Mercer, Aon and Willis Towers Watson still face a referral to the Competition and Markets Authority (CMA) over conflicts of interest over their investment consultancy services after the FCA rejected their undertakings in lieu of an investigation.
The FCA’s asset management market study final report says there will be a further consultation on whether to refer the ‘big three’ investment consultancies to the CMA, and will make a final decision in September 2017, citing concerns over the relatively high and stable market shares for the three largest providers, a weak demand side, relatively low switching levels and conflicts of interest.
The review also recommends that employee benefits consultants undertaking investment consultancy should be regulated by the FCA.
The regulator has confirmed that it will also launch a market study into investment platforms.
The review, which also includes a package of measures to include fund management transparency, found that pension trustees find it difficult to scrutinise the performance of their fiduciary manager because there is very little public reporting and scrutiny of fiduciary management fees and performance, making it difficult for investors to assess the performance of fiduciary managers and compare them, both at the point of sale and on an ongoing basis. It also found fees and charges disclosure by fiduciary managers are not consistent and comparable. This lack of transparency is likely to make it difficult for pension trustees to manage conflicts of interest when investment consultants also provide fiduciary management, leading to poor outcomes, says the regulator.
The report says more can be done to improve fiduciary management reporting and welcome suggestions raised by respondents. As part of the undertakings in lieu received from the big three EBCs, parties suggested reporting templates covering fiduciary management fees and performance, but the FCA says its provisional view is to reject these, and would expect the CMA to consider these points if a referral is made.
A spokesman for Willis Towers Watson says: “We believe the UILs provide a solid foundation on which to build any future work on the investment consulting industry. It is in all our interests to work constructively to continually improve industry practice to best achieve the interests of our clients, and of the end-saver.
“We also note the FCA have confirmed that it will be recommending that Treasury considers bringing investment consultancy services within the FCA’s regulatory perimeter. As we have stated previously, we support this recommendation.”