Exclusive research: How the CMA's findings on fiduciary management hit smaller schemes hardest
Professional Pensions has collaborated with BMO Global Asset Management on a new piece of research covering how smaller pensions schemes are affected by the CMA’s fiduciary management reforms.
The findings of the Competition and Markets Authority (CMA) review of Fiduciary Management (FM) tendering process came into force in December last year, requiring pension schemes to make significant changes in how they tender for and select FM providers. Those who hired their consultants as managers without a tendering process will be required to re-tender, those considering new mandates face embarking on a more rigorous, and potentially more costly process.
Professional Pensions' research shows that small schemes (those with less than £100m AUM) are far more likely to use fiduciary managers, far more likely to value the service against a number of indicators, and, vs large schemes, nearly three times as likely to have hired their consultant. They also are significantly less likely to have professional trustees and have fewer resources when it comes to investment expertise: those best placed to benefit from FM arguably face the toughest buying decisions.
The positive news from the research we conducted with Professional Pensions is that trustees and third-party evaluators have already started to implement the CMA's objectives, with several recent tenders asking for specific information around fees and expected future costs on transitioning and ongoing management. This is to be welcomed.
The less positive news is that for many smaller schemes, some 47% of them, these changes are considered ‘burdensome', potentially putting a minority in danger of a ‘box-ticking' exercise.
BMO Global Asset Management are very pleased to have been able to collaborate with Professional Pensions on this important piece of research for the industry, and we hope that it will go some way towards improving schemes' awareness of these issues; the quality of the dialogue between them and their prospective fiduciary providers; and, ultimately, the value which they can pass on to members.
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