Fiduciary Management: Improvement Through Competition?

Have you ever considered using fiduciary management services?

Does your scheme have a fiduciary manager? Are you considering appointing or replacing a fiduciary manager? If so, you should already be considering the implications of the Competition and Markets Authority's final report into the investment consultants market. The new requirements arise from concerns around the operation of the £1.6 trillion market for managed investments.

New rules are expected to come into force in late 2019. These will require trustees who appoint fiduciary management services for their scheme's assets to run a competitive tender process in respect of the appointment.

If you are considering appointing or replacing your provider, act now to ensure you are not storing up trouble for the future.

Key action points for trustees considering fiduciary management

Are you already in the process of appointing a fiduciary manager? Consider running a competitive tender.

The introduction of mandatory competitive tendering is not expected to come into force until late 2019. However, in light of the report, trustees should already be considering whether it would be appropriate to make an appointment without running a tender process first. To a large extent, we think it is possible to anticipate the Pensions Regulator's likely stance on how that should be done. Are you considering appointing or replacing a manager in the near future? Awaiting guidance could help your process.

The report confirms that the Pensions Regulator is expected to produce guidance for trustees when running tenders for investment consultancy and fiduciary management services. If you have the option, it may be beneficial to wait for the guidance to ensure your process is fit for purpose and meets the requirements. If you're considering an appointment, how does that fit within your wider business plan, budget and investment strategy?

The competitive tendering process is likely to be more time intensive and costly than trustees may be used to experiencing on past appointments. You should ensure your business plans and budgets contain sufficient capacity for making an appointment/re-appointment. Likewise, the process is likely to take longer, so ensure that is not going to impact negatively on your investment strategy. The investment landscape

In November 2018, we published an article considering whether the outpouring of recent pension investment publications, legislation and guidance meant a sea change for trustees' investment duties, or whether it was just more of the same.

We now consider the impact of a further publication on trustees' investment duties, the Final Report from the Competition and Markets Authority ("CMA") on its Investment Consultants Market...