Press Release: CMA Report Response
CMA Report marks turning point in drive for transparency and good governance
London, 18th July 2018 – Advisory firm IC Select welcomes the CMA provisional decision report and support the decision not to split up the investment consultants which we felt would have been detrimental to the investment services that many pension funds receive from them.
Peter Dorward, Managing Director, IC Select, commented: “Overall we believe the report and the process of discussion with the industry has changed attitudes towards transparency for the better by investment consultants and fiduciary managers. The remedies proposed will ensure that as the process moves forward from here, these transparency gains are not lost”.
Mandatory tendering is an effective way of dealing with conflicts of interest that arise when an investment consultant offers fiduciary management to existing clients. This enshrines the best practice followed by many trustee boards who recognise the value that can be gained from a competitive tender process. Trustees need to ensure that they have a robust governance process when selecting fiduciary managers, or advisers for that matter. Best practice would suggest that trustees get written advice from an independent third party organisation, so that they can demonstrate appropriate due diligence and process, whenever they appoint a new a fiduciary manager or adviser. This is analogous to the section 36 letter trustees require when they appoint any other fund manager.
The call for the introduction of common standards for performance reporting underlines the work that IC Select have undertaken in recent years culminating in the launch of the IC Select Fiduciary Management Performance Standard in April 2018. The standard helps pension schemes compare the skills of fiduciary managers hired by trustees to make investment decisions on their behalf. It also mitigates against the risk that managers would cherry pick performance data to look as attractive as possible to their potential clients, during a tender process
We welcome the call for greater demand side challenge in advisory consulting by improving the information that is made available to trustees. This is something that IC Select has been developing and discussing with investment consultants and we hope that these discussions will bear fruit over the coming months. As the report highlights access to comparative information and greater transparency should lead to greater trustee engagement which as the CMA can reduce the fees paid to the successful firm by up to 25%.
Finally we fully support the call for trustees to set clear objectives when hiring an investment consultant. In our discussions with consultants to improve demand side challenge we have addressed this by requiring consistent reporting of performance as the returns net of all fees relative to a liability benchmark. Standardising performance, and costs, in this way will help trustees better assess whether they are receiving value for money from their investment adviser.
For the pdf version: click here
For further information please contact:
Peter Dorward, Managing Director
0131 247 7439
Roger Brown, Founder and Director
0131 247 7454
Notes to Editors:
IC Select, the oversight and selection specialist, specialises in helping pension funds select, monitor and review investment consultants and fiduciary managers. The firm's assessment capabilities leverage on its unique positioning:
- Wholly independent
- Free of conflicts
- Research led
- Focused on assessment from an investors' and investment perspective
IC Select is a wholly independent organisation and is placed in a unique position amongst third party evaluator firms, as the only organisation that is able to conduct in depth research of both the advisory and delegated investment services of the major investment consultants, as well as other fiduciary management providers. By not competing with these firms, IC Select has unparalleled access to detailed information not available to other third party evaluators.
As a result, trustees can be more confident in the quality of their investment decisions and are able to enhance their scheme governance.