The Competition and Markets Authority (CMA) has released its working paper on the Investment Consulting business and its grip on the UK investment landscape.  Whilst there is a great deal of work on questionable practices, questionable value-add, and questionable fees, all of which will now be tackled, we are astonished to find under the section titled ‘Fees Paid To Third Parties’ the following:

“We have found little evidence in our document review that investment consultants regularly
undertake this kind of analysis for trustees:

• For many of the clients studied, we found no regular information or analysis regarding third party fees.

• In a small number of cases, asset manager fees were reported in quarterly performance reports.

However, no analysis was provided on the impact of such fees on returns, or whether fee levels were
competitive. No information was provided on other third party fees.”

This includes the management fees paid to management groups, implicit and explicit transaction costs, etc, and means that the main expenses being incurred by pension schemes are not being reported to the trustees of the schemes.  Which is absurd.

Perhaps it is an obvious thing to say, but if you have a funding gap then not having the first clue about third-party costs might be a little bit of a problem.