UK’s Competition and Markets Authority (CMA) has launched an investigation into the £1.6 trillion investment consultant industry following a market investigation reference (MIR) from the FCA.

This is the first time that the country’s financial regulator has made such a reference. It has the power to make such references in case of suspecting a financial services market of preventing or distorting competition.

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In its list of concerns, the FCA noted that there are barriers to new entrants; conflicts of interest in business models; and that many pension scheme trustees may not be capable of assessing value for money.

The three largest investment consultants – Aon Hewitt, Mercer and Willis Towers Watson – together account for up to 80% of the market currently. Earlier this year, these three players suggested a series of reforms for the sector in lieu of a reference. However, FCA warned that it was likely to discard the proposals.

FCA executive director of strategy and competition Christopher Woolard said: “It is a significant step for us to make this recommendation. We have serious concerns about this market and believe that the CMA is best placed to undertake this work.

“Investment consultancy services play a significant role advising pension fund trustees when they are 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.”

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The competition regulator expects to conclude the probe by March 2019.