On the go: UK pension schemes will be required to conduct competitive tender processes before hiring their first fiduciary manager, under recommendations set out by the Competition and Markets Authority on Wednesday.
The competition watchdog found an adverse effect on competition in both the investment consultancy and fiduciary management markets, but the majority of its recommendations were aimed at fiduciary managers.
Schemes who have already appointed a fiduciary manager without a tendering process will have to retender within five years, while managers themselves will have to disaggregate their fees and costs, including those related to exiting the product.
Both investment consultants and fiduciary managers will have to adopt a common standard for reporting their performance, albeit with more stringent requirements for fiduciary managers, who have already adopted a standardised methodology and template for past performance.
The CMA also took forward the FCA’s recommendation that its remit be extended to cover investment consultants, who do not currently fall under any formal regulation.
John Wotton, chair of the investigation, said: “We’re concerned that pension schemes are not currently putting pressure on the market to get the best value for money on behalf of their members. They may lack the information they need to compare competing offers and so could be sticking with their existing investment consultant or fiduciary manager when there are better options available."
The report puts a strong focus on the strength of the trustee buy side, arguing that the Pensions Regulator should provide greater support for schemes running tenders for both services.
Trustees will also be required to set objectives before hiring an investment consultant, to enable them to better assess the quality of the advice given.
The CMA is now consulting on its proposed remedies, with responses invited before August 24 2018.
