The Competition and Markets Authority has issued a legally binding order requiring investment consultants and fiduciary managers to provide clearer information about what their customers are getting for their money.
The order is the competition watchdog’s final step in its reform of the fiduciary management and investment consultancy sectors.
It encourages trustees to shop around to ensure they are getting the best deal for their schemes.
The CMA's investigation found that many trustees failed to explore alternatives – using only the fiduciary management service offered by their investment consultants.
Under the CMA's order, trustees who want to delegate investment decisions for 20 per cent or more of their pension fund assets are required to run a competitive tender when first purchasing fiduciary management services. They must invite at least three fiduciary managers to bid for their work.
Schemes that have already appointed a fiduciary manager for 20 per cent or more of their assets without a tender are required to put the service out to tender within five years.
Furthermore, fiduciary managers must provide potential new customers with more information on their performance and fees. Existing clients must also be provided with more information on fees.
Fiduciary managers, trustees and investment consultants have six months to make sure their practices are in line with the competition watchdog’s requirements. If they fail to comply, the CMA could take them to court.
John Wotton, chair of the CMA’s investigation, said: “Millions of people rely on pension scheme trustees to invest their savings effectively – which is why it’s so important that trustees shop around for the best deal for them. Our investigation found that many trustees lack the information needed to assess and compare investment consultants and fiduciary managers, meaning they may not be getting the best value for their members’ money.”
He added: “By putting the requirements of our investigation into law today, we will increase competition and make sure these markets work better for UK pension beneficiaries.”
Sourced from The Pensions Expert - written by Sophia Imeson