The UK’s Financial Conduct Authority (FCA) released the final report of its 18-month Asset Management Market Study in the summer. The study offered evidence that the UK market for institutional investment advice and fiduciary management is not working efficiently. The FCA highlighted the weaknesses of consultants’ business models, particularly in relation to measuring performance and managing conflicts of interest. The issues ring true for countries outside the UK. The regulator has promised further scrutiny of the sector, with a possible referral to the country’s antitrust authority, the Competition and Markets Authority (CMA). The FCA has also proposed to bring investment advice, which is currently unregulated, under its remit. We asked industry participants how relevant the issues raised by FCA are, and whether the regulation of investment advice will benefit pension schemes. Here is a selection of their views. 


Odi Lahav, CEO

Given the market share of the big three consultants, it is possible that there is a competition issue. The issue is more acute in the fiduciary management space, where our research has shown that some consultants have sold their fiduciary services to their existing clients without a competitive tender. As advisers, they must put their client’s interests first but that may clash with selling fiduciary services.

Fiduciary management conceptually makes sense, but pension scheme trustees need full knowledge of what is available in the market when deciding which offering best fits their needs. I think an investigation by the Competition and Markets Authority (CMA), as proposed by the Financial Conduct Authority (FCA), would help find out how efficiently the market is operating.

In general, the market needs more transparency in selling practices and of performance. However, any regulation aimed at achieving that needs to be balanced and not be too onerous given the current market context.

Aon Hewitt

Tim Giles, head of UK investment consulting

Throughout the process, we have made it clear that we want to achieve the best outcomes for our clients, help drive down the cost of asset management, and set consistently high standards for the industry. From that perspective, we would welcome any attempt by the regulator to support that. Our company is regulated by the FCA and we apply the same rules across all areas of our business, so we are comfortable we can meet high regulatory standards.

The CMA should carry out a rigorous, forensic investigation to understand what would be the right approach to promote competition in the industry and get the better outcomes for members, all of which we are very supportive of.

We hope that the Undertakings in Lieu (UILs), which we proposed to improve competition in the industry, will help direct the regulatory process towards promoting best practice. We are keen to publish how our fiduciary management service works, because that is where we can demonstrate exactly how we perform when we have freedom to take decisions on behalf of the clients, from asset allocation to manager selection.

We are proud of our track record and we will happily share it. We welcome the possibility to share and compare this data across the industry.

Avida International

Bart Heenk, UK country head

What the FCA has done is laudable, in terms of highlighting some of the issues that trustees should have addressed themselves, if they were running pension funds more like businesses. However, it appears trustees have not challenged the industry enough.

The FCA report raises awareness of the issues, thus improving transparency. Trustees now must be aware of the conflicts of interest that emerge when advisers offer their fiduciary services to their clients. Improving the transparency and quality of investment consulting should mainly be a matter of caveat emptor. In that sense, switching from a traditional advisory model to a fiduciary management model with the same firm, without running an open tender for fiduciary services, is just poor governance on part of trustee boards.

Regulation would not necessarily solve the issue and might have unintended consequences, such as firms focusing on compliance rather than helping clients reaching their objectives, not to mention the additional costs.

A potentially bigger problem for the industry is asset managers offering investment advice to pension funds. This advice might be sold to clients at cheaper prices than traditional advice, and clients inevitably end up buying the asset managers’ products.


Alan Pickering, chairman

The FCA report discussed competition between investment advisers but, from my perspective, I have many options when it comes to choosing investment advice firms. As a trustee, I would not take advice from someone who has a vested interested in the outcome of that advice.

I am not necessarily in favour of regulating the supply-side, as regulation can often have unintended consequences and staunch innovation. I think that consultants who want to sell fiduciary management should have the confidence to subject their offering to the scrutiny of an independent consultant. There is already evidence that this is happening. In order to address the issues, we need to build a more robust demand side and reduce the asymmetry of information.

I have some misgivings about situations where the consultant and the asset manager are, in a way, designing products for clients. Also, I am not too comfortable with situations where the consultant focuses on one manager because the amount of business that they do with it means they will be able to give a good deal to the client. This can blunt objectivity and rigour in manager selection.

Advice on strategy and asset allocation is the most important part of what advisers do. However, I want to make sure that the managers who are being deployed have been properly vetted in terms of product and efficiency.

Brighton Rock Group

Con Keating, head of research

There is a place for fiduciary management but there is a serious problem with the way some firms capture mandates. Furthermore, fiduciary management as it is being delivered today falls short of its reputation, as the legal obligations of fiduciary management are actually no more than those placed upon an asset manager. The expression implies a much higher duty of care to investors than standard asset managers.

The challenge for fiduciary managers, and advisors in general, is to behave as professionals and put their clients’ interest before their own. Regulation of the matter is justified, as little is being done to address the issues, despite the fact that trustees are said to be aware of the issues. In fact, regulation of investment advice is long overdue, as the only test of regulation at the moment is credibility, but trustees are obliged to hire advisers.

