CFA UK proposes new Value For Money framework to address inconsistencies in the investment sector and increase public trust

Monday 17 December 2018

  • New framework should be based on
    1. Costs and charges
    2. Output, defined as risk and return
    3. Quality and service 

  • There should be regular dialogue with clients to ensure their understanding and to reinforce the investment firm’s commitment to deliver

  • The paper also proposes reversing the order in which net risk-adjusted returns are usually shown, starting with those with the highest information value (the longest) and ending with those containing the most noise (one-year figures)


CFA UK has today published a whitepaper on the assessment of Value for Money (VFM) in the UK investment sector, entitled Value for Money: A Framework for Assessment.

The paper follows the publication in June 2018 of PS18/08 by the FCA which prescribes remedies and rule book changes to tackle issues highlighted in their Asset Management Market Study, released in 2017. The paper also seeks to address current inconsistencies across the sector and argues that the establishment of a more consistent framework for assessment could enable the investment profession to better demonstrate its value to clients and increase public trust.

Whilst VFM is already a widely used concept in the investment sector, CFA UK notes that a lack of common understanding around VFM is currently inhibiting clarity and transparency in this area. This is partly due to the existence of separate regulatory requirements for DC pension scheme trustees, Independent Governance Committees and the Boards of UK Authorised Funds.[1]

The whitepaper argues for a clearer taxonomy around VFM and proposes a model framework for assessment that is designed to work for all funds.

According to the paper, this framework should be built around three core components, which should be evaluated alongside each other: (i) costs and charges; (ii) output, defined as risk and return; and (iii) quality and service. CFA UK notes that too often in the finance industry, professionals take a binary approach, equating VFM simply with low-cost while ignoring the other factors, and that the investment profession could learn from how other sectors, including government agencies, evaluate VFM in this respect.

Key recommendations include the introduction of simple requirements, such as reporting and evaluating performance returns since inception, and in reverse order (so that the most recent returns are last), to draw attention to long term returns over short term. The paper further recommends considering other features that clients may feel are worth paying a premium for, such as the quality and effectiveness of asset stewardship and the deep integration of ESG into the investment process.

To address the fact that clients may weight elements differently, and value propositions may change over time, early and regular dialogue between clients and asset managers to define parameters is considered essential.

Says Andrew Burton, Professionalism Advisor at CFA UK: “Establishing a consistent means to address Value for Money is challenging, especially given that perceptions of value are subjective. The incorporation of a robust ESG evaluation process, for instance, will be valued by some end-investors even though it comes with additional cost, but it may be a lower priority for others. We don’t see a solution in introducing a single metric for VFM, but implementing this framework across the UK investment profession would go a long way to addressing the confusion and inconsistency that we currently see. Ongoing dialogue is also crucial to ensure that asset managers understand what their clients want, framing (and re-framing) objectives and so rebuilding trust and confidence in the sector.”

Says Will Goodhart, chief executive of CFA UK: “We need to develop a better framework for assessing Value for Money to improve transparency for the end investor and enable effective comparability between providers. We’re pleased to see that the profession is increasingly focusing on value. Given the FCA’s incoming requirements, this is an issue everyone should be thinking about now, in order to prepare.”

The framework developed by CFA UK is the result of input from contributors from a wide range of roles in the investment profession including wealth managers, investment consultants, pension funds, research analysts and other consultants.

[1] The requirements for UK Trust-based DC Pension Funds, UK Insurance Company Workplace Pension Schemes and UK Regulated Funds are compared in the paper, according to the following regulations respectively: Occupational Pension Schemes (Charges and Governance) Regulations 2015; FCA COBS 19.5; and FCA PS 18/08 and proposed changes to FCA COLL 6.6.

Notes to editors: 

For further information about the results or to request an interview, please contact Ogilvy Public Relations: 


About CFA UK

Part of the worldwide network of member societies of CFA Institute, CFA UK represents the interests of 11,600 investment professionals in the UK.