On 14 September 2017, we blogged that the FCA decided to make a market investigation reference to the Competition and Markets Authority (CMA) in relation to investment consultancy and fiduciary management services.
The CMA has now published a working paper on information on fees and quality as part of its investment consultants market investigation. The working paper presents the CMA’s analysis and emerging findings to date in respect of the information available to pension trustees on the fees and quality of investment consultants and fiduciary managers. The working paper notes that no provisional or final decisions have been made at this stage on any potential adverse effects on competition or on potential remedies as the CMA’s enquiry is ongoing.
The CMA states that evidence reviewed so far indicates that competitive processes are not providing customers with the necessary information to judge the value for money of investment consultants and fiduciary managers. The potential competition concern with this is that customers are not well-equipped to choose, and subsequently monitor the performance of, their provider and in turn to drive competition between investment consultants, and between fiduciary managers.
In terms of potential remedies, the CMA notes the following:
- guidance and off-the-shelf materials for running better tenders – template documents including standardised fee or performance schedules and guidance on how to assess responses and requesting relevant metrics;
- standardised information for prospective clients in response to tenders – firm facing guidance or minimum standards on how to provide comparable information in response to off-the-shelve requests;
- better fee information – requirements on frequency, format and content of fee reporting for current clients including third parties and anticipated or actual changes in fee level;
- standardised performance metric – requiring firms to provide information in a standardised way or according to a menu of options requested by trustees; and
- stronger service quality metrics – mandatory use of standardised client survey format, or centrally administered survey with outcomes provided in tenders or public register.
The deadline for comments on the design questions and any other potential remedies is 22 March 2018.
View CMA publishes working paper in investment consultants market investigation, 1 March 2018
