On April 26, 2018, the U.K. Competition and Markets Authority published three more consultative working papers as part of its Investment Consultants Market Investigation. The CMA is assessing the supply and acquisition of investment consultancy services and fiduciary management services. These working papers should be read alongside the Issues Statement on the investigation, published in September 2017, as well as the other working papers, published earlier this year.
The first working paper is on barriers to entry and expansion in the investment consultancy and fiduciary management sectors. The paper sets out the CMA's emerging findings, focusing on the financial and other costs of entry and expansion. The CMA has neither identified, nor concluded whether there is, any adverse effect on competition in relation to barriers to entry or expansion. The CMA's separate emerging finding in relation to new market entrants is that the barriers are not excessively high but are greater in the fiduciary management sector than in the investment consultancy sector. In relation to barriers to expansion, the CMA's emerging finding is that the potential barriers to winning new clients are greater than the barriers to new entry and are also greater in the fiduciary management sector than in the investment consultancy sector.
The second working paper is on financial performance and profitability. The CMA has examined the financial performance and profitability of six providers of investment consultancy and fiduciary management services. The CMA does not consider that an assessment of economic profitability would be proportionate and, as a result, it cannot conclude on whether the providers have earned profits that exceed the cost of capital. The CMA is seeking feedback on: (i) identification of suitable industries against which to benchmark investment consultancy and fiduciary management profit margins; (ii) whether the profit margins appear to be high and if there are any factors to explain this; (iii) identification of any further suitability metrics, such as revenue per client; and (iv) whether the CMA should estimate a potential detriment to competition.
The third working paper is on the competitive landscape in the supply of investment consultancy and fiduciary management services, focusing on market concentration. The paper sets out the CMA's analysis of market definition, the CMA's the approach to analyzing market structure and the CMA's analysis of the size, and firms' share, of the markets and trends within the market.
Responses to the working paper on barriers to entry and expansion can be submitted by May 11, 2018. Responses to the other two papers can be submitted by May 10, 2018.
The working paper on barriers to entry and expansion is
available at: https://assets.publishing.service.gov.uk/media/5ae0a3c1e5274a0d85c1c6c3/icmi_barriers_to_
entry_and_expansion_working_paper.pdf, the working paper on
financial performance and profitability is available at: https://assets.publishing.service.gov.uk/media/5ae0a40a40f0b60a9a985c2d/icmi_financial_and_profitability
_analysis_working_paper.pdf, the working paper on the
competitive landscape is available at: https://assets.publishing.service.gov.uk/media/5ae0a475e5274a0d85c1c6c5/icmi_competitive_landscape.pdf
and the Issues Statement and other working papers are available at:
https://finreg.shearman.com/focus?categoryID=691&yearmonth=0.
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