18 July 2018

Investment & Pensions Europe: Advisers, fiduciaries respond to ‘softer stance’ from competition regulator

Investment consultants and fiduciary providers breathed a sigh of relief as the UK’s competition regulator stepped back from some of the more extreme remedies it had proposed for the sectors.

Providers welcomed proposals from the Competition and Markets Authority (CMA) to require pension schemes entering the fiduciary market for the first time to run a full tender, saying it would improve competition among managers.

Providers also praised the CMA’s decision not to impose a ban on investment consultants also providing fiduciary services to advisory clients. The CMA acknowledged that this measure “would not be effective or proportionate in addressing the problems we have provisionally found”, as it would drive up costs and reduce choice for clients.

Sam Gervaise-Jones, UK head of client consulting at bfinance, said the CMA had taken “a significantly softer stance on the relationship between investment consulting and fiduciary management functions” than the Financial Conduct Authority’s (FCA) initial assessment. The CMA’s evidence suggested a less concentrated market than the FCA had observed.

“The CMA seems to have now accepted arguments made by large consultants that investment consulting and fiduciary management functions cannot be separated easily due to shared resources, and indeed that the combination can benefit clients,” Gervaise-Jones said.

However, some consultants contested the CMA’s findings, in particular that there were “adverse effects on competition” exacerbated by low levels of engagement from some trustees.

Andy Cox, global business officer and head of investment at Aon, said: “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.”

Nikesh Patel, head of investment strategy at Kempen Capital Management, added that the CMA had proposed “little to meaningfully address” low levels of engagement. He called for a “braver push towards consolidation” to aid “overstretched” trustees of smaller pension schemes.

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