Consultants to shift focus to fiduciary management

The leading investment consultants in the UK will increasingly concentrate on providing fiduciary management services, according to SEI.

SEI said regulatory and commercial factors would propel investment consultants to shift to fiduciary management by 2022. As evidence, it cited a recent FCA report, which is now under consultation, which expressed concerns about conflicts of interest and misaligned incentives in the asset management industry. SEI’s managing director of the institutional group, Patrick Disney, commented: “The tide is clearly turning towards fiduciary management, and, while investment consultants will continue to exist in some shape or form in future, it’s likely that regulatory pressure will hasten the demise of the traditional advisory model in the pension’s space. Indeed, I think we could see some investment consultants exit the traditional standalone pensions advisory market within 3-5 years, with the largest – driven by revenue considerations – deciding to focus their resources on fiduciary management instead.”

Disney compared a move away from a conflicted model of investment consulting to a previous change in the investment industry, commenting: “People forget that stockbrokers used to manage institutional money and they did so on a commission, not fee, basis. This created terrible conflicts of interest and portfolio churn. It was dissatisfaction with this model that eventually led schemes towards asset management and a new charging structure which removed the incentive to trade in order to generate fees.”