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Consultants enquiry: Schemes urge caution from watchdog

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The UK’s pension scheme trade body has flagged up “persistent concerns” about investment consultants offering fiduciary management services.

The Pensions and Lifetime Savings Association (PLSA) surveyed a small sample of its members earlier this month, asking questions related to the CMA’s competition enquiry .

The results were submitted in response to the CMA’s first consultation with the pensions sector and published by the CMA this week.

The PLSA urged caution from the Competition and Markets Authority (CMA) in its approach to proposing changes to the investment consulting and fiduciary management sectors.

Caroline Escott, policy lead for investment and defined benefit at the PLSA, said in the association’s response: “We believe fiduciary management can offer some benefits for schemes, including reduced governance burden, greater efficiencies and cost savings.

“There have been instances where a scheme’s investment consultant was strongly focused on recommending their own in-house offering”

PLSA

“However, some scheme members have raised persistent concerns about the potential misalignment of interests where consultants offering investment advice also have an in-house fiduciary management or master trust offering.

“We understand there have been instances where a scheme’s investment consultant was strongly focused on recommending their own in-house offering.”

However, the association’s survey found that, of those schemes using fiduciary management provided by their investment consultant, all were either “very satisfied” or “fairly satisfied” with the service.

The CMA’s paper sought feedback about potential new disclosure requirements and benchmarking initiatives for fees and performance, covering both investment consultants and fiduciary managers.

However, the PLSA said the competition watchdog “should be mindful that further disclosure for its own sake is not always helpful to trustees”, and urged the enquiry to focus on “clear, standardised disclosure presented in a meaningful way”.

The PLSA found that 30% of respondents retendered their external investment consultancy services contract every 4-5 years, with 30% re-tendering every 2-3 years and 26% having never re-tendered their contract. The CMA proposed mandatory tendering on a regular basis, as well as the introduction of standardised tender documents.

The CMA asked for feedback on its first paper, published last month, which outlined how the authority would approach the enquiry. It also proposed some initial remedies to improve standards.

It has so far received 15 submissions from asset managers, fiduciary managers, consultants and trade bodies.

Tomorrow IPE will publish an in-depth analysis of the responses so far.

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