The Competition and Markets Authority (CMA) has halted the merger of FNZ and GBST.
The two retail wealth software firms have a large footprint in the UK sector, the watchdog warned.
FNZ acquired GBST in November 2019, and the M&A deal has been under scrutiny ever since.
In its ‘phase 2’ provisional findings, the CMA said that greenlighting the merger could result in lessening competition within the UK retail platform space.
“This could lead to UK consumers who rely on investment platforms to administer their pensions and other investments facing higher costs and lower quality services,” the regulator added.
The merger would create the largest supplier in the UK, holding nearly 50% of the market.
Before striking the deal, the two firms were competitors in the space, where customers viewed them as “close alternatives”, the CMA said.
If FNZ and GBST were allowed to combine, there would only be one provider that could keep up with their offering, according to the watchdog: a firm called Bravura.
The competition regulator has also set out a list of options available to FNZ to mitigate its concerns, which include selling part or the entirety of GBST.
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.”