Pension schemes' upcoming requirements to tender for fiduciary managers should have a minimum standard in place, in order to avoid it being a box ticking exercise, it has been said.

Speaking at the Transparency Task Force Symposium yesterday, 16 January, both EY and Goldman Sachs Asset Management suggested that there should be a “minimum standard” for tendering, to stop schemes paying lip service to the Competition and Market Authority’s (CMA) new requirements.

In December, the CMA published its final report on its Investment Consultants Market Investigation, suggesting that pension schemes must run a competitive tender before choosing a fiduciary manager for more than 20 per cent of its assets, in order to drive up standards and lower costs across the industry.

EY advisory services manager, Jonathan Craddock, said: “The only thing I would be slightly concerned about is the mandatory re-tender of the schemes which haven’t done it in the first place, whether there is going to be a minimum standard for that, or whether it is just going to be a box ticking exercise.

“There may be trustees which really like their fiduciary manager at the moment, that may not honestly be looking to move and are just doing it to say to you, ‘look we’ve done it’, and that might not be in the best interest of the underlying members.”

When asked if the CMA had plans to track what schemes have been doing as part of their tendering process, it said: “There is thought but not yet a plan, at the moment we are at the stage of getting the rules in place. We will initially be monitoring what schemes will be doing and then hand it over to The Pensions Regulator.”

Goldman Sachs Asset Management fiduciary management consultant relations, Richard Stephens, agreed that some sort of shared data around the tendering process would be “handy”.

“Anecdotally, we've heard of some schemes which have got written advice from a third party, but that pension schemes chose their current IC to be their FM, having just got the firms procurement office to say ‘this is a fine company appointment’,” Stephens said.

“That kind of data would be quite handy to see, maybe not who was involved, but who was running for tender and from whom was the advice sort, to get more transparency around the standard of these various tenders.”

The CMA said it would be consulting on the draft order of its suggested remedies into the investment consultant and fiduciary management markets in mid-February, with a view to finalising the order by the end of March.

It added it will make the order after it has received its response from the European Commission, before its statutory deadline on 11 June, and that it will come into force six months later.

Share Story: