CITY regulator the Financial Conduct Authority has taken the highly unusual step of referring the investment consultancy sector to the Competition and Markets Authority for a market investigation, writes Margaret Taylor.

This is the first time the FCA has made such a reference and reflects the “serious concerns” it has about the competitiveness of businesses that advise pension schemes on where to invest their assets.

The 12 largest consultancy firms advise on a combined total of £1.6 trillion of assets and while they mainly provide their services to pension schemes they also advise charities, insurance companies and endowment funds.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “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.”

The three largest players in the market, Aon Hewitt, Mercer and Willis Towers Watson, had previously suggested a package of undertakings to address the competition issues in the market but these were rejected by the FCA.