UK Competition Authority Consults on Trustee Engagement With Investment Consultancy and Fiduciary Management

The U.K. Competition and Markets Authority has published a working paper seeking views on its initial analysis on trustee engagement with investment consultancy and fiduciary management service providers. This is the fourth working paper in the CMA's Investment Consultants Market Investigation in which it is assessing the supply and acquisition of investment consultancy services and fiduciary management services. The working paper should be read alongside the Issues Statement on the investigation, published in September 2017. The intention to publish a series of working papers on aspects of the investigation was outlined in a progress report in February 2018. The first working paper, relating to information on fees and quality, was published on March 1, 2018. The second working paper, on asset manager product recommendations, was published on March 22, 2018. The third working paper was published on March 29, 2018 and covered competition issues that may arise when firms offer both investment consultancy and fiduciary management services. This working paper builds on the CMA's second working paper, analyzing the information available to pension trustees on the fees and quality of investment consultants and fiduciary managers.

In the working paper the CMA sets out its analysis of the extent to which pension scheme trustees are able to assess the value for money of alternative service providers and act on the outcome of their assessment. The CMA uses four indicators to examine the level of engagement across different types of scheme: switching; tendering and/or switching; undertaking a formal review of fees and/or quality; and undertaking an external review of fees and/or quality. The CMA's preliminary findings are that levels of engagement vary significantly across pension schemes, with Defined Contribution schemes and smaller schemes less likely to engage than other schemes. In addition, the time and costs involved in switching fiduciary management providers can be sizeable. These conclusions indicate a potential concern about the extent to which trustees can assess their current providers and, in fiduciary management, switch provider. The CMA is considering potential remedies under three categories, namely: (i) measures which would provide trustees with better information on switching costs; (ii) measures to reduce switching costs; and (iii) measures to empower and incentivize trustee boards to enhance their engagement.

Feedback on the analysis presented in the working paper should be provided by April 26, 2018. The working paper will then be finalized and will form part of the CMA's provisional decision report on the investigation, which is scheduled to be published in July 2018.

View the fourth working paper.

View details of the Issues Statement.

View details of the working paper on information on fees and quality.

View details of the working paper on asset manager product recommendations.

View details of the working paper on competition issues arising when firms offer both investment consultancy and fiduciary management services.