2016年-FCA英国金融行为监管局_ms15_2_2_a_mir_18页_269kb

Summary of MIR Consultation Document

Overview

The Financial Conduct Authority (FCA) is proposing to make a market investigation reference (MIR) on investment consultancy services, particularly those provided to institutional investors and employers. The FCA has determined that there are reasonable grounds to suspect that certain features of the investment advisory sector may restrict or distort competition. The consultation document outlines the rationale for this decision and invites comments from interested parties by 20 February 2017.

Scope of MIR

The MIR is intended to investigate the market for investment advisory services, which includes:

• Advice on asset allocation and manager selection for institutional investors
• Advice on pension schemes for employers, for the benefit of their employees

The FCA is particularly concerned about the lack of regulatory oversight in these areas and the potential negative impact on competition and investor outcomes.

Features of the Investment Advisory Sector

The FCA has identified several key features of the investment advisory sector that raise competition concerns:

• Weak demand-side: Institutional investors, especially pension trustees, often rely heavily on investment consultants without challenging their advice. This is due to limited experience, resources, and the fear of appearing ignorant.
• Inability to assess the quality of advice: Investment advice is considered a "credence good," meaning its quality is hard to evaluate. Institutional investors lack transparent and comparable performance data, making it difficult to judge the effectiveness of consultants.
• Persistent market concentration: The top three investment consultants (Aon Hewitt, Mercer, and Willis Towers Watson) control approximately 60% of the market, with relatively stable market shares. Smaller firms struggle to expand beyond niche areas.
• High barriers to entry: Smaller or newer consultants find it challenging to compete due to the importance of reputation and branding in attracting clients.
• Vertically integrated business model: Investment consultants are now offering products traditionally provided by asset managers, such as fiduciary management and fund of fund products, which may lead to conflicts of interest and misaligned incentives.

Scale of the Suspected Problem

The FCA considers the scale of the problem to be significant, as the investment advisory sector is a major part of the institutional market, which manages around £5.5 trillion in assets. Key factors include:

• Market size: Institutional investors represent 80% of the total asset management client base.
• Proportion affected: The identified issues affect both small and large institutional investors, with weak demand-side problems and supply-side concentration being widespread.
• Persistence of features: The market concentration and other structural issues have been long-standing and are unlikely to change significantly in the near future.

Availability of Appropriate Remedies

The FCA has considered potential remedies that the Competition and Markets Authority (CMA) could implement if it finds adverse effects on competition. These include:

• Standardizing performance and fee information for consultants
• Making performance and fee data publicly available
• Prohibiting fee structures that may misalign incentives
• Improving redress mechanisms for underperformance
• Requiring periodic contract reviews and re-tendering by trustees
• Recommending best practices for managing investments and pension schemes

Undertakings in Lieu

The FCA has the option to accept Undertakings in Lieu (UILs) instead of making an MIR. However, UILs are considered only if they offer a comprehensive and reasonable solution. The FCA is open to considering UILs if they are confident they will address the issues effectively.

Alternative Powers Available to the FCA

The FCA has determined that it does not have the regulatory authority to directly address the issues in the investment advisory sector, as strategic asset allocation advice and EBC advice are not currently regulated by the FCA or other authorities. The FCA has recommended to HM Treasury that these services be brought under its regulatory scope to enhance oversight.

Conclusion

The FCA provisionally believes that the features of the investment advisory sector, both individually and collectively, meet the reference test. These include structural issues such as market concentration, weak demand-side challenges, and the vertically integrated business model. The FCA is proposing an MIR to enable a thorough investigation and the design of appropriate remedies to address these concerns.