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What has happened?

In August 2023, following a review that it carried out of 14 authorised fund managers’ value assessments (known as AoVs), the FCA stated that, while many firms have better practices in place, some still require improvement. 

What are the key points of this review?

In 2017, the FCA had published its Asset Management Market Study, which found evidence of weak demand-side pressure on fund prices, resulting in uncompetitive outcomes for investors in authorised funds. Since then, the FCA has worked with the industry to encourage a greater focus on assessment of value, with a view to driving improved value for money for investors. 

The findings show that many firms have now fully integrated considerations of assessment of value into their product development and fund governance processes. However, there remain outliers where action needs to be taken. This is particularly important in view of the Consumer Duty, which came into force on 31 July, where firms are expected to deliver fair value for retail consumers. 

The key points identified by the review were:  

• Eamples of good practice include moving investors to clean share classes with no trail commission or cutting funds’ fees,
• Some firms' independent non-executive directors did not provide sufficient challenge, with some accepting information provided to Boards at face value without probing further,
• There are significant differences between good and poor practice in how AFMs assess their funds’ performance,
• Firms are putting too much emphasis on comparable market rates to justify their fees, rather than conducting an assessment using the full range of value assessment considerations, and
• Some firms now have better processes for allocating costs but are reaching conclusions on AFM costs and economies of scale that do not take into account the information made available by that better process.  

The FCA expects firms to consider these findings and to make improvements where required. 

How can we help you?

Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, its team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your AFM value assessments, or more general regulatory questions? Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 0207 436 0630 or send an email to info@thistleinitiatives.co.uk.