Campaigners have called on the Treasury to accelerate progress on bringing investment consultants into the regulatory regime.
Groups including the Association of Member Nominated Trustees (AMNT) have backed a letter from campaign group ShareAction to the Treasury, highlighting the need for investment consultants to be regulated by the Financial Conduct Authority (FCA).
Catherine Howarth, chief executive of ShareAction, urged the Treasury to “expedite plans to regulate all activities of investment consultants”.
Howarth’s letter – addressed to Gwyneth Nurse, the Treasury’s director general for financial services – was supported by leaders of the AMNT, the Financial Inclusion Centre, Pensions for Purpose and Make My Money Matter, among others.
Six-year campaign
ShareAction highlighted years of support for consultant regulation, going back to the Competition and Markets Authority’s (CMA) review of consultants and fiduciary managers in 2018. The CMA then said the Treasury should pass legislation to bring investment consultants into the FCA’s remit.
The FCA expressed support for the move in its response to the CMA in 2019 and noted “broad support from across industry”.
Despite the Treasury promising to “consider this recommendation and consult in due course”, no consultation has been forthcoming.
The idea of regulating investment consultants was raised again in the wake of the 2022 gilts market crisis, after concerns were raised about the implementation of some liability-driven investment (LDI) strategies.
The FCA stated that there was a “gap in regulation” with investment consultants, a stance supported by the Bank of England.
While most in the industry put the blame for the gilts market crash on the then-government's mini-budget announcements, the subsequent enquiry highlighted issues with advice on LDI.
In its report following the enquiry, the Work and Pensions Select Committee said several of those giving evidence – including the FCA – had warned that consultants had given “standardised advice, rather than thinking through what was best for the individual pension fund”.
The committee called for consultants to be regulated, as did the House of Lords Industry and Regulators Committee, also following the gilts crash.
As recently as May this year, the then-pensions minister Paul Maynard said in a letter to the Work and Pensions Select Committee that the Treasury still intended to consult on consultant regulations.
The Pensions and Lifetime Savings Association and the Association of British Insurers have also supported regulation to support the goals of the Mansion House Compact.
A Treasury spokesperson said: “The government is aware of calls to regulate investment consultants. The government is considering a range of proposals in the course of the Pensions Review and will set out its plans in due course.”
Further reading
FCA highlights investment consultant ‘gap in regulation’ (10 November 2022)
Pension providers call for stronger regulation of consultants and advisers (27 February 2024)
L&G blames government for LDI crisis and backs consultant regulation (22 November 2022)
