CMA launches market investigation into investment consultants

CMA launches market investigation into investment consultants

The Competition and Markets Authority (CMA) has launched a market investigation into investment consultancy and fiduciary management services following a reference from the Financial Conduct Authority (FCA). 

The FCA’s reference follows its own market study into asset management.  The FCA concluded that it has reasonable grounds to suspect that there are features of the sector which prevent, restrict or distort competition.  The FCA found that buyers of investment consultancy may not be best placed to judge quality or value for money; that the largest firms hold a large share of the market; barriers to expansion for smaller firms; and potential conflicts of interest relating to cross-selling of other services.

The FCA has the power to investigate markets both under its competition powers (market studies under the Enterprise Act 2002) and also under its regulatory powers (under the Financial Services and Markets Act 2000). This gives the FCA flexibility and means that markets can be investigated outside the confines of the relatively tight competition regime (meaning the FCA has more flexibility and can investigate broader issues than the CMA).  However, only the CMA may conduct a full ‘second phase’ market investigation under the Enterprise Act.

The CMA issued requests for information today to the main market players.  An issues statement will be published shortly, where the CMA will invite submissions from interested parties.

The CMA is due to report on its investigation by March 2019, although the timetable may be extended by a further 6 months.

An enduring regulatory trend of the last twenty years or so has been the series of market investigations and similar probes into the financial services sector.  These have covered such areas as: SME banking, store cards and insurance, PPI, home credit, most recently, personal current accounts, audit services, pay day lending and retail banking.  The latest market investigation into the asset management sector where 12 of the largest consultants advise on around £1.6 trillion of assets echoes many familiar themes.

CMA press release, 14 September 2017.  Available at:  https://www.gov.uk/government/news/cma-launches-market-investigation-into-investment-consultants