The UK's Competition and Markets Authority, as the result of an original request from the Financial Conduct Authority, is proposing to impose a number of reforms on the investment consultancy and fiduciary management sector.

Investment consultants advise pension trustees, who oversee companies’ pension schemes, on how to invest their funds. Some pension schemes delegate investment decisions to fiduciary managers.

In September last year the CMA began to investigate competitive practices in this sector at the request of the FCA and it has now published a "provisional decision."

The CMA has spotted the following problems.

n Around half of pension schemes choose the same provider for fiduciary management that they use for investment consultancy. Their current investment consultants sometimes steer them to do this. Companies which offer both services therefore have an advantage over other firms when it comes to getting this business from existing clients.

• Some pension trustees do not talk much to providers in the sector when choosing their first fiduciary managers. Only a third of trustees ask firms to compete for their business through a tender process.
• Pension trustees often do not have enough information on the fees or quality of these services to be able to judge if they are obtaining good deals from their existing investment consultants or fiduciary managers, or if they could do better elsewhere.

In the report, the CMA has proposed the following.

• Pension trustees selecting their first fiduciary manager ought to run competitive tenders. Trustees who have already appointed fiduciary managers without doing this must also put thse jobs out to tender within five years.
• Fiduciary management firms ought to provide trustees with clearer information about fees and how they have performed for other clients, the better to allow those trustees to make comparisons between them.

The authority also wants the Pensions Regulator to produce some guidelines to provide trustees with more advice about how to choose and scrutinise providers. It also wants HM Government to broaden the FCA’s regulatory reach, the better to oversee the whole industry. Feedback is welcome.

Lesley Titcomb, the regulator's CEO and an alumnus of the FCA, plans to leave the organisation at the end of her tenure in February next year.