The UK’s pension scheme trade body has voiced support for the regulator’s push for a competition review of the investment consulting sector.
The Pensions and Lifetime Savings Association (PLSA) said it supported the Financial Conduct Authority’s (FCA) plan to refer the investment consulting sector to the Competition and Markets Authority (CMA).
As part of the FCA’s asset managment market study, the regulator said it wanted to to investigate the dominance of Willis Towers Watson, Mercer, and Aon Hewitt within investment consulting.
In February the three firms submitted “undertakings in lieu” (UIL) to the regulator outlining potential changes and guidelines, but the FCA said it was minded to reject them and press on with the CMA referral.
Caroline Escott, investment and defined benefit policy lead at the PLSA, said the UIL contained “insufficient market coverage or detail”, despite “many welcome commitments” to addressing the FCA’s concerns.
“The FCA identified issues on both the demand- and the supply- side of what is a complex and evolving market,” she said. “A CMA investigation could probe competition issues in greater depth and recommend far-reaching solutions. We would therefore support a referral to the CMA and hope such a step would ensure a market which works in the best interests of pension schemes and their members.”
Escott said some PLSA members had “consistently expressed their concerns about the potential misalignment of incentives” in the investment consulting sector, but acknowledged that some members were happy with the services provided.
Separately, a survey carried out by fiduciary manager SEI claimed that more than half of pension schemes planned to “re-evaluate” their relationships with advisers following the asset management market study.
SEI polled 35 pension trustees outside of its client base, representing £42bn of assets. The majority (87%) said they would review their investment consultant in the next two years, while 60% they would look into alternative models outside of traditional investment consulting.
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