On 6 June 2025, the FCA set out its proposals for reducing the assessment of value reporting requirements that apply to authorised fund managers (AFMs). Whilst this will be welcome news for many AFMs, firms should guard against viewing this change as a lowering of standards generally, when conducting assessments of value.
Fund assessments of value were introduced in 2019 to improve price competition and value for money following the asset management market study in 2016/17. These rules require AFMs to carry out an assessment of value at least annually, and to report publicly on their conclusions. Rules in the COLL sourcebook of the FCA Handbook specify minimum considerations for AFMs when performing the assessment including: quality of service; performance; AFM costs; economies of scale; comparable market rates; comparable services; and classes of units. The FCA has done a lot of work in recent years on AFMs' assessment of value including its 2023 review. It makes clear in this latest consultation paper published on Friday 6 June that rigorous standards relating to value assessments continue to apply.
What is changing?
The FCA's proposals are set out in quarterly consultation no 48 and relate only to the reporting requirements. They do not impact on the rules for undertaking the assessment of value itself. Under the existing rules in COLL, AFMs are required to give a detailed description of the assessment in the fund's annual report or in a separate report covering multiple funds.
The FCA's proposals involve removing certain prescriptive reporting requirements. In their place will be a general requirement that AFMs include in the annual report a summary of:
- the assessment of value and the conclusion of the assessment as to whether the charges out of scheme property are justified in the context of the overall value delivered by the scheme; and
- any remedial action they are taking as a result of the assessment.
The FCA has made clear that these are minimum requirements, and it will be for AFMs to decide how much information to include. These latest changes, arguably, therefore introduce a degree of uncertainty for firms and ultimately Boards will be responsible for assessing what is appropriate for each relevant fund. This is particularly the case in respect of distributor information for the purposes of the distributor's Consumer Duty price and value requirements. The FCA has separately said that it will clarify the application of the Consumer Duty through distribution chains including how firms share information within the chain.
Timing
The consultation period is short; firms have until 14 July 2025 to respond.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
