As the UK financial services landscape continues to evolve, the Financial Conduct Authority is further developing its emphasis on ensuring that consumers receive good outcomes and fair value from the products and services they use.
For asset managers the Assessment of Value framework, a regulatory requirement introduced following the Asset Management Market Study, has become a core pillar in helping evidence good outcomes for consumers..
But looking ahead, the FCA is expected to place greater emphasis on outcomes-based supervision. This is likely to lead to less prescriptive regulatory oversight with the evolution of a more holistic evaluation of how managers demonstrate value and ensure good outcomes.
The FCA’s 2025/26 priorities are focused towards becoming a “smarter regulator”, greater efficiency, more effective use of data and being more responsive to changing market dynamics. And at the same time the regulator is likely to increase scrutiny of managers’ governance structures. Now the FCA have removed the requirement for an appointed ‘Consumer Duty Champion’ they will expect the necessary levels of governance to be demonstrated board wide.
Consumer Duty sits at the heart of the FCA’s evolving regulatory approach and the asset management community, through the Assessment of Value framework, has had a mechanism that is aligned to many of the Duty’s expectations since 2019. Following reviews of how managers applied their processes it is reasonable to conclude that most have now embedded a rigorous annual review of their UK authorised funds, and there have been demonstrable benefits for investors. Across 7 key criteria, covering performance, costs and quality of service managers must demonstrate that individual funds are ‘fit for purpose’
However, whilst internal Assessment of Value processes have become more rigorous it is clear that the publically available Assessment of Value reporting is not widely read by investors or used by advisers. Moving forward we should expect less prescription as to how managers present their findings allowing them to tailor output in a way that is more suitable to their own profile and customer base.
Alongside the FCA’s current consultation on Proposals for Consumer Composite Investments it is possible that Assessment of Value output could be integrated into this new regime. Aligned to Consumer Duty’s key objectives it is hopeful that managers will have more flexibility in how they engage and communicate with their investor base than they have with the current retail disclosure regime.
For those promoting active strategies the market is likely to remain challenging with only the most compelling propositions attracting significant fund flow. Evidencing value ex-post and ex-ante will become increasingly important as managers aim to differentiate strategies against their competition.
And looking further forward as managers, and the regulator for that matter, adopt more artificial intelligence into business models engagement with investors and advisers will become far more dynamic. In this quickly developing environment it is not going to get easier to successfully promote strategies and only those that can truly demonstrate the value they offer will be successful.
