By Rob Leedham, CEO at Yealand
The UK funds industry is built on the idea that strong governance, healthy competition and high service standards ultimately deliver better outcomes for investors. However, there is one area of the market that deserves closer attention because it may be working against those principles: ACD exit fees.
When investment managers consider changing authorised corporate director (ACD), it is rarely a decision taken lightly. These transitions are complex, highly regulated and operationally demanding. In most cases, firms explore a move because they believe another provider can offer improvements — whether through stronger governance, better service levels, enhanced operational support or a closer strategic fit. That is why the ability to move providers efficiently, matters.
The balance between fair costs and market flexibility
In a competitive market, firms should feel able to make decisions that they believe are in the best interests of their funds and investors. Competition should encourage providers to continually improve their offering, invest in service quality and strengthen relationships with clients.
However, there is growing discussion within the industry around whether some ACD exit fee structures may be making that process unnecessarily difficult.
To be clear, transitions between providers do involve genuine operational work and costs. It is entirely reasonable for firms to recover appropriate expenses associated with a transfer process. However, there is an important distinction between fair cost recovery and fee structures that become prohibitive to change. Where the cost of exiting a relationship becomes significant enough to delay or discourage movement, it is fair to ask whether this risks limiting competition across the market.
A wider regulatory focus on exit fees
This question also feels increasingly timely given the broader regulatory conversation around exit fees and fair treatment across financial services. Over the past year, the Financial Conduct Authority (FCA) has shown a growing willingness to scrutinise fee structures that may create unnecessary barriers for consumers or clients.
Most recently, the FCA and Solicitors Regulation Authority launched reviews into exit fee practices within claims management and legal services markets, focusing on whether some firms were using unfair or disproportionate charges that restricted customer choice.
While the ACD market is clearly very different, the underlying principle is similar – firms should ideally retain clients through the quality of their service rather than through financial barriers that make it difficult to leave.
Against the backdrop of the FCA’s wider focus on investor outcomes, fair value and healthy competition, it feels reasonable for the industry to reflect on whether all current practices continue to align with those objectives.
Competition and investor outcomes go hand in hand
Healthy competition is the strongest driver for higher standards. It encourages innovation, responsiveness and accountability. Investment Managers should feel able to move towards providers they believe can better support their funds, without unnecessary barriers slowing that process down.
Importantly, this is not about criticising individual firms or suggesting all exit fee arrangements are problematic. Many providers operate fairly and transparently, and long-term relationships between ACDs and Investment Managers remain hugely valuable to the stability of the market.
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Yet, it is still worth asking a broader question: how should firms retain clients?
Ideally, relationships should be built on service quality, trust and consistent delivery. Clients should remain with providers because they value the partnership, not because the process of leaving feels overly costly or difficult.
That creates a healthier dynamic for everyone involved. Providers are incentivised to continuously improve, while Investment Managers retain the flexibility to make strategic decisions where they believe change is necessary.
An opportunity for the industry to evolve
The UK funds industry has built a strong reputation for professionalism and oversight, and maintaining that reputation means continuing to evolve as market expectations change. As regulatory attention increasingly focuses on fair value and competition, it seems likely that discussions around ACD exit fee structures will continue to grow. That should be viewed as a positive opportunity for the industry rather than a criticism of it.
Open conversations about market practices are part of what drives improvement. Reviewing whether current structures continue to serve investment managers and end-investors effectively is both reasonable and healthy for the sector.
Ultimately, the strongest businesses are rarely the ones that rely on exorbitant barriers to retain clients. They are the ones that consistently deliver value, build trust and maintain high standards over time. In a market centred on investor outcomes, that is where the focus should remain.
