The new payment method for investment research, introduced by the FCA, aims to help reduce barriers, increase research quality and foster a more dynamic investment environment in the UK. Will you be benefitting from the new method?

The FCA has finalised new rules allowing UK fund managers greater flexibility in how they pay for investment research. Published on 9 May 2025 in Policy Statement PS25/4, the rules introduced a third payment option to the two existing methods:

• Existing: Direct payment from a firm’s own resources

• Existing: Paying via a research payment account (RPA)

• New: Joint payment for research and execution services

This regulatory development follows a consultation launched in late 2024 and forms part of the FCA’s broader strategy to enhance the competitiveness of the UK asset management sector post-Brexit.

A constructive shift for fund managers

The new joint payment option is designed to simplify operational processes and reduce compliance burdens, particularly for smaller and fast-growing firms. It allows fund managers to pay for research and execution services together, provided they adhere to a set of regulatory “guardrails” intended to preserve transparency and investor protection.

Some of the key guardrails include:

• Establishing written policies on joint payments,

• setting and monitoring research budgets,

• stipulating the methodology through established arrangements for calculation and separation of research costs for joint payments,

• fair cost allocation between clients for joint research payments; and

• making appropriate disclosures in the fund’s annual report.

Amendments to the final rules

While the final rules largely reflect the proposals set out in the consultation paper (CP24/21), the FCA has introduced several refinements in response to industry feedback on the application of the guardrails:

Standardised policies: Fund managers are now permitted to adopt a single set of written policies for joint payments across multiple funds, rather than drafting separate policies for each fund.

Aggregated budgets: It has been clarified that research budgets can be aggregated across fund ranges, provided this aligns with the firm’s investment management processes.

These changes are expected to ease the implementation of the rules and reduce administrative overheads, particularly for firms managing a large number of funds.

Enhancing market competitiveness

The FCA’s move follows recommendations from the 2023 UK Investment Research Review, which concluded that the MiFID II unbundling rules had negatively impacted the availability and quality of investment research in the UK. By introducing a more flexible payment framework, the FCA aims to support better research access and foster a more dynamic investment environment.