FCA Refers Investment Consultants


The Financial Conduct Authority  has today confirmed its final decision to make a Market Investigation Reference to the Competition and Markets Authority in relation to investment consultancy and fiduciary management services.  This is the first time that the FCA has made such a reference to the CMA.

The FCA has the power to make a Market Investigation Reference when it has reasonable grounds to suspect that any features of a financial services market prevent, restrict or distort competition. In the case of investment consultancy and fiduciary management, the FCA considers those features are:

  • A weak demand side with pension trustees relying heavily on investment consultants but having limited ability to assess the quality of their advice or compare services with resulting low switching rates.
  • Relatively high levels of concentration and relatively stable market shares with the largest three firms together holding between 50-80% market share.
  • Barriers to expansion restricting smaller, newer consultants from developing their business.
  • Vertically integrated business models creating conflicts of interest.

In the interim report on its asset management market study published in November 2016, the FCA announced it had made a provisional decision to make a MIR. In response, the three largest investment consultants (Aon Hewitt, Mercer and Willis Towers Watson) offered the FCA a package of undertakings in lieu (UIL) of a reference to address its concerns.

Although the FCA welcomed the UIL package proposed, it noted that it could not be confident that the package would provide a comprehensive solution to the adverse effects of competition identified. So, alongside its asset management market study final report published in June 2017, the FCA announced a provisional view to reject the UIL.

Following further consultation the FCA has considered the responses it received and made a final decision to reject the UIL and make a MIR.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

‘It is a significant step for us to make this recommendation. We have serious concerns about this market and believe that the CMA is best placed to undertake this work.

‘Investment consultancy services play a significant role advising pension fund trustees when they are procuring asset management services. It is important that trustees can be confident they are getting good quality advice and value for money from their investment consultants.’

Assets affected by investment consultants’ advice are significant, with up to £1.6tn of assets affected by the advice of the twelve largest firms. The institutional investors who use investment consultancy services are mainly pension schemes but also include charities, insurance companies and endowment funds.

Source: FCA

Some responses:



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