UK pension trustees have called for the Financial Conduct Authority (FCA) to take an active role in the country’s new investment cost disclosure initiative to ensure its success.
The Association of Member Nominated Trustees (AMNT) and campaign group the Transparency Task Force (TTF) made the call as they welcomed the Cost Transparency Initiative (CTI), aimed at defining and measuring the full cost of investing. They also warned that the initiative’s success depended on a meeting a number of other requirements.
Earlier this month, the CTI was launched by the UK trade bodies for asset managers (Investment Association) and pension funds (PLSA), alongside the Local Government Pension Scheme (LGPS) Advisory Board.
It involved the creation of a series of cost disclosure templates for UK institutional investors.
In a joint statement this week, the AMNT and the TTF said the disclosure templates had “the potential to be a significant step forward, but whether that potential is realised will depend on how the CTI deals with five key questions”.
On the issue of the FCA’s potential role, they said: “Given the importance of consumer protection to the FCA’s statutory remit we believe the regulator should be an active driver of the agenda and not a mere onlooker.”
The FCA took part in the Institutional Disclosure Working Group as on observer as representatives of asset owners and asset managers agreed the design of the cost disclosure templates. This work was in turn a direct result of the FCA’s in-depth review of the asset management industry.
The AMNT and the TTF also challenged whether the CTI would be unduly influenced by sell-side industry interests and motives, urging other pension fund and investor representatives to support the CTI’s chair Mel Duffield, pensions strategy executive at the Universities Superannuation Scheme.
“While it is encouraging to know the CTI will be chaired by a distinguished representative of asset owners, she will need strong buy-side support on her steering group if the CTI is not to be seen as vulnerable to pressure to favour the commercial interests of its sponsors’ members,” the organisations said.
Other questions posed concerned whether the templates would become mandatory, whether the data would be spot-checked by the FCA or the Pensions Regulator, and whether the disclosure regime would “properly contextualise cost in relation to performance and risk”.
The AMNT and the TTF said trustees were required by TPR to act as “challenging customers”, adding: “Unless the five issues identified are dealt with properly it is difficult to see how trustees can carry out their duties effectively or efficiently; they will not be able to play their full part as a driving force in caring for the interests of pension scheme members.”