Mandatory searches, the separation of marketing materials and falling under greater powers from The Pensions Regulator and Financial Conduct Authority are among new requirements for the investment consulting and fiduciary management industries.
In a final report of its decisions regarding the consulting and outsourced CIO markets, published Wednesday, the Competition and Markets Authority said it will introduce mandatory searches for the first purchase of OCIO services where a pension fund wishes to delegate investment decisions for more than 20% of fund assets. Further, competitive searches will also be required within five years if an OCIO has already been hired without a search.
Investment consultants that also offer OCIO services will be required to separate marketing of the two offerings. Consultants and OCIOs will also have to report the performance of any recommended money management strategies using basic minimum standards. Further, OCIOs will have to provide better and more comparable information on fees and performance for prospective clients, and also on fees for existing customers.
Regarding the U.K.'s Pensions Regulator, it will be required to give greater support to trustees when they run searches for consultants and OCIOs.
The CMA also recommended that the government enable TPR to oversee its recommendations and to extend the Financial Conduct Authority's regulatory remit to include all of the main activities of investment consultants.
"This is an extremely important sector that influences how well millions of people's pension savings are invested, yet we've found that many pension trustees may not be getting the best value for money for their members," said John Wotton, chairman of the CMA's Investment Consultants Market Investigation, in a statement accompanying the final report. "Some lack the information they need to compare providers and so could be sticking with their existing investment consultant or fiduciary manager when there are better options available."
Mr. Wotton added that it is "therefore imperative we make these changes so that the sector works better for those it is meant to support — pension scheme members."
The CMA will set out its requirements for consultation early next year. Implementation of the new requirements is set to come into force later in 2019.
The final report is the culmination of a market investigation into the investment consulting and OCIO industries. It was launched in September 2017 following a request by the FCA.