Investment research payment optionality: New joint payment option increases flexibility in how fund managers pay for research

The FCA has introduced a “joint payment” option for research and execution services for UK fund managers. This is intended to address operational complexities and barriers UK fund managers have encountered when purchasing research. The change follows similar rules introduced last year for UK MiFID investment firms. 

On 9 May 2025, the Financial Conduct Authority (FCA) published its policy statement (PS25/4) outlining the final set of rules allowing fund managers to pay for investment research using a joint payment option for research and execution services (the Policy Statement). 

The rules were adopted following the FCA’s consideration of responses to its consultation paper (CP24/1), which proposed changes to the restrictions around how fund managers pay for investment research (the Consultation Paper). The new rules came into effect immediately on publication.

A new option aimed at improving the investment research market

Under the previous rules introduced following implementation of MiFID II, fund managers were restricted to paying for research either from their own resources or through separate research payment accounts. Many market participants considered this ‘unbundling’ of research and execution costs as negatively impacting the provision and availability of investment research in the UK. Recognising the importance of access to and quality of research to an effective and attractive UK public market, the 2023 UK Investment Research Review set out a number of recommendations to improve the investment research market, including the creation of a combined payment option.

Following these recommendations, the new rules adopted by the FCA will now enable fund managers to purchase investment research using a joint payment option (in addition to the existing payment options), subject to certain specific requirements (‘guardrails’) aimed at ensuring appropriate controls, transparency and fairness. The approach is similar to the rules already introduced for MiFID investment firms in 2024 (see our blog post on this development here). 

Whilst the proposals made in the Consultation Paper have been largely adopted in the final rules, the FCA has made certain adjustments to the guardrails to reflect feedback relating to enhanced flexibility and consumer protection. 

Requirements for fund managers taking up the payment option

The new rules permit UK UCITS management companies, full scope UK alternative investment fund managers (AIFMs), small authorised UK AIFMs and residual collective investment scheme operators to purchase investment research using the joint payment option, subject to the below guardrails:

1. Written policies: fund managers must establish written policies for each fund purchasing research using the joint payment option specifying governance, decision-making and controls, including how research will be maintained separately from trade execution. The approach has been amended in the final rules  to allow firms to have one set of standard policies across fund ranges, which can be modified to suit a specific fund;
2. Methodologies for calculating research costs: fund managers must specify the methodology for how the research costs will be calculated and identified separately within total charges for joint payments;
3. Research provider payment allocation structure: fund managers should establish a research provider payment allocation structure;
4. Price and value assessments: fund managers will need to assess the price and value of research periodically. Value measures will have to be assessed on a fund-by-fund basis, so that each fund can benefit from research that is relevant to it;
5. Budgeting and cost allocation: budgets will need to be set for the purchase of research with joint payments, and fund managers should allocate the cost of research fairly to all applicable funds. The guardrails for budgets have been revised in the final rules to allow budgets to be created at the level of a particular fund or at an aggregated level appropriate to the firm’s investment processes. Where a firm both manages funds and offers MiFID investment services, budgets and costs may be allocated appropriately across both funds and investment services where the research informs investment decisions relevant to both;
6. Disclosure: disclosure will need to be provided on joint payments. Where research budgets have been exceeded or increased, authorised funds only need disclose the proportion of increase instead of the amount of increase in the funds’ annual report; 
7. Administrative responsibility: fund managers will be responsible for the administration of the account used for purchasing research with the joint payment option (including pursuant to commission sharing agreements (CSAs)). However, the FCA has clarified that this does not mean each fund will need to have a separate CSA to adopt the payment option; and
8. Authorised funds: the adoption of the joint payment option is a significant change for authorised funds, requiring fund managers to notify unit holders and the FCA (through the usual approval process) before the changes take place.  

Comparison with the Consultation Paper       

The Consultation Paper initially proposed adopting the overall approach on guardrails introduced for MiFID investment firms (see here) and adapting them for funds. However, based on the feedback received, the FCA revised its proposal in line with the changes highlighted above, allowing fund managers to establish controls across their fund ranges rather than for each individual fund (with the exception of value assessment and disclosure requirements for authorised funds). This is particularly important as different types of research will contribute to investment decisions differently. Some research may be directly relevant to a particular fund while other research may feed into wider investment strategies. Feedback received by the FCA therefore indicated that requiring guardrails at a fund level would potentially reduce the likelihood of adoption.

Acceptable minor non-monetary benefits

In addition to the joint payment rules, the FCA has made final rules on including short-term trading commentary without substantive analysis as an acceptable minor non-monetary benefit. This means it can be received for free without breaching the FCA inducement rules. 

In addition, the FCA has removed the previous rule on research for smaller companies being an acceptable minor non-monetary benefit, as the research payment rules will no longer distinguish between research for companies based on market capitalisation.

What are the next steps? 

The FCA wants the final rules adopted in the Policy Statement to encourage competition for investors, ensure adequate consumer protection, and improve the competitiveness of UK fund managers. The FCA believes the new joint payment option should increase both the amount and breadth of investment research available in the UK, which will benefit the wider UK equity market. On the international stage, the new rules will hopefully reduce barriers to purchasing research in jurisdictions where bundled payments are standard practice and thereby enhance UK fund managers’ international competitiveness.

Whether the joint payments option is successful may be measured based on matters such as the level of take-up, changes in the production and consumption of research, and whether there are any unintended costs or harms to consumers. The FCA has indicated that it may conduct a survey after the new rules have been in place for a reasonable amount of time. Over time, it will also consider the impact on enhancing the UK asset management market by monitoring assets under management relative to other jurisdictions. 

Firms should now consider and determine whether they might adopt the joint payment option for research. In determining whether to adopt the joint payment option, the FCA expects fund managers to consider both the price and value, and customer understanding outcomes under the Consumer Duty, where applicable. If they wish to use the new option, they can do so immediately upon having implemented the required arrangements, systems and controls as outlined in the new rules in COBS 18 Annex I of FCA’s Conduct of Business sourcebook and in the Collective Investment Scheme sourcebook for authorised funds.