On July 18, 2018, the U.K. Competition and Markets Authority published a Provisional Decision Report in respect of the Investment Consultants Market Investigation in which it is assessing the supply and acquisition of investment consultancy services and fiduciary management services. The CMA has already published several working papers and an Issues Statement as part of the investigation.

The Provisional Decision Report sets out the CMA's assessment of the investment consultancy and fiduciary management markets, its general conclusions on competition, its provisional decision on competition and provisional remedies to address the identified competition issues. The CMA's provisional finding is that there is an adverse effect on competition which may result in material detriment to customers in both the investment consultancy and fiduciary management markets, although there are more concerns with the fiduciary management market.

In investment consultancy, the CMA considers that there is a low level of engagement by some customers in choosing and monitoring their provider. In addition, some customers may have difficulty in accessing and assessing the information needed to evaluate the quality of their existing investment consultant and identifying whether it would be to their advantage to use an alternative provider.

In fiduciary management, the CMA has found that firms providing both investment consultancy and fiduciary management have an "incumbency advantage" as a result of low customer engagement at the point of entry and due to investment consultants directing their advisory customers towards their own fiduciary management service. In addition, the CMA's view is that prospective customers cannot access comparable information on providers' historic performance and do not have clarity on fees because they cannot access information to assess whether a better fee deal is available from an alternative provider.

According to the CMA, the result is a diminished ability for customers to drive competition which in turn leads to a disincentive for providers' to compete. The CMA is proposing various remedies, including requiring:

  • Pension trustees selecting their first fiduciary manager to run a competitive tender. Where trustees have already appointed a fiduciary manager, the trustee must put the role out to tender within five years.
  • Pension trustees to set objectives when they hire an investment consultant so that they can better assess the quality of service.
  • Fiduciary management firms to provide clearer information on fees by providing disaggregate fees for prospective customers and providing more detail to existing customers on costs, including those relating to exiting the service.
  • Investment consultancy and fiduciary management firms to report to their customers on how they have performed for other clients using a set of common standards.

The CMA also recommends that The Pensions Regulator should provide trustees with more advice on how to choose and evaluate providers and that the FCA's regulatory scope should be expanded to increase oversight of the industry.

The CMA is inviting feedback on the Provisional Decision Report by August 24, 2018. The statutory deadline for the CMA's final report is March 13, 2019.

The provisional decision report is available at: https://assets.publishing.service.gov.uk/media/5b4f4db2e5274a730e4e273b/investment_consultants_market
_investigation_provisional_decision_report.pdf, the appendices and glossary are available at: https://assets.publishing.service.gov.uk/media/5b4e20e7e5274a72fee9c20c/investment_consultants_market
_investigation_appendices.pdf, the research and analysis page is available at: https://www.gov.uk/government/publications/investment-consultancy-market-investigation-summary-of-provisional-findings/serving-uk-pension-schemes-better-provisional-findings-from-the-cmas-investigation-into-investment-consultancy and the market investigation webpage is available at: https://www.gov.uk/cma-cases/investment-consultants-market-investigation.

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