The UK’s antitrust body will carry out a full-blown competition probe into investment consultants after the financial watchdog found far-reaching problems in an industry that advises on more than £1.6 trillion (US$2.1 trillion) of pension and insurance assets.
The Financial Conduct Authority said on Thursday, September 14, that it was referring the investment consultancy and fiduciary management sector to the Competition and Markets Authority, the antitrust body. It is the first time that the FCA has referred an industry to the CMA since it gained new powers more than two years ago.
The competition probe marks a big step in scrutiny of a sector which has power over the retirement incomes of millions of people across the UK.
The FCA said it was concerned the investment consultant market had “relatively high levels of concentration”. The watchdog said the so-called big three — Aon Hewitt, Mercer and Willis and Towers Watson — account for up to 80% of market.
It warned of a “weak demand side”, where pension fund trustees rely heavily on consultants but have limited ability to assess the quality or their work or compare services, which affects switching rates.