FCA response to the CMA’s final report on its investigation of investment consultancy and fiduciary management services

Today the Competition and Markets Authority (CMA) published the final report and remedies for its market investigation of investment consultancy and fiduciary management services.

The CMA undertook this investigation following a reference we made as part of our asset management market study in September 2017. We made the reference because we had identified serious competition concerns in both markets. Investment consultants advise on £1.6 trillion of pension scheme assets in the UK and fiduciary management providers manage over £110bn of assets in this fast-growing market.

In its final report, the CMA has found competition problems in both markets. When selecting a fiduciary management provider, the CMA found that a large proportion of pension schemes chose the same provider that they use for investment consultancy. This gives these firms an incumbency advantage. The CMA also found that prospective customers do not have access to clear information about providers’ fees and historic performance. Once pension schemes have engaged a fiduciary manager, the cost of switching providers is relatively high.

For investment consultancy services, the CMA found low levels of engagement by some pension schemes in choosing and monitoring their provider. They found that it is not easy for pension schemes to access information about the quality of their provider. The CMA considers that these market features make it harder for pension scheme trustees to drive competition between providers. This reduces providers’ incentives to compete. Improving competition could help drive value for money and have a significant positive impact for pension schemes and the pension pots of millions of pension savers.

The CMA has designed a package of remedies to address the competition issues identified. These measures aim to promote greater trustee engagement. They will provide trustees with more information on fees and performance of fiduciary managers and investment consultants. To support its remedy package, the CMA has made several recommendations. This includes a recommendation to HM Treasury to broaden the FCA’s regulatory scope to include the activities of investment consultants to ensure greater oversight of this sector in the future.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:  

‘We welcome the CMA’s in-depth analysis of both investment consultancy and fiduciary management services and support the package of remedies proposed. It is essential that competition works well as these services have a significant impact on the retirement outcomes of millions of pension savers. We will continue to work closely with the CMA, HM Treasury and The Pensions Regulator to implement the CMA’s remedy package and take forward the recommendations in its report ’

Notes to editors

  1. CMA's final report on its investigation of investment consultancy and fiduciary management services