The Financial Conduct Authority (FCA) has published the proposed reforms put forward by the big three investment consultants as it seeks industry views on whether to reject them.
The previously secret undertakings in lieu (UILs) of a market competition investigation - made by Aon Hewitt, Mercer, and Willis Towers Watson - outline the consultancies' promises to improve competition and provide clearer information to clients.
The firms namely committed to "encourage regular tendering of investment services contracts in relation to which they act as consultant", and "demonstrate their commitment to improving transparency and comparability of active asset manager performance [by providing] clients with detailed information which will allow them to assess the performance" of fund managers.
They also said they would "provide an annual disclosure statement, covering all costs" compared with estimated costs provided during the tender process, and disallow incumbent consultants from recommending the same firm's fiduciary management service or master trust.
The document, which is marked ‘confidential', was submitted to the FCA in February, following the regulator's interim report of its asset management market study, which expressed concern about a lack of competition and transparency in the market.
Yet, details of the document were scarce until the regulator published it alongside its final report on 28 June.
In a letter to the consultancies, FCA executive director of strategy and competition Christopher Woolard said the regulator was minded to reject the UILs, naming potential conflicts of interest as major reasons in particular.
"Without having carried out a full market study we are unable to confirm our understanding of the competition issues in this sector," Woolard wrote. "A full investigation of the sector by the CMA would enable them to identify all the relevant issues and put appropriate remedies in place."
The regulator is now inviting the industry to comment on whether to reject the UILs and refer the market to the Competition and Markets Authority (CMA), and is accepting views until 26 July before making a final decision in September.
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