Regulation 

Treasury wavers over giving FCA new powers

Treasury wavers over giving FCA new powers

The government is still considering the recommendation made by the Competition and Markets Authority to extend the Financial Conduct Authority powers to allow the watchdog to crack down on investment consultants and fiduciary managers.

This was one of the recommendations made by the CMA after its investigation into this market, which was initiated at the request of the FCA.

The regulator itself has written to HM Treasury to extend its regulatory remit to include investment consultancy services and asset allocation advice.

However, the government hasn’t confirmed that this will be the way forward.

In a statement published today (March 12), John Glen, economic secretary to the Treasury, said in the context of competing priorities for both the government and the financial services sector, the Treasury will consider this recommendation and consult in due course.

Investment consultants advise pension trustees on how to invest their funds. Some pension trustees delegate investment decisions to fiduciary managers and a number of firms offer both services.

In its investigation the CMA found a low level of engagement by some pension fund trustees in choosing and monitoring their investment consultant and fiduciary manager as well as established firms having a considerable advantage over new smaller ones.

The remedies, which are to come into effect six months after a statutory order has been made, will see pension scheme trustees obliged to tender ahead of purchasing fiduciary management services where the mandate would cover 20 per cent or more of the scheme’s assets. 

Firms which offer both fiduciary management and investment consultancy services will be required to separate the marketing of fiduciary management services from the provision of investment consultancy advice.

Another recommendation made was that the Department for Work and Pensions should pass legislation to enable The Pensions Regulator to oversee duties on trustees.

As well as allowing TPR to more effectively monitor compliance, the move would create a more joined up approach between those carrying out enforcement and those producing guidance.

DWP has accepted this recommendation and intends consult on new rules later this year.

Meanwhile TPR has accepted the CMA’s recommendation that it should develop guidance to help trustees run a competitive tender process for fiduciary managers.

According to Guy Opperman, minister for Pensions and Financial Inclusion, these changes will have a positive impact on millions of people’s pension pots.

He said: "The market sometimes restricts trustees’ ability to find the best value for money, meaning that defined benefit schemes are less affordable and more difficult to fund, while defined contribution schemes face higher costs and reduced returns for members.

"We want trustees to be better equipped and engaged when accessing services which have a huge influence on decisions affecting how much their members will have to live on in retirement."

Steven Cameron, Aegon pensions director, said the government's refusal to make a decision on the FCA's new powers was yet another ‘casualty of Brexit’.

He said: "The pensions related activities of such firms can overlap or be adjacent to those of other regulated firms so we believe it makes sense to bring them within the scope of both the FCA and the Pensions Regulator.