19/09/2017
A market investigation into the provision of investment consultancy and fiduciary* management services for the £1.6trillion investment fund market has been launched by the Competition and Markets Authority after the Financial Conduct Authority rejected a package of ‘undertakings in lieu’ put forward by the three major players, who hold between 50-80% of the market.
The FCA announced its provisional decision to make a Market Investigation Reference (MIR) in the interim report of its asset market study, published in November 2016, because it considered the following features of the market could potentially ‘prevent, restrict or distort competition’.
- 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 holding between 50-80% share of a £1.6trillion market advised by just 12 firms in total.
- Barriers to expansion restricting smaller, newer consultants from developing their business.
- Vertically integrated business models creating conflicts of interest.
‘Asset Management Market Study: Final decision to make a Market Investigation Reference (MIR) on investment consultancy services’ will gather a large amount of information on the market, including running a bespoke market survey. It will engage with key participants and undertake significant economic analysis before coming to its conclusions in March, 2019.
‘Fiduciary management’ occurs when the owners or trustees of a fund delegate responsibility for the integrated management of its assets to an investment expert.