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EU manufacturers in the post-Consumer Duty UK fund distribution market

leveraging local frameworks to create a UK compliant value assessment

This blog is aimed at the asset management sector

In the wake of the UK FCA Consumer Duty value assessment rules, EU firms who distribute into the UK are questioning what their obligations are in this area. Under the Consumer Duty, UK distributors must take ‘all reasonable steps’ to gather relevant information to understand the value of products, products manufactured by non-UK firms, to comply with their own obligations and distribute appropriately. They must also satisfy themselves that the product they are distributing offers good value to retail clients, once their fees are included (PRIN 2A.4.16, PRIN 2A.4.17).

EU funds (UCITS and AIFs) are subject to requirements under ESMA’s Supervisory Briefing to have a structured pricing process in place to assess fund costs and fees. Whilst these requirements are narrower in scope and not as detailed as their UK counterpart, they are comparable.

Recently, however, several member state local regulators are seeking to clarify their expectations regarding the ESMA Supervisory Briefing. Publications recently from both the Luxembourg and Irish regulators point towards a greater scrutiny over firms’ costs and pricing frameworks, with what seems to be a nod to the UK’s higher standard value assessment regime.

EU firms distributing into the UK can find themselves in somewhat of a quandary determining the nature, jurisdiction and extent of the value assessment regimes and methodologies they need to comply with, all the while balancing the cost of compliance vs commercial strategy.

UK distributors are seeking out high quality UK standard value assessments from UK and EU manufacturers as par for the course, to enable them to satisfy their own Consumer Duty requirements. There is an increasing likelihood that UK distributors only have appetite for the standardised UK Consumer Duty value assessment, meaning EU firms producing something different, could find their competitive edge compromised.

With increased obligations on UK distributors to obtain information from UK and EU manufacturers alike, EU firms might find themselves on the back foot if their methodologies and collateral lack sufficient detail compared to UK standards.

Building on practices already in place with similar objectives and addressing multiple purposes could be a useful tool for EU firms wanting to remain competitive in the UK market.

The UK Consumer Duty value assessment

To increase transparency for retail investors, the UK regulatory regime already has provisions for manufacturers to determine fund value. When the UK fund rules introduced the requirement to publish value assessments, these were the first of their kind. The rules require UK funds subject to COLL to conduct a value assessment annually, detailing how their fund calculated and determines value. Under the COLL rules, the value assessment requires manufacturers to develop value methodologies assessing 7 criteria (see illustration):

The UK Consumer Duty goes slightly further than the COLL requirements published in 2020 and includes more rigorous breakdowns of the value components in manufacturer methodologies including:

  • Greater detail required around value of services included in methodology
  • New standard to ensure UK distributors are made aware of and can access fund manufacturers’ value and pricing indications
  • Standardised sharing of value assessment template (the EMT +)

ESMA Supervisory Rules – A comparable framework

ESMA’s supervisory rules around fund pricing and the UK COLL value assessment rules contain similarities, which are already in effect.

This echoes the UK Consumer Duty Value assessment expectations and will allow manufacturers in EU jurisdictions to align their regulatory strategy within fund value and pricing frameworks.

EU firms are already expected to conduct activities to identify and mitigate any undue costs, ensure investors receive equal treatment, provide information about cost of services in investors best interests, performance breakdowns, and charges. All of this is mirrored albeit to a more detailed extent in the UK Consumer Duty Value assessment requirements.

Rather than reinventing the wheel, EU firms could leverage their existing obligations under ESMA Supervisory Briefing to create a value assessment which is compliant across both EU and UK markets.

A Potential Solution?

A UK and EU compliant EMT +: aligning regime requirements in a multi-jurisdictional value assessment framework

To address the challenge the UK Consumer Duty value assessment requirements inadvertently puts to EU funds distributing into the UK, it’s important to provide a UK compliant value assessment. Firms may wish to consider streamlining their costs and pricing requirements in the EU with that of the UK requirements to create a methodology that can be leveraged for multijurisdictional compliance.

To find out more about how Deloitte can help you remain strategically, commercially, and competitively compliant in the UK distribution landscape, as well as compliant with local rules and guidance, please contact Jessica Castellino and Bettina Horvath.

Please also visit our other blogs on the territorial reach and subsequent information sharing considerations under the UK Consumer Duty

Consumer Duty – A potential stalemate?, Jessica Castellino, Bettina Horvath (

The Extra Territorial Scope of the Consumer Duty, Paul Fraser, Jessica Castellino, Chris E Collins (