Asset Management Market Study: a change of approach from the FCA to the assessment of "value for money"

This blog post highlights the FCA’s welcome move towards a more holistic approach to the assessment of the service and value provided by fund managers to investors.

The Financial Conduct Authority (FCA) today published a Policy Statement (PS18/8) which implements the first set of remedies outlined in the Final Report (MS15/2.3) of its Asset Management Market Study published on 28 June 2017. These remedies have been the subject of a formal consultation process (CP17/18).

The FCA has implemented the large majority of its original proposals following the consultation, albeit some with minor changes. However, by far the most significant development is that FCA has changed its approach to assessing “value for money”. In the consultation process, the FCA proposed a new value for money rule, which would have required managers to assess whether investors had received value for money on an ongoing basis and which would need to be documented formally on an annual basis.

Following feedback from various industry participants and other stakeholders including this firm, where it was suggested that the proposed rule appeared unduly focused on assessing fund charges rather than the overall value provided, the FCA has changed its approach. In the Policy Statement, the FCA has clarified that:

  • fund charges should be assessed in the context of the overall value delivered, rather than using the term “value for money”
  • the assessment criteria will include fund performance (on the basis of reasonably expected future performance as well as past performance), and
  • the assessment can be made over a time period appropriate to the fund’s investment objective, policy and strategy.

The change in approach of the FCA, particularly the wider assessment criteria and the removal of the term “value for money”, is a positive development for the industry, reflecting a more holistic approach to the assessment of the service and value provided to investors.

The FCA has indicated that it will make a number of amendments to the FCA Handbook in order to implement the new rules. The rules are expected to come into force by 30 September 2019.

For further information on the Policy Statement please see our dedicated article on the topic.

In addition, we are hosting a webinar during the course of next week to discuss the new rules. If you are interested in attending, please get in touch with one of the contacts on the right-hand side of this page or your usual Simmons & Simmons contact.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.