threesixty: Co-manufacturing – an end to the confusion?
In CP26/23: Consumer Duty – scope and proportionality, published on 29 June 2026, the FCA has set out proposed new rules on co-manufacturing.
The FCA’s approach to co-manufacturing has long generated uncertainty across the advice and investment management market since the term was first coined in 2022.
At the heart of the issue lay a fundamental problem: there was no formal FCA definition of ‘co-manufacturing’. Instead, the concept evolved through guidance, statements and supervisory activity, leaving firms (and consultants) to piece together the regulator’s expectations from multiple sources.
The FCA’s original position on co-manufacturing was set out in its Finalised Guidance on the Consumer Duty (FG22/5), published in July 2022. At that stage, the emphasis was on the materiality of a firm’s role in the design and delivery of a product or service.
Under this framework, a firm would typically be considered a co-manufacturer where it could “determine or materially influence” key product features – such as pricing, target market or investment strategy. Working out what constituted a ‘material influence’ required subjective judgement and led to inconsistencies in the marketplace.
Rather than referring to co-manufacturers, the FCA referred more broadly to ‘firms working together’ and ‘partnerships’
The regulatory language shifted in December 2025 when the FCA published its Statement on firms working together to manufacture products or services.
In this Statement, rather than referring to co-manufacturers, the FCA referred more broadly to “firms working together” and “partnerships”. The FCA acknowledged the confusion in the marketplace and the Statement was presented as a reminder of FCA expectations.
In CP26/23, the FCA again acknowledges the confusion around the terminology ‘co-manufacturing’, commenting: “We have received feedback that use of the term ‘co manufacturing’ isn’t always clear, as it doesn’t match industry use in some parts of the market.”
Any proposals that bring some clarity are to be welcomed and should be seen as a positive development
The FCA’s acknowledgement that the term “isn’t always clear” feels somewhat understated given the widespread uncertainty and differing interpretations across the market. However, any proposals that bring some clarity are to be welcomed and should be seen as a positive development.
What is the FCA proposing?
The FCA is proposing to remove the terminology ‘co-manufacturing’. Instead, the rules will focus on what happens when more than one firm contributes to the manufacture of a product or service.
Where there is more than one manufacturer, firms will be either a principal or secondary manufacturer. Firms with substantive control over the design or operation of the product or service will be classed as the principal manufacturer and other firms as secondary manufacturers.
Ignore Consumer Duty co-manufacturing at your peril
The FCA proposals will require some analysis to ensure that the definitions of ‘principal manufacturer’ and ‘secondary manufacturer’ are clear and work from a practical perspective.
However, the removal of the terminology ‘co-manufacturer’ is to be welcomed. The use of the word ‘co’ – rightly or wrongly – implied joint responsibility or liability particularly to a consumer and that was a cause for concern.
Where an adviser firm was ‘co-manufacturing’ a discretionary management solution, there was always a question mark over the extent to which the adviser firm could genuinely ‘co-manage’ the solution given that it didn’t have discretionary permissions.
Consumer Duty and price and value outcome
Whatever the terminology used by the FCA, its supervisory priorities where firms are working together to manufacture a product or service are and remain clear. Its focus is firmly on consumer outcomes under the Consumer Duty. Firms working together to manufacture a product or service must deliver good outcomes to consumers.
Firms are expected to demonstrate, in tangible terms, what they do in return for the fees they receive
One of the most significant areas of regulatory scrutiny currently is the price and value outcome.
Where multiple firms are involved in manufacturing a product, each must be able to clearly articulate the value it brings to the arrangement. This is not simply a theoretical exercise: firms are expected to demonstrate, in tangible terms, what they do in return for the fees they receive.
Where firms work together in partnership, each firm needs to record:
- Their specific role within the arrangement
- The fees they earn or receive
- The rationale for those fees, linked directly to the value delivered
Regulatory attention in this area is increasing. For example, the FCA’s recent model portfolio service (MPS) survey explicitly asked firms to detail their co-manufacturing relationships and explain how fees are allocated between parties.
Where value is unclear or difficult to evidence, firms are likely to face challenges in demonstrating compliance with the Consumer Duty.
Adviser charging: a structural constraint?
One unresolved issue in the co-manufacturing/working in partnership debate relates to the adviser charging rules.
Under current regulation, adviser firms can only be remunerated through charges agreed with and paid by the client. This creates tension in scenarios where advisers work in partnership alongside discretionary managers or other providers. Can an adviser firm be remunerated for its role in that partnership?
Under current regulation, adviser firms can only be remunerated through charges agreed with and paid by the client
If the FCA genuinely wants to encourage collaboration between firms, it may need to revisit how the adviser charging rules operate in these arrangements. For now, however, the existing adviser charging rules remain firmly in place.
What next for firms?
The consultation period on the proposals ends on 18 September 2026. The FCA expects to publish a policy statement summarising responses and to make any new rules in Q1 2027.
In the meantime, firms working together should ensure that:
- All parties involved in manufacturing a product or service have been correctly identified
- Responsibilities are clearly and appropriately allocated
- There is a formal written agreement in place
- The arrangement delivers good outcomes for retail customers and these outcomes are evidenced
- Fee arrangements meet the regulatory requirements (adviser charging rules and price and value outcome) and are clearly disclosed to consumers
An adviser firm recommending any investment solution to which it is a party will also need to ensure it complies with its wider regulatory obligations including conflicts of interest and suitability requirements.
Vanessa Johnson is head of compliance strategy at threesixty services
