From fishing buddies to co-CEOs: that is how the relationship between Martin Gilbert, chief executive of Aberdeen Asset Management, and Keith Skeoch, his counterpart at Standard Life, will change after the companies this week announced plans to join forces. The merged company, to be based in Scotland, will have £660bn ($800bn) in assets under administration, making it Britain’s largest, and Europe’s second-largest, “active” asset manager.

Competition is forcing asset managers to consolidate. Henderson and Janus Capital teamed up last October; Amundi and Pioneer did the same in December. They hope to defend market share from fast-growing “passive” fund managers, whose funds track market indices rather than try to beat them, as active funds do. The research involved in trying to pick winners inevitably makes actively managed funds dearer than passive ones; once these costs are factored in, active managers tend to underperform passive ones. The fee gap is wide enough to have attracted scrutiny from British and European regulators: in Britain passive funds’ fees are around 0.15% of assets under management, compared with 0.9% at actively managed funds.

Both Aberdeen and Standard Life have struggled to compete. Aberdeen has seen net outflows from its funds since 2013 (see chart), not helped by its focus on emerging-market and Asian funds, which have had a rough patch. At Standard Life, overall assets under management increased, but its flagship range of funds faced net outflows in 2016.

The hope is that coming together will change this picture. Standard Life—whose shareholders will own two-thirds of the new company—will move even further away from its roots as an insurer, and will be able to make use of Aberdeen’s more international client base. For its part, Aberdeen can sell its products through Standard Life’s wider British distribution network. Another attraction is cutting costs: spending on IT and sales can be scaled back; underperforming managers fired. The companies estimate that the deal will generate annual savings of around £200m.

Shareholders seemed happy. Share prices for both companies rose by around 8% on the announcement. There are some uncertainties, though. Mr Gilbert and Mr Skeoch may know each other well, but the history of such condominiums in other companies has not been happy.

The benefits to clients are also unclear, says Jonathan Miller of Morningstar, a research firm. Cost savings could end up boosting shareholder returns rather than lowering charges. Research by the Financial Conduct Authority, a British regulator, finds that increased scale does not lead to lower fees. The two firms say the merger will offer investors better value for money, through a wider choice of funds. It will need to, if it wants to keep regulators at bay and withstand the passives’ aggression.