FCA proposes high wealth threshold and stricter safeguards in retail and professional client classification overhaul

The Financial Conduct Authority has set out proposals to reset how firms classify retail and professional clients under MiFID-derived rules, seeking to widen access to certain investment opportunities while tightening safeguards against inappropriate opt-ups.

According to the original report published by the FCA on 8 December 2025 (Consultation Paper CP25/36), the core of the consultation is a two‑fold objective: enable firms to treat wealthier or more sophisticated individuals as elective professional clients more readily, while strengthening protections so that retail consumers are not stripped of safeguards without clear evidence and consent.

Wealth threshold and the removal of the quantitative test
The consultation introduces an alternative, high wealth threshold: a client would qualify for elective professional status if they hold net investable assets of at least £10 million. The FCA frames this as a deliberately high bar intended to ensure that disapplication of retail protections is limited to those with considerable financial resilience.

In parallel, the regulator proposes removing the long‑standing “quantitative” test , the limb requiring a client to have carried out transactions of significant size at a stated frequency. The FCA says that test has proved both difficult to apply and vulnerable to misuse, and that some firms have relied on it in lieu of a robust capability assessment.

Qualitative assessment and new mandatory factors
The FCA retains the qualitative route to elective professional categorisation but would require firms to assess a defined set of factors when deciding whether a client is capable of understanding risks and making informed investment decisions. The factors identified include occupational experience, investment history, financial resilience, knowledge and ability to assess risk, and the client’s objectives. Firms would be able to opt a client up for a limited range of products or services if appropriate.

To reduce the risk of superficial self‑certification, the FCA would prohibit firms from relying solely on client representations, and would bar invitations for clients to self‑assess via click‑through online forms. The regulator also proposes an express safeguard that firms must not encourage, mislead or pressure clients to opt up; any communication about the option to opt up must be compatible with the firm’s obligations under the Consumer Duty and the best interests rule.

Informed consent and record‑keeping
A further notable change is the proposal that informed consent to opt out of retail protections must be obtained by signature rather than a tick box. The FCA specifies that consent will only be treated as informed where the client is given sufficient information about the protections they will lose, a clear and prominent warning about opting out (including implications for regulatory redress where relevant), and reasonable time to consider the decision.

Firms would be required to keep records explaining the basis for any categorisation decision, including information obtained from the client, verification undertaken and the firm’s reasoning. The FCA is also exploring whether client categorisation data could be collected via a regulatory return to develop monitoring metrics.

Transition costs and practical difficulties
The FCA expects firms to review the categorisation of all existing elective professional clients against the new rules within one year of the rules coming into force. The regulator anticipates this could be a material operational burden and that many firms will need to obtain new consents where prior “tick box” opt‑ups are insufficient. The paper acknowledges potential misalignment with other regimes , for example where the MiFID definitions have been transposed into legislation that the FCA cannot amend , and asks for stakeholders’ views on likely frictions.

Simplifying per se professional and conflicts rules
The consultation would also simplify per se professional categorisation by removing a prescriptive list of eligible entities and clarifying that any entity authorised or regulated in the UK or a third country to operate in financial markets can be treated as a per se professional. The FCA would default to MiFID financial thresholds for large undertakings where other criteria do not apply.

Separately, the paper proposes to rationalise conflicts of interest rules to remove duplication and reduce complexity while preserving the current policy approach. In places the draft language defaults to more onerous formulations (for example “all appropriate steps”), and some provisions would become rules rather than guidance, though the FCA proposes a proportionality saving and will not require firms to update policies before their next scheduled review.

Industry reaction and policy context
Industry bodies have urged a more consolidated opt‑up approach. The Managed Funds Association has recommended a unified professional client opt‑up process that would apply across MiFID and non‑MiFID activities, arguing the current patchwork complicates access to alternative investments.

Observers note the client categorisation proposals sit within a broader post‑Brexit effort by the FCA to recalibrate investor information and market access rules so as to stimulate retail participation and capital formation. Reuters reporting on the regulator’s reforms highlights related changes already underway, including replacement of EU‑derived product disclosure regimes and other measures aimed at simplifying legal and reporting burdens.

Next steps
The FCA is seeking responses to the consultation by 2 February 2026. The paper sets no firm timetable for final rules; the FCA itself signals that any substantive changes are unlikely before 2027. The proposals combine partial liberalisation of opt‑up routes with a suite of procedural and record‑keeping safeguards, and are likely to attract significant feedback both on policy substance and on practical implementation challenges.