Concerns about the way pension assets are invested have prompted the Financial Conduct Authority (FCA) to refer the investment consultant sector to the competition watchdog.
A decision published by the FCA today said competition problems identified in the asset management study last year were ‘widespread’ in a sector which influences nearly all of the £2.1 trillion held by defined benefit pension schemes in the UK.
It added that a growing number of people saving into defined contribution schemes were affected by consultants’ decisions in the form of the ‘default’ strategy used by many workplace pension schemes.
Any changes suggested by the Competition and Markets Authority (CMA) are likely to focus on offering pension trustees better information in order to compare consultants. As part of its study of asset management, the FCA found that very few trustees switched between consultants and often relied on ‘limited’ information when choosing which company to use.
FCA executive director of competition and strategy Christopher Woolard (pictured) said referring to the CMA was a ‘siginifcant step’ to take in addressing these issues.
‘Investment consultancy services play a significant role advising pension fund trustees when they are procuring asset management services. It is important that trustees can be confident they are getting good quality advice and value for money from their investment consultants,’ he said.
Earlier this year the FCA rejected a bid by the three biggest investment consultant companies, Aon Hewitt, Mercer and Willis Towers Watson, to avoid a competition investigation through an ‘undertakings in lieu’ package of measures.