The importance of Skilled Person Reviews: why firms should take them seriously

Imagine waking up to an FCA request asking for a detailed assessment of your firm’s past advice files. For many financial services firms, this isn’t hypothetical, it’s reality. Skilled Person Reviews (s166) are being used more than ever to examine conduct, client outcomes, and governance, and failing to respond effectively can be costly, both financially and reputationally.

Whether you operate in wealth management, insurance, investment, or financial advice, preparing for an FCA Skilled Person Review (s166) is critical for regulatory compliance and protecting your firm’s reputation.

What is a Skilled Person Review (s166) and why it matters

A Skilled Person Review, under section 166 of the Financial Services and Markets Act 2000 (FSMA), is a regulatory tool the FCA uses to assess specific areas of a firm’s business. The FCA appoints an independent expert, the “skilled person” to provide an objective review of processes, controls, and client files. Skilled Person Reviews may focus on:

• Conduct and governance failings

  
  

• Client outcomes and suitability

  
  

• Past business practices and file accuracy

  
  

For example, a firm could be asked to verify whether investment advice provided over the past three years matched clients’ risk profiles. The FCA uses the findings to determine whether remediation or regulatory action is required.

While these reviews can be resource-intensive and stressful, proactive preparation can turn them into a manageable process rather than a reactive challenge.

Why Skilled Person Reviews (s166) matter for financial services firms

1. Protect your firm’s reputation

   Skilled Person Reviews highlight the FCA’s focus on client outcomes and governance. Poor handling can damage stakeholder confidence, client trust, and your market reputation.

   
   

2. Reduce risk of financial penalties

   Preparing early can limit the scope of the review and reduce the potential cost of redress. Ignoring potential issues often escalates financial exposure once the FCA is involved.

   
   

3. Gain control over remediation

   Proactive engagement allows firms to identify and resolve gaps in governance, processes, or client files before they escalate. This demonstrates accountability and a commitment to regulatory compliance.

   
   

4. Strengthen regulatory relationships

   Firms that engage transparently and professionally with the FCA are more likely to build trust, positively influencing the scope of the review and future interactions.

   
   

5. Improve internal processes

   Reviews provide valuable insight into a firm’s systems, controls, and culture. Acting on these insights prevents repeated errors, enhances operational efficiency, and improves client outcomes.

Practical steps to prepare your firm for a Skilled Person Review (s166)

Proactive preparation can make all the difference. Firms that act early reduce risk, save costs, and demonstrate credibility with regulators. Here are practical steps to stay ahead:

1. Conduct internal file reviews

   Identify gaps or inconsistencies in client files, advice records, and past business practices. Early detection allows for smoother remediation.

   
   

2. Establish a remediation taskforce

   Assign a dedicated team with clear responsibilities, timelines, and escalation paths to manage any issues efficiently.

   
   

3. Implement process improvements

   Don’t just fix individual errors, review underlying processes to prevent recurring compliance issues. This shows regulators your firm is committed to long-term governance improvements.

   
   

4. Schedule mock reviews

   Simulate an FCA assessment to identify weaknesses and test your team’s response, reducing surprises during the actual review.

   
   

5. Document everything

   Maintain clear records of internal reviews, actions taken, and decisions made. A strong audit trail demonstrates accountability and can reduce regulator concerns.

   
   

6. Train and engage staff

   Ensure your team understands regulatory expectations, internal processes, and how to escalate issues. Well-informed staff reduce errors and strengthen compliance culture.

Take control before the FCA calls

Regulatory scrutiny isn’t going away, but being prepared can make it manageable. Compliance doesn’t have to be reactive.

At TFAS Compliance Services, we help directly authorised firms navigate Skilled Person Reviews with practical, proactive solutions, from readiness assessments to full-scale remediation programmes. We ensure your firm meets FCA expectations while protecting reputation and client trust.

Get in Touch