Thomson Reuters
LONDON, Sept 14 (Reuters) – Britain’s markets watchdog said on Thursday it has serious concerns about the investment consultancy sector which it had asked the country’s competition authorities to investigate.
The Financial Conduct Authority said it was the first time it has referred a case to the Competition and Markets Authority, and the initiative was part of broader efforts by the FCA to improve value for money and transparency in the asset management industry.
“We have serious concerns about this market and believe that the CMA is best placed to undertake this work,” Christopher Woolard, the FCA’s executive director of strategy and competition, said in a statement.
Aon, Mercer and Willis Towers Watson dominate the sector, advising pension schemes, charities and endowment funds on their investment arrangements.
The three have a combined market share of 50-80 percent, the FCA said.
Pension trustees were relying heavily on investment consultants, but had limited ability to assess the quality of their advice or compare services, the watchdog added.
The regulator said it was also concerned about barriers restricting smaller, newer consultants from taking market share, and that “vertically integrated” business models were creating conflicts of interest.
The FCA said in November 2016 it was minded to refer the sector to the competition watchdog, and in June this year added that it was expected to reject a package of undertakings proposed by the three biggest consultants in a bid to head off a full competition probe.
Danny Vassiliades, managing director of Punter Southall Investment Consulting, which competes with the biggest three consultants, said the FCA’s referral was good for the industry.
“It Several of the undertakings in lieu that were proposed had merit. However, it cannot be right that the future direction, structure and regulation of our industry is driven by its participants. We look forward to the CMA’s findings in due course,” Vassiliades said.
Woolard noted that investment consultancy services played a significant role advising pension fund trustees when they were 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,” he said.
The 12 largest consultants influence investments worth up to £1.6 trillion ($ 2.1 trillion).
($ 1 = 0.7566 pounds)
