News & Views

Investment objectives: Are advisers setting and marking their own homework?

This article was published in Professional Pensions | May 12, 2023 By Donny Hay

Since December 2019, the Competition and Markets Authority (CMA) has required trustees of DB schemes to set strategic investment objectives for their investment advisers, whether those advisers are investment consultants or fiduciary managers. In the summer of 2022, The Pensions Regulator (TPR) took over from the CMA in overseeing and guiding trustees.

More than three years on from the CMA order, most trustees are still merely tweaking the investment objectives proposed by their advisers. This means that investment advisers are reporting against objectives they have largely designed themselves. In effect, they are setting and marking their own homework.

The main danger from this conflict of interest is that investment advisers will set themselves low bars – unchallenging objectives that they can easily meet. This obscures the quality of the adviser’s service and makes it harder for trustees to get a true impression of how well their investments have performed. The net result is likely to be sub-optimal service for DB schemes and their members.

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