Watchdog Investigates Pension Advisers’ Conflicts of Interest

The UK’s Competition and Markets Authority is looking into whether market features are crimping competition.

UK competition regulator the Competition and Markets Authority (CMA) is conducting an independent investigation to see if there are any market features that prevent, restrict, or distort competition, according to the Financial Conduct Authority (FCA).

The investigation covers investment consultancy services, which provide advice to employers about their pension plans, and institutional investors, particularly pension funds. It also covers fiduciary management services, where the provider makes and implements decisions for the investor.

“It is extremely important that the investment consultancy sector works effectively for its clients, which include many of the UK’s biggest pension funds,” said John Wotton, chair of the investigation group.  “And we want to ensure we are looking at the right issues. That is why we are urging people to get in touch if they have any evidence to share or views about whether these are the correct areas for us to be investigating.”

The CMA is required in its investigation to decide whether any feature, or combination of features, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the UK, according to the CMA.  The CMA will then decide whether it should put in place remedies, or recommend that other bodies should do so, to “tackle the adverse effect on competition or any detrimental effect on customers so far,” said the CMA.

Potential issues and possible remedies to put in place if competition problems are found have been grouped into the following areas:

  • Whether difficulties in customers’ ability to assess, compare, and switch investment consultants mean investment consultants have little incentive to compete for customers.
  • Whether conflicts of interest on the part of investment consultants reduce the quality and/or value for money of services provided to customers.
  • Whether barriers to entry and expansion mean there are fewer challengers to put pressure on the established investment consultants to be competitive.

The CMA is also calling on the public to offer views on whether the correct issues have been identified, and whether other issues should also be investigated, as well as views on potential remedies. It has appointed an investigation group, which will act as the decision-maker in the case.

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