Why WTW, Mercer and Aon cannot speak for us all.

Well I never!

Aon Hewitt, Mercer and Willis Towers Watson have submitted a joint response to the FCA’s Asset Management Market Study Interim Report, proposing a number of measures to improve competition and transparency in the investment consultancy and fiduciary management sectors – but are refusing to say what their proposals are.

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The three consultancies’ joint response contains a number of ‘undertakings in lieu’ in a bid to fend of the threat of a referral to the Competition and Markets Authority (CMA) for a market investigation.

One question is whether this is a bid prompted by the FCA, to the investment consultants off the hook (rather as the IGC initiative got the insurers off the hook following the OFT report. Corporate Adviser is hinting it is and that  such an “Undertakings in Lieu” of making a Market Investigation Recommendation , would address its concerns.

Another question is whether these consultancies had any intention of changing their ways independently of the threat of a referral. Judging by WTW’s claim to have been working on its AMX “clean-up” service for the past two years, the answer might be “yes”. But the market remains to be convinced about just why it’s taken so long and what happened the clients got from WTW in the meantime.

Frankly I don’t really care how these investment consultants get their  act together, as long as they do. But the “as long as” to date, has been very long indeed and the only time that I have seen any of these consultancies take any steps towards resolving their conflicts was when Eliot Spritzer gave Mercer a gook kicking when Mayor of New York.

These consultancies are good at self-advocacy and their UIL will, I’m sure, sound very credible. But is the time for the FCA to relent? It has never yet seen a threat of a CMA through, every time that it allows its threat to be withdrawn in lieu of some promises, the status quo is re-established within a couple of years. The CMA is a tough place, much feared and to be avoided.

I rather hope that the FCA will reject the UIL on grounds of collusion. Aon, Mercer and WTW are in charge of 60% of the decision making made by occupational pension scheme trustees and clearly they have no intention of losing their hegemony. The UIL excludes the views of Hymans Robertson, LCP, Barnett Waddingham, Xafinitym, Redington  (and our own First Actuarial). It excludes the view of the large accountancy practices and or the smaller investment consultancies, many of which were set up to provide an alternative to Mercer, Watsons and Aon.

In my opinion, it is from the 40% of the market not covered by the big three, that there is a genuine chance of  seeing  the change the FCA wants. Tying the 40% to a UIL they had no part in and can’t even see is as anti-competitive as it gets.

And if thee is any doubt that these big three consultancies really believe in change, listen to what they are saying to Corporate Adviser.

“This package reflects both the concerns raised by the FCA and our own views on how the industry can progress effectively. We operate in a highly competitive and innovative marketplace, and are in complete support of measures to enable trustees to monitor and better evaluate their investment consultants. The package represents readily implementable changes in place of a protracted market investigation.”

Well if investment consultants act in the competitive and innovative marketplace they have nothing to fear from an MIR.

WTW says

“The specific measures that we have submitted to the FCA for consideration will, if accepted, help all institutional investors ensure they have the right provider, the right service model, and the right information to judge the quality of our input.  We believe their adoption by all firms operating as investment advisers or fiduciary managers will promote the continuation of healthy competition and strong outcomes for our clients.”

As I have mentioned in a recent blog, WTW still see themselves not just as above the law, but the law itself, this high-handed language ill-befits an organisation under threat of a CMA.

In Corporate’s excellent article, only Mercer are showing anything like an understanding of their gravity of the situation.

Mercer fully supports the FCA’s aim to ensure an effective asset management sector for clients, and – most of all – individuals who participate in pension plans

It is ordinary participants of pension plans that pay the price for poor investment consultancy. They have no chance of managing their way around the problems created by poor behaviour and that is why the FCA should stick to their guns.

Giving in to the big-three at this stage would be a retrograde step. The FCA must have the courage of its convictions and demand that whatever solution they come to , comes from all investment consultancies and not just the three that have colluded.

With thanks to Corporate Adviser for this excellent expose


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Why WTW, Mercer and Aon cannot speak for us all.

  1. Con Keating says:

    If ever there was an argument for referral it lies in this action. These are the principal bodies who have been arguing for years that there are no problems – and then we see new commercial actions predicated upon their existence, such as WTW’s new AMX service. We hear that this was 2 years in the arrangement which raises the question: what was being done during thise two years.
    BUT those issues pall into insignificance, with this action. We have a set of proposals intended to elude a competition referral, where transparency and disclosure are a central concern, BUT these proposals are SECRET – we are not to know which if any of the concerns have been addressed or even the extent to which those which may have been have been resolved. One thing though is obvious, old habits clearly die hard. This proposal is being presented in precisely the legacy manner and that was completely unacceptable. The competition referral should go ahead.

  2. Julie Richards says:

    Henry and Con – I suspect I have been guilty of complacency on this issue because it felt too far removed but your comments have struck a cord. Not sure what I could do but perhaps FCA needs to hear more from the clients/end users?

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