Suitability Under the Microscope: Lessons From AWM and the FCA's AI Review

An independent financial adviser has been stopped from carrying out regulated activities. The enforcement notice highlights concerns around client record-keeping, suitability documentation, and a firm’s ability to respond to the regulator. These are standards that apply across the advisory sector.

On 5 February 2026, the FCA published a news story confirming it had stopped Advantage Wealth Management Ltd (AWM) from carrying out any regulated activities. The firm can no longer act as an independent financial adviser or provide financial advice without the FCA’s prior written consent.

The restrictions follow a First Supervisory Notice issued on 22 December 2025. The FCA cited three areas of concern: treatment of customers, appropriate financial resources, and levels of cooperation.

The financial resources concern is specific to AWM’s capital position and insurance status. The other two concerns, relating to how client investments were handled and how the firm responded to regulatory requests, carry implications that extend well beyond a single firm.

What the FCA Found in the AWM Enforcement Action

According to the supervisory notice, the FCA raised serious concerns about circumstances in which several AWM clients had their investments moved into cash holdings. The notice describes a director who attempted to submit a blanket instruction for all clients to be moved into cash. The platform provider did not implement that instruction.

The FCA noted that some of these clients may have incurred losses from being out of the market for an extended period, with some holdings reportedly moved to cash as early as June 2025. The regulator questioned whether these transfers were made in the best interests of the clients involved.

The firm’s professional indemnity insurance also lapsed in July 2025 and was not renewed.

On cooperation, the FCA stated that AWM had “repeatedly failed to respond to requests for information over an extended period.” An inability or unwillingness to provide records when the regulator requests them is treated as a standalone regulatory failing under the FCA’s Threshold Conditions.

FCA Documentation Standards Every Advisory Firm Should Know

This is an enforcement action against one firm, and it would be reasonable to read it as an isolated case of poor management. The specific areas the FCA chose to highlight, however, reflect standards that apply to every authorised adviser in the UK.

Documenting the rationale for investment decisions

Under COBS 9 (Suitability) and the FCA’s broader conduct expectations, firms are required to document why a recommendation is suitable for a specific client. That documentation should include the client’s objectives, financial situation, risk tolerance, and the reasoning that supports the advice given.

When investments are moved, whether into cash or into a different product, the suitability rationale needs to be recorded and retained. If there is no documented reason for why a client’s portfolio was restructured, the firm has limited ability to demonstrate that the decision served the client’s interest. This applies regardless of whether the change was initiated by the adviser, by the client, or through a combination of both. Keeping suitability reports concise, personalised, and clearly structured reduces the risk that critical rationale gets buried in boilerplate.

The Consumer Duty, which came into force on 31 July 2023, adds further expectations. Firms are now expected to proactively consider whether their actions could cause foreseeable harm to retail customers. Recording decisions in real time, rather than reconstructing the rationale after the fact, is likely the most practical way to meet that standard on an ongoing basis.

Responding to regulatory information requests

Under SYSC 9.1, firms must keep orderly records of their business and internal organisation. Those records need to be sufficient to allow the FCA to monitor the firm’s compliance with its regulatory obligations. They must also be stored in a way that enables the FCA to access them readily, to reconstitute each element in a clear and accurate manner, and to identify any changes, corrections, or amendments that have been made.

That language is specific. “Access readily” means the records should be retrievable without significant delay when the regulator asks for them. “Reconstitute each element” means the FCA expects to see a clear picture of what happened, when it happened, and why. Fragments spread across disconnected systems, email threads, and local drives may not satisfy that standard.

In the AWM case, the failure to respond to FCA requests was cited as a standalone ground for intervention. For many firms, the challenge may be less about willingness and more about whether records are organised well enough to produce a comprehensive response within the timeframe the regulator expects.

Record retention requirements

The COBS record-keeping requirements set out what must be recorded and for how long. Suitability records under COBS 9A.4 and appropriateness records under COBS 10A.7 must be retained for a minimum of five years. They must be stored in a format the FCA can access and review. For firms that still rely on a combination of paper files, email attachments, and local drives, maintaining that standard consistently across all client records can present a real operational challenge.

The Mills Review: AI Regulation and the Future of Financial Advice

This enforcement action sits alongside a broader regulatory direction that the FCA has signalled in recent months.

On 27 January 2026, the FCA launched the Mills Review, a formal review into how AI could reshape retail financial services by 2030 and beyond. Led by Sheldon Mills, the FCA’s Executive Director for Consumers and Competition, the review is seeking input from firms, consumer groups, technology providers, and academics across four areas: how AI could evolve, how it could affect markets and firms, how it could impact consumers, and how regulators may need to adapt.

The FCA has stated that it does not plan to introduce AI-specific regulation. It will continue to rely on its existing, principles-based framework, including the Consumer Duty. But the review makes clear that the FCA sees AI-driven change as something that is already well underway across financial services, and that the regulator intends to stay close to how that change unfolds.

In a speech delivered on 28 January 2026, Mills described advisory AI systems that recommend and encourage action, and autonomous AI agents that could act within boundaries set by the consumer. He noted that the Bank of England found more than 75% of UK financial services firms were already using AI as of 2024. The FCA has already begun live testing AI applications in financial services, a signal that practical oversight is moving alongside the broader review.

The Mills Review’s engagement paper is open for comment until 24 February 2026, with recommendations due to the FCA Board in summer 2026.

How Advisory Firms Can Strengthen Suitability Record Keeping

Professional working at a keyboard alongside a printed financial report with charts, representing suitability record documentation and compliance reporting — Firms that lack structured documentation processes face growing regulatory exposure as the FCA increases its focus on record-keeping standards.

SYSC 9, COBS 9, and the Threshold Conditions are not new. The Consumer Duty raised expectations further when it came into force in 2023. What the AWM case demonstrates is how quickly the FCA will act when it identifies gaps in how a firm manages its documentation, its client records, and its engagement with the regulator.

The practical question for advisory firms is whether their current systems allow them to record client interactions as they happen, retain suitability records in a format that is accessible and auditable, produce a clear audit trail for investment decisions, and respond to a regulatory information request without weeks of manual retrieval across disconnected systems.

Firms that centralise client data, record meetings, and generate compliant reports from structured data are likely to be better positioned when those questions arise. No technology can prevent misconduct, and no CRM replaces the judgement of a qualified adviser. But when the regulator contacts a firm and asks for documentation on a client case, the speed and completeness of that response can shape what happens next.

With the Mills Review signalling that the FCA is actively examining how AI and automation will reshape advisory practices over the next five years, the direction of travel is clear. Firms that build documentation infrastructure now are building on ground the regulator has already indicated it expects the sector to occupy.

Automwrite generates bespoke, FCA-aligned suitability reports in seconds from meeting notes, fact finds, or voice summaries, with full audit trails built in. If the AWM case and the Mills Review have you rethinking your documentation infrastructure, book a demo to see how it works in practice.

Suitability Records Under the Microscope: Lessons From AWM and the FCA’s AI Review