Poor competition in the market for advice to pension fund trustees has resulted in “substantial customer detriment”, Britain’s Competition and Markets Authority said on Wednesday.

UK pension schemes have total assets of 1.6 trillion pounds ($2.04 trillion), and the dominant advisors are Aon, Mercer, and Willis Towers Watson.

Half of pension schemes buy fiduciary management that makes investment decisions on their behalf, from their existing investment consultant.

It announced a range of reforms to the investment consultancy and fiduciary management sector, saying it was vital that competition works well.

Remedies include mandatory tendering when pension trustees first purchase fiduciary management services, and a requirement on investment consultants to separate marketing of their fiduciary management service from their investment advice.

The CMA said that trustees who have appointed a fiduciary manager without a tender must put the service out to tender within five years.

“This will increase competition and reduce the competitive advantage held by incumbent investment consultants when it comes to getting new business,” it said.

Fiduciary management firms must also provide potential clients with clear information on their fees, and show how they have performed for other clients.

The watchdog will put out to public consultation in early 2019 a draft “order” setting out the changes the sector must introduce later in 2019.

The CMA’s investigation began in September 2017 following concerns at the Financial Conduct Authority over a range of issues, including conflicts of interest and opaque fees.

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