The FCA’s newly launched consultation paper aims to protect retail clients by increasing the level of proof needed to be classified as an elective professional client to protect more retail clients, whilst allowing genuine professional clients to more easily access this status.
The FCA has launched a consultation paper to ensure that only clients who genuinely do not need retail protections are classified as professional clients. The FCA wants to maintain a high threshold for an investor to be classified as a professional client. Firms will have 12 months to review the categorisation of all existing elective professional clients before the rules come into force.
The FCA expects ‘rigorous processes’ to be demonstrated by firms that are classifying clients as professional. This will be done by removing the quantitative test from COBS 3.5.3R(2) and replacing it with an alternative wealth assessment (AWA). The AWA requires that to be classified as a professional investor, a client must have at least £10 million in investable assets. Clients who meet this threshold can be treated as an elected professional client, provided that they have given informed consent for this. Alternatively, firms can perform an enhanced qualitative assessment, including a knowledge and experience test, and an assessment of the client’s ability to bear losses.
All clients must request to be considered as a professional client, with any attempt to incentivise, mislead, or pressure a client into being categorised as a professional strictly prohibited. The goal of the policy change is to protect retail clients who need retail protections whilst simplifying the process for professional clients to be categorised as such. This is part of the FCA’s attempts to simplify regulation and reduce the regulatory burden firms currently face.
How Thistle can help
- We can create a compliant process to assess whether a client can be classified as professional.
- We can assist your firm with reviewing existing elective professional clients.
- We can provide training on the differences between retail and professional clients and the categorisation process.
Meet the Expert
Melissa Buckingham, Compliance Consultant 
Melissa joined Thistle Initiatives in 2025, bringing with her a strong background in managing conflicts of interest and cross-border regulatory activity from her time at a Tier 1 bank.
With a deep understanding of both the regulatory landscape and operational pressures facing firms, Melissa adopts a thorough and detail-oriented approach to helping clients achieve and maintain compliance.
She supports clients across a range of sectors, but primarily in the investments and wealth management space.