An update, published by the Competition and Markets Authority today (August 5), found FNZ’s purchase of GBST could result in “substantial lessening of competition” in the UK platform space.
It said: “The merged business would be by far the largest supplier in the UK, holding close to 50 per cent of the market.
“Although there are differences in the business model that the two companies use, with FNZ providing an integrated software and servicing solution and GBST being a software-only provider, the CMA provisionally considers that they compete closely in a concentrated market in which there are few other significant suppliers.”
The CMA said it had found FNZ and GBST had competed consistently against each other in recent tenders to supply major investment platforms in the UK and that customers viewed them as close alternatives.
It also found that switching retail investment platform solutions was an “expensive and complex process” and so the reluctance of customers to change made it difficult for smaller or less well-established firms to enter or scale up in the UK.
FNZ and GBST — two of the three major tech providers for UK adviser platforms — had agreed a merger worth £220m last summer but the Competitions and Markets Authority started investigating the agreement in November 2019.
In March it referred the deal for a “phase two” investigation and pushed forward with its probe, arguing FNZ was already in a strong position in a market with limited external constraints.
FNZ has consistently branded the CMA’s view of the platform space as “outdated” and claimed the watchdog’s view of the platform market had caused a frame of reference which was “excessively narrow and artificial”.
But the CMA today set out options for addressing its findings, which included requiring FNZ to sell all or part of GBST.
It is accepting views on the provisional findings by August 15 and on the possible remedies by August 18.
Martin Coleman, chair of the CMA inquiry group, said: “The evidence we’ve seen so far consistently points in the same direction – that FNZ and GBST are two of the leading suppliers within this market and compete closely against each other.
“That’s why we’re concerned that their merger could lead to investment platforms, and therefore indirectly millions of UK consumers who hold pensions or other investments, facing higher fees and lower quality services.
“We’re now inviting comments on our provisional findings and possible remedies.”
Ben Hammond, platforms director at Altus Consulting, said the result was likely positive for both advisers and the end investor.
He said: "If an adviser is using a more efficient platform and prices have been driven down over time because technology is getting better as there is greater competition in the market, then that should trickle down to the end client. The customer will get better value."
imogen.tew@ft.com
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