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CMA launches market investigation into investment consultancy and fiduciary management services

  • United Kingdom
  • Competition, EU and Trade - Competition e-briefings
  • Financial services


The Competition and Markets Authority (CMA) has today launched a market investigation into investment consultants following a Final Decision by the Financial Conduct Authority (FCA) to make a market investigation reference (MIR) in respect of the supply and acquisition of investment consultancy services and fiduciary services to institutional investors and employers in the UK (more information is available on the CMA’s website).

The CMA has today sent out requests for information to the main companies involved to allow its work to begin. An issues statement setting out the CMA’s proposed focus of the investigation and potential remedies – in the event that an adverse effect on competition (AEC) is found – will also be published shortly.

All market participants, not only the recipients of the questionnaires, are invited to respond to the issues statement and this will present an opportunity for market participants to submit their views on key substantive issues.

The launch today marks the start of an 18 month in-depth review into whether there are any AECs in the referred market. The CMA will conclude the investigation by March 2019.


The FCA’s decision is the culmination of its long-running market study into the asset management market which began in March 2015. The referral is significant as it marks the first time that the FCA has exercised its powers to make an MIR to the CMA. It is also the first time that investment consultancy services and fiduciary management services have come under the competition spotlight. The decision to make the referral comes after the FCA’s decision to reject undertakings in lieu proposed by the three largest investment consultants, Aon Hewitt, Mercer and Willis Towers Watson.

Competition concerns identified by the FCA

As reported in our briefing of 28 June, the FCA has “serious concerns about the market” and has identified a number of aspects that might give rise to AECs, namely:

  • Weak demand side characterised by:
    • trustees of many pension schemes being over dependent on investment consultants
    • trustees finding it difficult to assess the quality of advice provided by investment consultants and the services of fiduciary managers
    • low switching rates
  • Relatively high levels of concentration and relatively stable market shares among investment consultants, which indicate that competition may not be working effectively
  • Barriers to expansion, which particularly restrict smaller, newer consultants from developing their business outside of niche, specialist areas
  • Vertically integrated business models which create conflicts of interest.

Next steps

The CMA has today started its process of information gathering with key players in the market. A detailed statutory timetable will shortly be published on its website, together with information on who has been appointed to the panel.

The initial issues statement due to be released shortly will provide an early indication of the areas on which the CMA intends to focus together with its early thinking on remedies. These are likely to evolve as the investigation progresses but all market participants have the opportunity to respond and to set out their views in order to influence the CMA’s thinking.

Although the CMA will consider the theories of harm and potential remedies identified by the FCA, it will approach this with a fresh pair of eyes and come up with its own views. The CMA has a wide range of legally enforceable remedies that it can use to address any AECs it identifies as a result of its investigation. These remedies could include structural or behavioural remedies, or recommendations to Government or to regulators which go beyond those indicated by the FCA. Structural remedies are generally seen as a draconian or an extreme form of market intervention but cannot be disregarded at this early stage – particularly given the FCA’s concerns about conflicts of interest arising out of vertically integrated business models.