In 2017, the Financial Conduct Authority (FCA) first used its concurrent competition powers by referring the asset management market to the CMA. Although investment consultancy and fiduciary management is a relatively small market (revenue of approx. £558 million in 2016), the market influences pension scheme assets worth more than £1.6 trillion. The impact on consumers of competition enforcement is a key benchmark for the CMA..

The CMA’s provisional decision on the FCA’s reference identifies a number of competition concerns, including:

  • a lack of engagement among pension-scheme trustees
  • a lack of transparency and information from service providers
  • high levels of concentration and vertically integrated business models that create conflicts of interest between investment consultancy and fiduciary management services.

The CMA has proposed a number of changes to address its concerns:

  • Pension trustees selecting their first fiduciary manager must run a competitive tender. Trustees who have already appointed a fiduciary manager without doing this must put the role out to tender within five years. This is aimed at increasing competition in the market and, in particular, reducing the competitive advantage held by incumbents.
  • Fiduciary management firms must provide clearer information on fees and how they have performed for other clients, so that pension trustees have the information needed to make meaningful comparisons between providers.
  • Recommendations for new guidance from the Pensions Regulator to provide trustees with more advice on how to choose and scrutinise providers.
  • The government broadens the regulatory scope of the FCA, to ensure greater oversight of the industry.

The CMA is now consulting with stakeholders by inviting feedback on the provisional decision, with a deadline of 24 August 2018. The final report is due before 13 March 2019.

The CMA investigation is part of a growing trend toward greater and more formal enforcement in the financial industry. The European Commission, for example, announced last year that competition implications in the syndicated loan market were being analysed in six EU Member States: a typical precursor to a sector inquiry or formal enforcement action. More recently, the Spanish competition authority fined four banks €91 million for allegedly colluding to charge above-market prices for interest rate derivatives.