The CMA launches a market study into the investment consultants sector

The CMA launches a market study into the investment consultants sector


Author: Simon Barnes and Louisa Mottaz

Applies to: UK wide

The Financial Conduct Authority, FCA, has made its first ever reference to the Competition and Markets Authority, CMA, asking it to carry out a full market investigation to ensure the market is operating competitively.

The request comes after the FCA identified concerns over the functioning of the asset management sector in the UK.

The FCA, the financial services regulator, has asked the CMA to launch a market investigation into the investment consultants sector following a recent market study in the asset management industry that raised concerns that the sector is not operating as competitively as it should.

The FCA is not under a duty to make a reference to the CMA but, on this occasion, the FCA decided that it was necessary to ensure the proper competitive functioning of the financial investment industry. Especially given that the investment sector is a particularly large part of the UK economy estimated at approximately £6.9 trillion worth of assets and includes funds managed for individual UK investors (£1 trillion), UK pension funds (£3 trillion) and overseas clients (£2.7 trillion). Furthermore, any anti-competitive behaviour could have a significant impact on consumers in the UK as investors tend to bear all the investment risk and over three quarters of UK households are somehow reliant on these services through their saving plans, pensions' schemes and other investment services.

In particular, the FCA raised concerns over four key issues which prompted it to make a reference to the CMA: 

  1. The challenges faced by buyers of investment consultancy services in understanding whether the services offered are of a high quality and represent value for money.
  2. The fact that the biggest firms hold a large market share.
  3. The high barriers to expansion for smaller and newer consultant businesses.
  4. Potential conflicts of interest between some of the services offered by a number of consultancies.

As part of its independent investigation into the market, the CMA will gather as much information as possible and for this purpose it has already sent questionnaires to companies active in the financial consultancy sector, including suppliers and customers. We can also expect the issues statement which sets out the CMA's concerns and the parameters within which it will carry out the investigation to be published soon.

After completing its economic analysis, the CMA will determine whether there are any issues preventing the market from being competitive and will decide what actions should be taken to redress the situation. The CMA has broad powers to redress any issues such as imposing remedies or individual enforcement leading to fines against any companies that are found to be breaching competition law rules.

The CMA should conclude the investigation by March 2019.

Companies that are involved in this sector and who may have concerns over their activities or those who have received questionnaires from the CMA may wish to seek independent legal advice to ensure that they are managing risks and that they are in the best position when dealing with the competition regulator.


This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.