Last year was a quiet one for the Spanish pension fund industry and consultants have seen their workload reduce. When at the end of 2000 the Spanish government decided to postpone the deadline for companies to externalise their pension obligations to November this year, some Spanish companies that had started negotiations decided to finalise the process and take things easy for a few months. Today, with the externalisation deadline less than a year away, the market is again waking up.
The externalisation process has meant a lot of work from consultants, and some expect to gain substantial business this year. The first demand has been obviously for actuarial and plan designing services, but as some new funds have already started operating, investment consulting is becoming more important.
“We are starting to see things moving forward,” says Víctor Luis Gil, actuary at Madrid-based consultants Aserplan. “Clients are primarily demanding actuarial services because this is the area where they first need help when they start the externalisation process.
However, those companies that have already externalised are now becoming more concerned about the long term health of their schemes, focusing on investment strategies.”
Both local and domestic firms are competing in a market, that was traditionally run by the financial institutions themselves giving advise to clients on pension related issues for ‘free’.
“Using external consultants is something that people in general still aren’t used too,” says Jesús Lana, partner at consultancy firm Novaster in Barcelona. “However, large companies are now more aware about the fact that to develop things further in such a complex field they need this advice.”
Lana explains that 2001 has been quieter than expected. “We didn’t see any significant developments in the industry during last year, and we hope we see more things happening in the next few months. We’ll see externalisations coming from small and medium-sized companies.”
As a domestic player, Novaster sees competition with the large international firms such as Mercer, Watson Wyatt, Buck or Hewitt, as very tough. “As a domestic player, and not being related to any financial institution or international consultancy firm, competing in this market is difficult.”
For domestic smaller players to survive, developing investment consulting and other pension related services is crucial. “As the new schemes being created follow a defined contribution model, the demand for services other than actuarial is increasing. We have developed investment consulting capabilities and also offer education, training and software related to pension issues.”
The general opinion is that institutional investors in Spain are more concerned about the range of services that consultants can provide than whether the company is domestic or foreign.
The ability of offering this services, ranging from actuarial, legal and investment consulting has position William M Mercer as one of the leaders in the market. “We think that in 2002 we will significantly increment our already important presence in the market,” says Lázaro Villada, managing director at William M Mercer in Madrid. “Postponing the deadline for externalisation meant a decrease in demand for our services, but we are optimist about 2002 because many of the companies that stopped the externarnalisation process a year ago will now have to continue with it.”