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UK consultants may have to restructure fiduciary offerings

Financial regulationUK consultants may have to restructure the way they sell their fiduciary offerings thanks to “unprecedented levels of regulation”, a report said.

According to the report by Boston-based research and consulting firm Cerulli the UK’s Financial Conduct Authority’s (FCA) reforms will impose a significant regulatory burden on UK consultants who may have to spin out fiduciary offerings into separate entities or win fiduciary business via third-party advisors due to perceived conflicts of interest.

The FCA says that barriers to entry and competition have put the 'big three' consultants and large asset managers at an advantage over smaller independent firms.

In order to counter any conflicts of interest and competition biases, consultants must provide details of their practices and procedures.

In September the FCA referred the sector to the Competition and Markets Authority (CMA), prompting a probe into industry practices. Consultants have until June 2018 to respond before the CMA publishes its provisional decision on the issue.

The CMA has the power to impose a broad range of remedies to improve competition, including forcing investment consultants to spin off divisions.

In addition to impediments to competition, the FCA also raised concerns over potential conflicts of interest, particularly in the provision of fiduciary management by consultants.

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