The UK pensions association has cautioned the competition watchdog against opting for further regulation or guidance for trustees as a means of addressing concerns about competition in the investment consultancy and fiduciary management sectors.
The Competition and Markets Authority (CMA) today published a report in which it said it had found evidence indicating that trustees may not be able to assess the value for money of their current investment consultant or fiduciary manager or, with regard to the latter, switch to another provider.
Caroline Escott, policy lead for investment and defined benefit the Pensions and Lifetime Savings Association (PLSA), said the watchdog’s emerging findings were in line with analysis carried out by the PLSA, the Pensions Regulator, and the Financial Conduct Authority.
However, she said the association “would urge the CMA to think carefully about how any further regulation or guidance for trustees is designed”.
“The guidance space is currently crowded and the increasing compliance burden runs the risk of potentially leading to a more risk-averse and compliance-led trustee approach which could in turn impact upon trustees’ capacity for in-depth assessment of the value they receive from their service providers,” she added.
The CMA said it was considering three main categories of potential remedies: measures to inform trustees of switching costs; measures to “empower and incentivise” trustees to engage; and measures to reduce switching costs.
With regard to measures that could directly trigger trustee engagement, the watchdog indicated it was weighing up the case for any additional or streamlined guidance, measures to improve governance standards, and greater obligations on trustees to obtain value for money.
”Our preferred approach in relation to engagement,” it said, “is that trustees are supported by access to sufficient information and resources to reduce the cost of testing the market.”
However, it would need to consider whether such measures on their own or in combination with a package of remedies would be effective, it said.
The CMA’s report on trustee engagement is the fourth working paper it has published as part of its investigation into competition in the investment consultancy and fiduciary management sectors.