Interactive Investor

Value for money reports ‘have been a huge catalyst for change’

6th July 2021 12:50

Jemma Jackson from interactive investor

interactive investor comments on FCA statement about the reports.

Moira O’Neill, Head of Personal Finance, interactive investor, says: “It’s ironic that while most of the groups analysed by the Financial Conduct Authority (FCA) had fallen short on meeting its standards on value for money reports, the reports have been a huge catalyst for change less than two years since they were introduced.

“Schroders has simplified its charging structure, after finding that nine out of 86 funds had not demonstrated value in its first set of reports. BlackRock, the world’s largest asset manager, moved 14,000 investors into cheaper share classes last year, delivering savings of £3 million.

“With higher standards, we could see even more change, so we welcome today’s statement from the regulator. But we’d also like to see more guidelines on the reporting of value for money statements. They are frustratingly difficult for ordinary investors to find and require journalist-like investigative skills. It need not be so difficult. 

“In the absence of independent boards of directors on open-ended funds, value for money reports have potential to act as a check and balance – but we are not quite there yet.”

Kyle Caldwell, Collectives Editor, interactive investor, says: “First, the positives. The regulator’s ‘value for money’ initiative has spurred some fund managers into taking action on substandard funds. Some fund groups have undertaken a review of the fund, reduced fund charges or closed funds. Ballie Gifford and Rathbone are two examples of fund firms that have closed funds. Fund groups that have reduced fees on various funds include Invesco, Jupiter and Schroders.

“But there are some shortcomings. The reports are very difficult for investors to find, as they generally are not in a prominent position on a fund management firm’s website. Another issue is that fund management firms are essentially policing themselves – so where is the real incentive to ensure their funds are in tip-top shape for investors?”


Under new rules set out by the Financial Conduct Authority (FCA), which came into effect in September 2019, fund management firms are required to publish annual fund reports on the ‘value for money’ of their fund products. The reports must be publicly available on the fund manager’s website

The FCA set out seven “value criteria” that the reports are required to address.

These are: fund performance over an appropriate timescale relative to the fund’s objectives and strategy, investment manager’s costs, quality of service provided, comparable market rates of similar funds, cost of comparable services (for instance the cost of the fund to institutional investors or pension schemes), appropriateness of share classes, and whether economies of scale are being passed back to investors in the form of lower fund charges.

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