CMA launches market investigation into investment consultants


On 14 September 2017, The Financial Conduct Authority (FCA) made its first ever reference to the Competition and Markets Authority (CMA) asking it to carry out a full market investigation into:

  • investment consultants which provide advice to institutional investors (pension funds, charities, insurance companies and endowment funds); 
  • employers on their pension schemes; and
  • fiduciary management services.

The investigation was launched following the FCA's provisional decision after its interim asset management market study in November 2016. The FCA estimates that the 12 largest investment consultants advise on approximately £1.6tn of assets, which are dominated by the 'big three' of Aon Hewitt, Mercer and Willis Towers Watson who control between 50 and 80 per cent of the market. The big three offered a ‘package of undertakings’ to address these concerns in February 2017 but this was rejected by the FCA in June.

FCA concerns

The CMA set out the proposed focus of its investigation which can be grouped as follows: 

  • difficulties in customers’ ability to assess, compare and switch investment consultants could mean investment consultants have little incentive to compete for customers;
  • conflicts of interest on the part of investment consultants could reduce the quality and/or value for money of services provided to customers particularly where they are recommending their own products and services; and
  • barriers to entry and expansion could mean there are few new entrants to put pressure on the established investment consultants to be competitive.

What to expect next 

The market investigation will be an in-depth 18 month review of the sector, which seeks to investigate 'serious concerns' raised by the FCA that the sector may not be working well for consumers. The CMA panel will look to 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 appointed an investigation group, chaired by John Wotton, which will act as the decision maker in the review. An important milestone is the publication of the CMA’s Provisional Decision Report which is due to be published in September 2018 and the CMA is expected to conclude its investigation in March 2019. 


The CMA has wide ranging powers to redress any issues including:

  • making recommendations to Government, for example, if the CMA considers legislation is needed including imposing structural remedies;
  • requiring consultants to provided standardised performance information to their clients and make their performance and fee information publicly available;
  • prohibiting certain fee structures;
  • improving customer redress mechanisms where funds underperform;
  • requiring trustees to periodically review and re-tender contracts with their investment consultants; and
  • taking enforcement action where suspected infringements of competition or consumer law has occurred.

How RSM can help

Our global experienced pensions team at RSM can help pension funds understand the implication of this review on their investments. We also support pensions schemes with risk management, regulatory understanding, pension fund deficit management and fund management cost analysis which could lead 5 - 25bps of cost savings as well as identifying qualitative risks.

If you would like to discuss further how any of these issues will affect you please contact Ian Bell or Karen Tasker.