The Competition and Markets Authority (CMA) reforms to investment consulting and fiduciary management will now apply to the LGPS, after a change in the wording of the final order of the rules. The LGPS was initially excluded from the draft wording of the reforms and its inclusion in the final regulations was unexpected by most observers.
The Financial Conduct Authority (FCA) undertook a review of competition in the investment management industry, including profit margins at asset managers, which it published in 2017. This led to the FCA referring investment consultant and fiduciary managers to the CMA, and it found a lack of information on prices and performance, and investment consultants putting forward their own fiduciary managers to pension funds without adequate information on the wider market. Once appointed, it can be hard for funds to change fiduciary managers, which are mainly used by smaller pension funds as a way of coping with governance and investment decisions which they are not equipped to manage. LGPS funds now have six months, until December 10, 2019, to comply with the new rules.
Hymans Robertson head of LGPS investments, David Walker, said: “The new requirements include the need [for LGPS members] to set objectives for your investment consultant but may have wider reaching implications, depending on interpretation of what advice is now regulated and what is deemed a fiduciary relationship.”