Big three question ‘robustness’ of updated CMA findings

Mercer, Aon and Willis Towers Watson (WTW) have reiterated their criticism of the data used in the Competition and Market Authority’s (CMA) provisional decision report (PDR), in their response to the regulator’s updated results.

Submitting its response on the 5 November, Mercer questioned the CMA’s “headline” finding that clients who do not run a formal tender pay 22 per cent more, by arguing that the CMA’s dataset covered less than 3 per cent of the market in 2016.

Last month, the CMA updated the results of its PDR on the investment consultants market and said it had made changes to the underlying dataset, affecting the status of some schemes as well as “expanding the number of firms in the analysis”.

However, Mercer said: “In order to achieve this result, the dataset of FM appointments analysed by the CMA has been narrowed to the extent that the benchmark group is less than 3 per cent of the market as it existed in 2016. Specifically, the benchmark group is comprised of fewer than 20 clients out of a total market of over 700.”

Also responding to the update, Aon said that its review had remained unchanged in that “there is a lack of persuasive evidence of adverse market outcomes in relation to trustee engagement”.

The group wrote: “The working paper fails to address Aon’s previous submissions that the CMA’s evidence does not support its investment consultancy – fiduciary management steering assertion.”

In a separate response, Willis Towers Watson agreed that the working paper “has not acknowledged or responded” to the concerns raised in its response to the PDR and also questioned the results.

“No weight can be placed on these results for the purposes of quantifying the level of detriment in the industry or informing any conclusions about the proportionality of the CMA’s remedies package," WTW said.

“This is because, even if the results presented in the working paper are taken at face value, it is clear that they are not robust. Small changes in model specification or the set of firms considered in the analysis, can have a significant bearing on the results of interest.”

The group added analysis undertaken by “external economic advisers” further demonstrated the “lack of robustness”

In September, Mercer questioned the credibility of the PDR after UK CEO Fiona Dunsire wrote to the investment consultancy market investigation chair, John Wotton, claiming that the CMA’s findings were based upon “incorrect data, errors in the CMA’s analytical code and reliance on unrepresentative samples”.

The CMA said it hopes to publish the final decision of its investigation on investment consultants and the fiduciary management market by Christmas.

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