CMA produces new requirements on investment consultants and pension trustees

The CMA order (24 page / 230KB PDF) is the conclusion of an investigation into the supply and acquisition of investment consultancy services and fiduciary management services to and by institutional investors and employers in the UK.

The investigation began in 2017 and the CMA published its reform plans in December last year.

The finalised rules provide for a number of requirements on pension scheme trustees, investment consultants and fiduciary management firms. There are some exemptions for small schemes and some public service schemes, as well as master trusts operated by firms offering investment consultancy and fiduciary management services.

Pension scheme trustees wishing to delegate investment decisions for 20% or more of their scheme assets need to run a competitive tender including at least three firms.

If trustees want to increase the proportion of assets managed under a fiduciary management contract by a single firm from less than 20% to more than 20%, they also need to conduct a competitive tendering exercise.

Trustees who have appointed a fiduciary manager for 20% or more of their scheme assets without a tender will now have to put the service out to tender within five years. There is a two-year grace period for existing agreements of more than five years.

Trustees should set strategic objectives in advance of receiving investment consultancy services from a provider. The order also contains requirements for information disclosed about recommended funds, as well as on marketing and advice to customers.

Trustees need to be provided with fiduciary management marketing material and advice on fiduciary management or on investment consultancy in the separate documents. Marketing material has to be marked using CMA wording.

Potential new customers will be provided with information on fiduciary managers' fees and performance, using the standardised methodology and template. Existing clients will be provided with fee statements at least once a year.

Firms will be using a CMA-approved Fiduciary Management Performance Standard, for reporting on past performance of their services within six months.

Trustees, fiduciary management firms and investment consultants will submit annual compliance statements to the CMA confirming they are following the new rules.