How did you get on producing your first value assessment?

17 September 2020

AssetAsset ManagementAsset ManagementClient ExperienceCOVIDInvestmentsretailvalue

How did you get on producing your first value assessment?

Expert:           Julia Kirkland, FST
Facilitator:     Ralph Jackson, Lansons 

State of play

As the first round of Value Assessments have begun to be published, it is clear that they are approaching it in a considered and serious way. Some have yet to publish, but asset managers must begin to properly implement the findings of the reports into product life cycles, as part of the usual considerations around flows, risk, liquidity, and others. As has been considered for some time, asset managers are still having to work with their ACDs to define ‘value’. The seriousness of the reports is seen in the scrutiny that larger institutional investors put on them, with asset managers and product teams having to defend and answer questions on their reports.  Asset management as a whole is under intense scrutiny by the regulator, and the industry needs to consider how many products or assets no longer properly serve their target market, which can be highlighted by the Value Assessment report.


  • Asset managers have approached the Value Assessment requirements with a commonality of seriousness
  • As the first wave of Value Assessment reports have been produced, the findings need to be implemented in product life cycles
  • There is some divergence between who is responsible for producing the reports, with risk, compliance, & product the most likely to be so
  • Product governance committees and NEDs are now elevated to a new level of importance, due to these requirements
  • It is possible Europe may follow the FCA in introducing similar ‘value assessment’ requirements

 Key themes

With the first wave of Value Assessment complete, it is important for these value assessments and the findings to be properly integrated into firm’s product life cycles. Firms now have a defined ‘value for money’ framework which can be included in product reviews, on top of the usual criteria such as trend analysis, returns, portfolio concentration, asset liquidity, etc.

As these ‘value for money’ criteria become more embedded into this cycle, product governance committees and NEDs become elevated to a new level of importance, and asset managers should demonstrate that they have embraced the changes which the Value Assessments have highlighted and incorporated these into normal routines. Regarding it being fully embedded in product governance, some firms have now done this. Every time a discussion is had about changing a product, this is seen in the context of the Value Assessment and how it might impact it.

In terms of deciding the framework process for the Value Assessment, there was a divergence in who was responsible for this, including boards, compliance, risk, and product teams, and external consultants, although compliance tended to be most responsible. Some surprise was expressed as to why product teams were not doing more of the heavy lifting. There were also additional stakeholders who took part in this process.

An issue was raised as to what is being referred to in terms of ‘boards’, which the regulator has not been clear on, as it could refer to a fund’s board, or the board of the firm. In some instances, depending on the structure of the organisation, the funds may have the same board as other parts of a firm. The consensus was largely that this would be at the level at which an organisation is providing the fund governance.

This raises questions over who has responsibility for producing the Value Assessment reports, especially for firms who have outsourced fund administration, custody, accounting, etc. Firms need to ensure that they work with any outsourced functions to ensure that they are satisfied with the report frameworks which are being put in place. This will differ in many firms, but responsibility must be clear, especially in the context on Senior Managers and Certification Regime which requires firms to demonstrate good governance and oversight.

The prospect of ESMA following the FCA’s lead was raised, in terms of a similar requirement being introduced for Europe. This could be a potential threat for firms which are distributing European UCITs, in terms of it impacting access to fund platforms.

Asset managers are still having to steer what they view their ‘value’ is versus what their ACD is defining as value, and that means that in certain cases, asset managers are heavily engaged at quite a high level.

Clients, notably smaller retail adviser clients, were not viewed as taking an especially strong view of the reports. However, these do receive a lot of focus at investment committee levels of larger firms.  In some cases firms had to arrange further meetings between product or investment management teams with these investment committees to go through reports in detail and answer questions.

As reports have now been published, there is likely an increased focus on how these reports are to be used. The reports need to be made available for all investors, especially retail investors, and it is not yet clear if fund distributors are yet to satisfactorily do this. In addition, the reports need to ensure that they live up to the spirit of protecting investing, and are not viewed as perfunctory or containing excessive jargon. Asset managers need to consider their responsibilities for when their products end up in the hands of retail investors.

Asset managers must also keep in mind that the Value Assessments will come to a conclusion about each fund and each asset class, which will require tangible actions. Asset management is under intense scrutiny by the regulator, and the industry needs to consider how many products or assets no longer properly serve their target market.