Fiduciary tenders become mandatory for 20% of assets

From December 10, trustees must run competitive tender processes to recruit managers, if their schemes use them for 20 per cent or more of their assets.

According to the guidance published on Thursday, which reflects an order made by the Competition and Markets Authority, the requirement will also apply to existing arrangements that have not been made as a result of competitive tenders.

The watchdog warned that trustees need to be on their guard against conflicts of interest.

It said: “Conflicts of interests may not always be a barrier to appointments or decisions being made. However, you should ensure that appropriate measures are in place to identify, mitigate and manage those conflicts.”

TPR stated that if the existing investment consultant or fiduciary manager is involved in the tendering process, schemes “should ask them to provide, in writing, details of how the conflicts will be mitigated and managed”.

Trustees must also set strategic objectives for those providing them with investment advice, so that they can monitor performance and measure whether the service is good value for money.

Separately, fiduciary managers and investment consultants will also have new duties placed on them around reporting charges, fees and performance, to make it easier for trustees to compare providers effectively.

The CMA’s investigation found a series of weaknesses in the institutional buying of investment advice and fiduciary management, including trustees entering into uncompetitive terms or failing to switch to potentially better providers because they struggled to compare fees and performance.

Despite this, assets managed by fiduciary managers have broken the £170bn barrier, up 21 per cent from £142bn in 2018.

The popularity of these managers was highlighted in the annual KPMG 2019 survey published in October, which showed a total of 946 mandates in the UK were boosted by an additional 80 schemes opting for this service over the year.