The UK antitrust watchdog has blocked the merger of two of the three leading providers of technology for UK financial adviser platforms.
After FNZ acquired GBST last summer the Competition & Markets Authority started investigating the deal in November and revealed various concerns earlier this year.
Following an in-depth 'Phase 2' investigation, the CMA said on Wednesday that that the deal “could result in a substantial lessening of competition”.
This could lead to higher costs and lower quality services for UK consumers who rely on investment platforms to administer their pensions and other investments.
A merged FNA and GBST would hold close to 50% of the market and, although FNZ their offering is slightly different, the CMA said it considers “they compete closely in a concentrated market in which there are few other significant suppliers” and have often competed against each other for tenders to supply major investment platforms in recent years.
GBST and FNZ's JHC arm supply technology for AJ Bell's core back-office platforms, Old Mutual Wealth moved from its own technology to FNZ, Alliance Trust Savings moved to GBST, which also is the platform for Aegon.
Previous reports from the investigation revealed the internal documents from the two companies showed they view each other as rivals and often comparing offerings, with third parties also viewing them as competitors.
The watchdog’s probe found a merged business would face limited competition, with only one other supplier, in the form of Bravura, offering similar capabilities.
“Switching retail investment platform solutions is an expensive and complex process. The reluctance of customers to change suppliers, as a result of the risks involved, can make it difficult for smaller or less well-established firms (including suppliers active outside the UK) to enter or scale up in the UK,” the CMA said in its statement.
However this is a provisional decision, the body said, offering potential options for addressing its concerns, including requiring FNZ to sell all or part of GBST.
The CMA has invited industry figures to submit views on the provisional findings by August 25, and on the notice of possible remedies by 18 August.