Publishing its provisional decision report, part of its Investment Consultants Market Investigation today, the CMA says that it had found evidence of an adverse effect on competition (AEC) in the field of fiduciary management.
It has also recommended that TPR develop enhanced guidance for trustees on conducting competitive tender processes.
Willis Towers Watson says that while it accepts a competitive tender process for the appointment of a fiduciary manager is sensible, the CMA should consider the cost to schemes of a mandatory requirement.
Aon says the CMA has not presented sufficient evidence to show any adverse effect on competition, and says it does not recognise the CMA’s finding of low levels of engagement among trustee clients.
The CMA found levels of engagement, including switching, vary considerably across schemes. In particular, small schemes and DC schemes are less engaged, with considerably lower rates of switching and tendering than average, and are less likely to have formally reviewed their provider, said the CMA.
Willis Towers Watson head of investment, EMEA Ed Francis says: “The requirement for a competitive tender on appointment of a fiduciary manager is in principle a sensible proposal – the large majority of our fiduciary management clients have appointed us following a competitive tendering process. However, we will urge the CMA to consider the proportionality and cost to schemes of a mandatory tendering requirement, particularly for smaller pension schemes, and stand ready to work with the Pensions Regulator in developing support for such schemes.
“We fully support, and have long advocated, measures to provide pension schemes with clear, consistent and transparent information on performance and fees and the CMA’s proposals in this area will be a significant step forward for the industry. The requirement for investment consultancy clients to clearly articulate their investment objectives is also a welcome development.
“Finally, we are pleased that the CMA has acknowledged that structural reforms of the investment consultancy market would be detrimental to customers.”
Aon global business officer and head of EMEA/APAC, investment Andy Cox says: “We are not surprised that the CMA has found a competitive market within the investment consulting industry and low barriers to entry. We do not believe that the CMA has presented sufficient evidence to show any adverse effect on competition, nor do we recognise low levels of engagement among our trustee clients. Despite these concerns, the CMA has come forward with provisional remedies and recommendations that we support in principle.”
Mercer UK CEO Fiona Dunsire says:“We welcome the clarity that today’s Provisional Decision Report brings and the reassurance it will give to our clients that the market operates in their interests. The report describes a market that is not concentrated, where barriers to entry are not significant and where trustees are generally satisfied with the services they receive. It also highlights that high quality investment consultants add considerable value for pension scheme members.
“The CMA has proposed measures which aim to help trustees better evaluate providers and create consistency across the market. We support steps to further increase transparency and provide greater information to trustees. We also support tendering as good practice for clients and see increasing levels in the industry. We will look to work with the CMA to ensure any steps to increase tendering do not result in unnecessary cost or the restriction of choice for trustees.”