On the go: The Competition and Markets Authority has published its final report into investment consultancy and fiduciary management, maintaining its finding of an adverse effect on competition in both sectors.
A largely unchanged verdict on the market’s dynamics confirmed that while there are few barriers to entry and no significant market concentration, trustees fail to engage as well as they might with providers, in some cases because of a lack of accurate information.
In fiduciary management, the markets watchdog reiterated that incumbent consultants have an advantage over other competitors. The CMA has carried forward its central recommendation that schemes choosing a fiduciary manager for the first time must tender for the service, a step that can significantly reduce fees even if the scheme stays with its original provider.
Minor tweaks have been made to its remedies, however. The requirement to tender will now apply to all delegations of responsibility for more than 20 per cent of scheme assets, and trustees will have to invite at least three managers to tender to demonstrate a competitive tender.
A recommendation that marketing of fiduciary managers by investment consultant colleagues come with a warning has been replaced by a requirement to separate out marketing and advice completely, after complaints from consultants.
The Pensions Regulator is expected to set out guidance for trustees on how to run competitive tender processes for both services, and legislation will be required to give it the power to oversee these areas.
Meanwhile the Financial Conduct Authority’s regulatory perimeter will be extended to include all the main activities of investment consultants. Fiduciary managers are already regulated by the FCA.
