CMA updates provisional decision following ‘flawed’ data

The Competition and Markets Authority (CMA) has updated the results of its provisional decision report (PDR) on the investment consultants market, after it was called into question over “flawed” data.

In an updated working paper assessing the market outcomes of its PDR published yesterday, 25 October, the CMA 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”.

Last month, 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 new results also made the distinction between the structured bidding process and a formal tender.

The CMA added that any issues raised around data issues and coding was being dealt with on a “case-by-case basis”.

According to the CMA’s updated results, which have been expanded to include four fiduciary management-only providers, “internally-acquired schemes” that ran a formal tender achieved 22 per cent lower prices on average, compared to the 26 per cent originally outline in the PDR.

Commenting on the updated results, XPS Pensions Group head of investments, Patrick McCoy, said: “In reality tendering is only common sense. IC-FMs who are challenging the CMA would be better placed supporting the manifestly evident benefits of mandatory tendering to pension schemes, confident that their offering, if most suitable, will be retained by their clients.”

He added that tendering would add “nothing close” to the 50 per cent increase in total costs and would then be “offset by the fee reductions that result from it”.

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

Published in July, the CMA proposed that pension funds will be required to run a competitive tender when choosing their first fiduciary manager to increase competition within the market.

Despite this, it added that the break-up of some investment consultant and fiduciary management providers would have “adverse consequences” for both trustees and schemes members.

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