Another issue that has to be dealt with is the huge barriers to entry for newly-established asset managers. This is due to the reluctance of advisers to appoint any manager who does not have a track record. It makes it virtually impossible to have a truly competitive asset management business.

Cambridge Associates

Alex Koriath, head of European pensions practice

We welcome the FCA’s desire to promote higher standards for investment managers and advisers and facilitate greater choice for asset owners to ensure they get the best outcomes.

We are fully supportive of bringing all activities of investment advisers under the regulatory remit of the FCA. We are not concerned about a referral to the CMA and assume that any outcomes of such a review would be measures that further competition, transparency and value for money.

In our experience, the FCA review and resulting public scrutiny has already raised awareness among many trustee boards of the issues identified. For our firm, this has already led to prospective clients asking us to take part in investment adviser review exercises. This is encouraging and we believe  that a continued shining of light on the issue will, in itself, be very helpful for increased competition.

Greater choice of consultants and fiduciary managers might well lead to a rebalancing of market shares and less concentrated market shares. If other markets are any guidance, this should benefit asset owners.


Richard Dowell, co-head of clients

We welcome action from the FCA on bringing the consultancy market into the FCA’s regulatory perimeter and a strengthening of the duty of care on asset managers. However, we see the findings of the FCA’s asset management market review as a missed opportunity in some areas. The final report outlines a number of critical issues that the sector needs to get right for the benefit of trustees and their members, particularly in regards to competition, value for money and performance measurement. However, there are only a few firm recommendations on how these areas can be improved.

In many ways, the anticipation of FCA action has been more effective in shaping the industry than the final report itself. We welcome that the FCA is consulting widely over their concerns regarding the competitive nature of the market and we look forward to their further update in the not too distant future.


Mark Hodgson, managing director

The FCA paper has poked investment consultants and stirred some general response, without actually achieving anything yet. The referral of the industry to the Competition and Markets Authority is only delaying what is inevitable. The shape of the pensions investment world has to, and will change. However, the focus on fees and conflicts of interest, whilst important in a wider competitive market context, misses a key point.

That point is that the investment landscape has changed markedly in the last few years. We are coming to the end of the downward spiral in interest rates and the alternatives are less than attractive. Just at the point when pension funds are crying out for innovation and a focus on returns, the industry is going to turn their collective thoughts to their own business models.

Broad asset allocation and derisking advice has become commoditised – every investment model in the world tells you that liability-driven solutions and diversification “reduces risk”. It does not matter how complicated the model, or how many iterations are run, the answer will be broadly the same. Modelling and journey planning is no longer the value add – it is driven by price. Where investment advice really needs to move to is a value-added proposition. This may be around specialist investments, co-investments, illiquid, activism or ESG.


Anthony Webb, head of fiduciary management research

The FCA study is evolutionary, rather than revolutionary, in terms of its impact on fiduciary management. It encourages trends that we are already seeing and promotes and idea of best practice that we are already aware of. I don’t think it will herald an immediate and significant shift of how fiduciary management operates in terms of the investment solutions it provides and how it is taken up by pension schemes.

However, as a result of the CMA review, firms could be asked to split their advice and implementation arms, but that remains a big unknown.

At the same time, the FCA study has highlighted that it is necessary for fiduciary managers to provide more detailed information on fees, costs and performance. There will always be differences between fiduciary management models and, as a result, between costs and fees, but a discussion on those differences cannot be had unless there is clarity of information.


Andew Kirton, senior partner

We are committed to continue to make the market for investment consultancy services work even better for our customers and we have engaged with the FCA over many months to help deliver this objective. For example, we have developed a substantial package of proposals – known as Undertakings in Lieu of reference (UILs) – which will further improve the investment consultancy market for our customers. These include a mandatory tendering regime, performance and fee standards, and conflicts of interest protocols, which together will act as a powerful spur to competition and benefit our customers.

We are always happy to help deepen understanding of the investment consultancy market and work closely and constructively with all relevant authorities to this end.

Ortec Finance

Lucas Vermeulen, managing director and Loranne van Lieshout, senior consultant

We see many firms offering both advice and fiduciary management services, not just in the UK. That is a clear conflict of interest. One would expect trustees to be aware of that conflict of interest, but it is still often the case that consultants advise their clients to choose their own fiduciary management services.

Furthermore, as highlighted by the study, advice on strategic asset allocation is not regulated. This is strange, given that asset allocation is the most important strategic investment decision. There are arguments for and against solving these issues through regulation. Regulation would ensure that advice is in line with the goals and risk attitudes of pension schemes. It would also minimise conflicts of interest and ensure minimum quality of advice.

Regulation may lead to higher costs but, on balance, it would be helpful it this part of the industry was regulated. A standard of how fiduciary managers report on costs and value added would also help, given the differences between fiduciary offerings in the marketplace.

