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Fiduciary managers: CMA sticks to its guns after data criticism

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Fiduciary managers and investment consultants have failed to persuade the UK’s competition regulator to scale back its proposed formal interventions in their markets.

In an update to its year-long investigation into the consulting and fiduciary sectors, published last week, the Competition and Markets Authority (CMA) said additional analysis of its data had shown that schemes using competitive tenders “paid significantly lower prices” than those that did not.

Mandatory tendering of fiduciary contracts was one of the CMA’s core “remedies” put forward earlier this year in a provisional decision report on its investigation. The remedies were designed to improve competition and outcomes for clients.

Despite several firms pushing back on data points from its July report, in its update last week the CMA indicated that these would not have affected its core findings.

Mercer, one of the leading providers of institutional investment advice and fiduciary management, argued that the CMA had used “incorrect data” and made errors in its analysis in its provisional decision report in July.

Aon, another leading provider of both services, also questioned the CMA’s data in a hearing at the end of September, according to documents published by the regulator.

Following further analysis and hearings with 11 consultancy groups as well as fund manager trade body the Investment Association, the CMA found that schemes running a formal tender paid 22% less on average than those that did not. This compared to 24%, as quoted in the July report.

Mixed feedback

The CMA conducted face-to-face hearings with companies in late September and early October, during which Mercer rejected the watchdog’s assertion that formal remedies were required to address “adverse effects on competition”.

Aon and Mercer also argued against the proposed mandatory tendering of fiduciary management. Mercer contended that forcing pension funds to go to market would bring “unintended consequences” and “unnecessary costs”.

Instead, both companies called for the Pensions Regulator (TPR) to publish best practice guides and adopt a “comply or explain” approach to tenders.

Most other consultants interviewed by the CMA – including Willis Towers Watson, the third major provider of fiduciary and consulting services in the UK – supported the CMA’s push for mandatory tenders.

Speaking at an industry conference earlier this month, Alison Gold, project director at the CMA, said it was “quite remarkable” that pension schemes were not “testing the market” when moving to a fiduciary arrangement.

Fred Berry, lead investment consultant at TPR, added that fiduciary contracts were “often tilted in favour of the fiduciary manager in a way we would not expect independent asset managers to get away with”.

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