ShareAction has written to the UK Treasury urging it to expedite plans to regulate all activities of investment consultants.

The charity was joined in its call by several pension organisations, including the Association of Member-Nominated Trustees, Pensions for Purpose, and Make My Money Matter.

ShareAction noted that, at various times over the past 10 years, the Financial Conduct Authority (FCA), Competition and Markets Authority (CMA), and parliamentary committees have called for investment consultants to be brought within the FCA’s regulatory framework.

It urged the Treasury to “rapidly progress” these plans to regulate the activities of investment consultants.

In the letter, ShareAction raised various concerns about the role and influence of the investment consultancy sector.

It noted that investment consultants play a key role in determining the investment strategies of pension schemes, with many schemes rely on advisers and investment consultants despite limited resources to assess the quality of the advice received.

Furthermore, the letter stated that while the FCA regulates many investment consultancy and fiduciary management activities, consultants’ investment advice to pension trustees is generally not regulated.

It also highlighted that the line between regulated and unregulated activities was “blurred”, and raised conflict of interest concerns when investment consultants are both assessors of asset managers and seeking to provide services as the fiduciary manager of assets themselves.

“The investment consultancy industry has faced criticism for the use of economic scenario models which significantly underestimate both the scale of future climate-related damages and the near-term risks of such damages occurring due to the failure to include climate tipping points in their models, which may result in incorrect investment advice,” the charity added.

The letter also pointed to evidence sessions from the Work and Pensions Committee (WPC) on fiduciary duties, which culminated with then Pensions Minister, Paul Maynard, writing to then WPC chair, Stephen Timms, saying it was his understanding that “HM Treasury intend to consult on the CMA’s recommendation that investment consultants be brought within the FCA’s regulator perimeter”.

“I would greatly value the opportunity to meet with you to discuss the need for the regulation of investment consultants,” ShareAction chief executive, Catherine Howarth, told the Treasury.

“I look forward to your response and will be pleased to liaise with your office on suitable dates for a meeting.”

This article was originally published on our sister website, Pensions Age.

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