FCA sees improvement in value assessments but warns there is ‘still work to do’

FCA warns not enough firms are cutting fees


The Financial Conduct Authority has said fund management firms have ‘significantly improved’ their assessments of the value they deliver.

In a report published today, 10 August, the FCA said following its review of value assessments, it has found that many firms have better practices in place, but some still require improvement. 

The ongoing process of scrutinising and raising the value fund managers deliver to their clients began with the 2017 Asset Management Market Study. It found evidence of ‘weak demand-side pressure’ on fund prices, resulting in ‘uncompetitive outcomes for investors.’ 

See also: Are US equities overvalued, or are valuations just high?

Since then, the FCA said it has worked closely with the industry to encourage a greater focus on assessment of value, and drive improved value for money for investors. 

In the authorised fund managers’ assessments of fund value 2023 report, the FCA said many firms now have a better understanding of the rules and have significantly improved their assessment of value processes.

Most firms are making fewer assumptions within their analysis that they cannot evidence as reasonable, and are presenting higher quality management information to boards and assessment of value committees.

The FCA warned that while firms had a better understanding of the need to justify fund fees, most remedial action did not involve cutting them. 

See also: Abrdn to fold GARS into Diversified Assets suite following poor performance

Where fees were cut, the reductions were almost always driven by ‘adverse comparable market rates findings’ rather than other considerations.

This suggests that fund managers continue to cluster around price points, which is something the FCA earlier identified as a market failure.

The regulator said it expects firms to consider the findings of today’s report and to make improvements where required. 

Camille Blackburn, director of wholesale buy-side at the FCA, commented:  “Authorised fund manager boards and senior managers are responsible for ensuring value assessments are carried out properly and any issues found are resolved quickly.

“It is vital that firms make sure they are not solely focused on a fund’s profitability over value for money for investors. The Consumer Duty, which is now in place, further supports our expectations in this area.” 

PA EVENT: Autumn CongressSeptember 27th– 29th | RSVP via email

Hosted at The South Lodge Hotel. Transport and accommodation will be provided for the duration of the event.

Our Autumn Congress will serve as a comprehensive platform for discussing the key trends, challenges, and innovations shaping the wealth management landscape. It will bring together thought leaders and industry professionals for enlightening discussions and networking opportunities. Register link | 

Sponsors include Alliance Bernstein, Alger, Boston Partners, Baillie Gifford, CCLA, Janus Henderson, GAM, Jupiter AM and much more! Please see the full line-up on our website: AC2023

Latest Stories