The UK's Competition and Markets Authority has provisionally blocked FNZ's proposed takeover of rival retail investment platform GBST, concluding that it could lead to higher costs and lower quality services for Brits.
FNZ purchased GBST in November 2019 for £150 million. Both firms have a significant presence in the UK, holding close to 50% of the market between them.
The CMA says that although there are differences in the business model that the companies use - with FNZ providing an integrated software and servicing solution and GBST being a software-only provider - they compete closely in a concentrated market in which there are few other significant suppliers.
The firms have consistently competed to supply major investment platforms in the UK, with customers viewing them as close alternatives, concludes the CMA after completing its in-depth Phase 2 investigation.
With only one other real rival - Bravura - the merger could result in a "substantial lessening of competition", says the CMA.
The watchdog has set out options for addressing its concerns, which include FNZ selling all or part of GBST. Comments on the findings and possible remedies must be offered within the month.
Martin Coleman, chair, CMA inquiry group, says: "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."