• Investment markets research

At a glance

IFF’s research amongst 966 trustees of occupational pension schemes was used to help inform the CMA’s market investigation of the supply and acquisition of investment consultancy (IC) services and fiduciary management (FM) services to and by institutional investors and employers in the UK. The CMA found competition problems within both the investment consultancy and – to a greater degree – the fiduciary management markets. In December 2018, the CMA announced a range of reforms to the investment consultancy and fiduciary management sector to deal with its concerns.

About the client

The Competition & Markets Authority (CMA) is an independent non-ministerial department that works to promote competition for the benefit of consumers, both within and outside the UK. They work to ensure that consumers get a good deal when buying goods and services, and businesses operate within the law.

CMA

Challenges and objectives

In September 2017, the Financial Conduct Authority (FCA) made a reference to the CMA for a market investigation into the supply and acquisition of investment consultancy (IC) services and fiduciary management (FM) services to and by institutional investors and employers in the UK. IC services and FM services are typically purchased by the trustee boards of occupational pension schemes, in order to assist them in administering the affairs of the pension scheme. The CMA appointed IFF to conduct quantitative research to explore:

  • How trustees purchase advice, monitor and switch between IC providers;
  • How the use of FM providers arises, and how those providers are monitored;
  • Trustees’ motivations for purchasing, monitoring and switching IC provider and FM provider;
  • Trustees’ attitudes toward providers of IC services and FM services, and the perceived extent of any problems and potential conflicts of interest there might be in the market.
CMA investment markets research

Solution

The target audience was the trustee boards of UK occupational pension schemes with 12 or more scheme members, excluding those with no trustee board or managed in the public sector. The Pensions Regulator (TPR) were able to supply details of all 7,102 pension schemes in scope for the research, although usable contact details were not available for 17% of schemes. All 5,905 pension schemes in scope with valid contact details included and given equal priority in sampling.

The questionnaire was designed in a collaborative, iterative process by the CMA and IFF Research. The survey was consulted upon with relevant stakeholders, including TPR and parties to the investigation. The questionnaire included a complex screening process, designed to ensure that the most appropriate person was being spoken to. The screener also allowed referrals to be taken to relevant trustees for whom TPR did not hold names or contact details. It also contained measures to ensure that the trustee spoken to was able to speak on behalf of the board of trustees for that specific pension scheme and had the knowledge of the scheme necessary to take part.

The survey was tested and refined through feedback from five cognitive depth interviews. These followed a standard format for a cognitive interview, consisting of the full draft questionnaire, followed by a series of questions designed to assess how the interviewee had experienced the survey, and explore any areas of possible misunderstanding. The questionnaire was further tested in pilot fieldwork.

A total of 966 valid interviews were completed.

Impact

The research was used to help inform the CMA’s market investigation. The CMA has found competition problems within both the investment consultancy and – to a greater degree – the fiduciary management markets. Its final conclusions are that:

  • Some pension trustees will choose their existing investment consultant to be their fiduciary manager even if a better deal may be available elsewhere, with only a third of pension trustees asking fiduciary managers to compete for their business through a tender.
  • Investment consultants who offer fiduciary management services also have an advantage when it comes to getting business from existing clients, as they are able to steer customers towards their own service.
  • Many pension trustees do not have sufficient information on the fees or quality of investment consultancy and fiduciary management to be able to judge if they’re getting a good deal from their existing provider, or if they could do better elsewhere.
  • These features reduce pension trustees’ ability to effectively compare all their options and reduce providers’ incentives to compete. We consider that this could lead a worse deal for pension trustees and the people whose pensions they manage.

In December 2018, the CMA announced a range of reforms to the investment consultancy and fiduciary management sector to deal with its concerns.

For more details view the published summary report and technical appendix.

For further information and advice on competitive markets or regulation research, contact Regulation research manager, Rob Warren.

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