Co-manufacturing May End Confusion

The proposed rules on the concept of co‑manufacturing, set out in CP26/23 published on 29 June 2026, aim to clear up a long‑running confusion in the advice and investment management market. The Financial Conduct Authority (FCA) first introduced the idea in 2022, but it never gave a formal definition. Firms had to piece together expectations from guidance, statements and supervisory activity, which led to inconsistent interpretations.

The FCA acknowledged in its consultation paper that the term “co‑manufacturing” isn’t always clear. It said it received feedback that the phrase doesn’t match industry use in some parts of the market. So the regulator is proposing to drop the label entirely.

Removing the term that caused confusion

Under the new rules, when more than one firm contributes to manufacturing a product or service, they will be classified as either a principal manufacturer or a secondary manufacturer. Firms with substantive control over the design or operation of the product will be the principal manufacturer; the rest become secondary manufacturers.

That shift matters because the word “co” implied joint responsibility or liability, especially to consumers. Adviser firms that co‑manufactured a discretionary management solution, for example, always faced questions about how they could genuinely co‑manage something without having discretionary permissions. The new labels should reduce that ambiguity.

In practice, firms will now need to figure out which bucket they fall into. The FCA expects them to work through the definitions carefully.

The removal of the term itself is a welcome step, but the real work lies in applying the new framework. For most adviser firms, the practical effect will be small: they could end up as secondary manufacturers in many arrangements, still accountable for the value they deliver but no longer carrying the implied label of equal responsibility.

Price and value under scrutiny

Whatever the terminology, the regulator’s supervisory focus remains on consumer outcomes under the Consumer Duty. Firms working together to manufacture a product must deliver good outcomes. The price and value outcome is a key area of regulatory attention right now.

Each firm in a manufacturing arrangement must clearly articulate what it does in return for the fees it receives. That’s not a theoretical exercise. The FCA expects firms to demonstrate, in tangible terms, the value they bring. Where multiple firms are involved, each needs to record its specific role and the rationale for its fees, linked directly to the value delivered.

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. If value is unclear or hard to evidence, firms will likely struggle to show compliance with the Duty.

One unresolved issue 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 because it is unclear whether an adviser firm can get paid for its role in a partnership with discretionary managers. The FCA may need to revisit these rules if it wants to encourage collaboration, but for now they remain in place.

The consultation period on CP26/23 ends on 18 September 2026.

The FCA expects to publish a policy statement and make any new rules in Q1 2027. In the meantime, firms working together should ensure all parties involved in manufacturing a product or service have been correctly identified, responsibilities are clearly allocated, a formal written agreement exists, and the arrangement delivers good outcomes for retail customers. Fee arrangements must meet regulatory requirements and be clearly disclosed to consumers. An adviser firm recommending any investment solution to which it is a party also needs to comply with its wider obligations, including conflicts of interest and suitability.