Fresh call for investment consultants to be fully regulated, UKSIF report

Investment consultants should be fully regulated by the Financial Conduct Authority (FCA), said the UK Sustainable Investment and Finance Association (UKSIF) in a report published on April 10.

Some consultantsʼ activities — including advice to pension funds on specific products and services — are already regulated but key activities, including high-level strategic asset allocation and the selection of fund managers, are not. UKSIF, which advocates for increased sustainable investment in the UK, suggested bringing the latter inside the regulatory perimeter would be a “positive initial step”.

Last summer, investor advocacy group ShareAction wrote to HM Treasury asking it to regulate investment consultants. Other signatories included Mick McAteer, co-director of the Financial Inclusion Centre and a former non-executive director of the  FCA.

Their concerns are echoed by UKSIF, which said that tackling the disjointed regulatory treatment of investment consultants was “overdue” and the government should address this in its pensions investment review.

Stock-take

The UKSIF report added that investors needed “decision-useful information” on sustainability. It wants the government to set-up an industry-led taskforce to establish a consensus on how the International Sustainability Standards Board’s S1 and S1 standards and transition plans can be applied across the pensions sector.

Zoe Alexander, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), supported the establishment of a taskforce to develop a “viable, industry-led solution”.

“With steps being taken to develop the UK into a world leader in sustainable finance, it is vital that sustainability reporting and disclosure requirements are as simple and streamlined as possible for pension schemes. We would welcome measures that seek to generate more decision-useful information at an appropriate frequency that can easily be acted on,” Alexander said.

The report also supported removing some reporting burdens from pension schemes by revising the frequency of required disclosures. UKSIF highlighted the recent change in the UK Stewardship Code to triennial reporting as a possible way forward.

UKSIF called on the government to raise the default contribution level under auto enrolment to “at least 12%”. It is currently 8%, of which employers must contribute 3%.

“Clearly linking regulation to delivery of real-world change, as highlighted in UKSIF’s review, would help to promote longer-term investment decision making, and in turn, help to deliver better outcomes to our customers,” said Joanna Walker, head of group sustainability at Royal London Group, commenting on the report.