  This is important for maintaining a safe and resilient market.  Its mission to be a smarter regulator means reducing burden where it can, so that firms can get the information they need as efficiently as possible.

The FCA’s Regulatory Priorities publications are part of this drive to simplify things.  They replace the portfolio (Dear CEO) letters, which set out expectations for firms in various markets.  There were more than 40 of these letters, with some firms needing to work through several to understand what they needed to do.  The FCA acknowledges these created an extra layer of complexity, and it has responded to these concerns.

As these new regulatory priorities reports are published I will summarise and share those that are relevant to us.

Influencers fined for issuing unauthorised financial promotions

Seven social media influencers have been sentenced at Southwark Crown Court for their role in the promotion of an unauthorised foreign exchange trading scheme.  The seven influencers were all fined after pleading guilty to one count of issuing unauthorised financial promotions.  The FCA press release gives more detail.