PTL Trustees

Richard Butcher, managing director

There are significant concerns in relation to consultancy-driven fiduciary mandates, and fiduciary mandates altogether. We have reservations about the number of fiduciary mandates that are awarded without open competition. Furthermore, there is no standardisation of what fiduciary management is. That makes it difficult to be informed buyers. A referral to the CMA will help to clear the air. It will inevitably bring around change, and hopefully we will end up with a more robust model.

More in general, the FCA found that consultants are good at doing due diligence of managers, but that it is still difficult to measure the quality of the advice they provide. We need a consistent methodology to do that that is shared across the industry.

Inevitably, solving these issues also requires intervention on the demand side. The majority of trustees are still lay trustees and cannot be fully informed buyers. From that perspective, the standard of individuals acting as trustees needs to improve, so they are able to challenge their investment consultants.

Punter Southall

Danny Vassiliades, head of investment consulting

We strongly believe competition within the investment consultancy market is worth looking at, and would encourage the FCA to make a recommendation to the CMA accordingly.

In our view, there is a clear requirement for remedies to increase competition, with the industry currently dominated by three big providers. Putting the industry under the auspices of the FCA is the right move and Punter Southall Investment Consulting is already regulated this way.

We are encouraged to see that the FCA has reiterated its support for greater transparency of fund manager fees and charges. In particular, a single all-in fee for fund managers and a more consistent disclosure of costs will help schemes to truly compare like for like. In terms of further action, we should continue to go further and push for performance expectations compared to cost to be fully disclosed and clearly communicated too.

Quantum Advisory

Robert Davies, partner

Fiduciary management can benefit pension schemes thanks to the economies of scale and efficient implementation it brings. However, issues can arise when there is no oversight of fiduciary managers, particularly when the fiduciary manager is responsible for setting the strategy.

An independent party overseeing the fiduciary mandate should be responsible for two things. One is the setting of strategy and the other is monitoring the performance of the fiduciary manager, which works as the implementation expert. Once you set strategy that reflects the trustees’ objectives, it is reasonable to expect the fiduciary manager to have responsibility for tactical asset allocation, manager selection and implementation of dynamic de-risking triggers.

However, I am worried that regulation could bring paralysis. Advisers are already regulated by their own bodies, so clients should be confident in the advice they give. But the industry could benefit from having best practice guidelines. An example of best practice could be hiring an independent firm to oversee the fiduciary manager. Possibly, the fiduciary manager should not be the firm that carries out actuarial valuations as well. I think a comply-and-explain regime would be better than regulation.


Dan Mikulskis, head of DB pensions

We believe a CMA investigation is not necessary, as we already see enough competition within the investment advice sector at the moment. The growth of our firm since its foundation 10 years ago is one piece of evidence for that.

Strong competition for investment advice mandates and innovation in certain areas of the industry also show the market is working. We have some concern about vertically integrated firms, which is something that should be looked at, but we do not observe that directly as we are not involved in fiduciary management.

That said, there are improvements that could be made to facilitate clients in assessing value for money in investment advice. We have to bear in mind the complex nature of the service, which means it is not possible to reduce everything to a performance number. It would be positive, however, if there were standard and consistent ways for consultants to demonstrate their performance in areas that can be measured quantitatively, including strategic asset allocation.

Finally, we think it would make sense for investment advice to be under the FCA’s regulatory perimeter.


Patrick Disney, EMEA head of institutional

Fiduciary management comes out relatively positively from the FCA’s report, despite the conflicts of interest some firms face in offering both investment advice and fiduciary services. Those issues should be dealt with through a CMA investigation.

Regarding performance, the issue about fiduciary management is that it aims to get a pension fund to a fully funded position, and it is sometimes difficult to equate performance of different managers relative to consistent benchmarks across all funds.

That said, there is work being done on benchmarking within the industry that will address those problems. When it comes to costs, fiduciary managers ought to be totally transparent and lay out all the elements for the client. As an aggregator, we can be very efficient, so we have no fear of showing our clients what the costs are. However, as with any industry that is relatively new, there might not be consistency in the way information is given to clients. As far as regulation of investment advice, it seems like a straightforward outcome of this process.

Stamford associates

Carl Hitchman, head of fiduciary management

We welcome the report and the referral of the matter to the CMA. There has been a lot of discussion about the benefits of fiduciary managers versus the traditional advisory model. Trustees need a balanced view of the differences between the two. We generally think one is not necessarily better than the other. They are different governance solutions that work for different schemes.

That said, there are conflicts of interests within the fiduciary management industry and they need to be clearly understood. It is important that fiduciary managers articulate what those conflicts are, and how they manage them, to make sure that trustees are comfortable that those conflicts are going to impact on investment decisions.

I think education and transparency may be better than regulation and enforcing action on an industry where every pension fund is different and needs flexibility. Trustees should cast their net as wide as possible when searching for a fiduciary manager.

In terms of standardisation of reporting, it is challenging to create a framework for performance or cost benchmarking. However, trustees should periodically test the market to make sure the fees they pay for the service they get are competitive.