In a nutshell – PwC Summary of CMA’s Order issued on 10 June 2019

CMA Investment Consultancy and Fiduciary Management Market Investigation

Order 2019 - 10 June 2019

  • The Competitions and Markets Authority (“CMA”) have found that there is an adverse effect on competition in both the investment consultancy (“IC”) and fiduciary management (“FM”) markets.
  • These arise from low levels of engagement by some customers, lack of clear and comparable, information to customers, steering of customers towards certain services and barriers to switching providers.
  • The Order will require fiduciary managers and investment consultants to provide greater transparency into the products and advice they are providing to their customer. It encourages pension scheme trustees to “shop around” to make sure they fully understand the products they are investing in and getting the best deal for members.
  • There are eleven parts to the Order. Parts 3 – 9 cover the main requirements of the Order and are summarised in the table below along with the key details of each part.
  • The next step is for trustees, fiduciary managers and investment consultants to ensure that their practices are in line with the Order’s requirement. If they are found to be non-compliant, the CMA could take them to court.
  • Please click here to see the CMA’s Order.  
  Order part Key details FM
3 Mandatory tendering for fiduciary management
  • New clients: competitive tender required, minimum of 3 bids, Trustee written confirmation to manager required
  • Existing clients (<20% of assets): Must conduct competitive tender for increases or moves to another provider
  • Existing clients (>20% of assets) who did not conduct a competitive tender: Must conduct competitive tender, grace period of ~ 2 years
4 Prohibition on marketing material and mandatory wording requirements
  • Marketing material: Separation of advice and marketing required
  • Mandatory wording: clear labelling, standardised wording
5 Reporting of disaggregated FM services fees to existing and potential
  • Existing clients: Must provide fee statement at least annually, must be itemised and expressed as % and cash
  • Potential clients: Minimum disclosure requirements, must be itemised and expressed as % and cash, also include one off and exit costs
6 Performance reporting requirements to potential
Standard methodology must be agreed by all FMs within 6 months and used for providing information to potential clients. Otherwise, CMA will appoint an independent person to develop and implement the Performance Standard  
7 Investment consultancy services objective setting
  • New clients: Must not enter into contact with investment consultant unless strategic objectives have been set
  • Existing clients: Must not continue to obtain investment consultant services unless strategic objectives have been set
8 Minimum standard for performance reporting of recommended products List of conditions that must be satisfied which include: meaningful comparisons, disclosure of sources, key facts and assumptions, time period shown, prominent warnings, currency, fee treatment and effect
9 Monitoring and compliance Compliance statements and signed certificate from Trustees and FMs within 12 months and 4 weeks from date Order Parts come into force, annually thereafter
Part 6: immediate, Parts 3, 4, 5, 7, 8: 6 months

PwC view: On the road to greater transparency

  • Pension scheme trustees sometimes have difficulty assessing whether they are getting value for money. Therefore, greater transparency around strategic objectives, performance and fees for investment consultants and fiduciary managers is a significant step in the right direction.
  • The Order will force pension scheme trustees who wish to delegate investment decisions for 20% or more of their scheme assets to run a competitive tender when first purchasing fiduciary management. We expect this will increase competition in the market and ensure fiduciary managers are communicating effectively to customers and really showing the value they can add.
  • Just like reviewing investment managers, we believe that schemes with fiduciary managers should also undertake regular independent oversight of their arrangements to ensure the trustees’ objectives are being met in an efficient and cost-effective way.
  • With the Order now issued and legally binding, trustees should consider the steps needed to ensure they are compliant. Please click here to use our impact meter tool.

Contact us

Keira-Marie Ramnath

Head of Fiduciary Management Oversight and Selection, PwC United Kingdom

Tel: (+44) 7710 036915

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