For pensions consultants in the Nordic countries, the level of incoming business varies according to the country they operate in. But the ebb and flow of legislative change continues to shape the business landscape. In Denmark, the trading environment for pensions consultants is certainly improving, says Jesper Kirstein, of Copenhagen-based firm Kirstein Finans.

"If you go just a few years back, Danish investors were not used to using consultants, and mostly used them on an ad hoc basis," he says. "We rarely see investors having a permanent relationship with a consultancy - as is the case in the UK."

Danish pension funds tend to have much more in-house investment expertise to draw on than do funds in the UK, he says. So when consultants are called on, it tends to be for specific tasks, he says. At the moment, pension funds are primarily turning to independent advisory firms for manager selection. "I think manager monitoring will become more the case," Kirstein predicts.

But the way this is done is also likely to change. Although manager monitoring is still usually conducted using a benchmark as the comparison, in future, peer group environment monitoring will become the norm. This method would give better information about the quality of their manager's performance.

In Sweden, consultants are fielding high volumes of business right now, particularly as a result of the major changes faced by pension funds as a result of the implementation of the EU pensions directive into local law.

The main effect of this was that pension funds have to use the prudent-man rule, says Jan Bernhard Waage, managing director of Wassum Investment Consulting.

In the past two years, many Swedish companies have used some of their cash surpluses to set up pension funds, or have simply used the cash within existing book-reserve arrangements to match their liabilities, he says.

The introduction of the IAS 19 international accounting legislation in Sweden has made corporations more willing to do something about their pension funds, which has in turn boosted business for pensions consultants, says Waage. Clients have been turning to consultants for asset liability work in particular, but also to get advice on the type of assets that they might include in their portfolios, he says.

Bond portfolios are being altered to increase the duration, he says. Although there seems to be less use of equities overall, there is a shift in the way pensions clients do invest in stocks. "We see more use of… the real active managers rather than the classic indexers," says Waage.

And there is more use of hedge funds, he adds. The faster flow of business is likely to continue, he says. "I don't see it slowing down; the changes are there and they have been implemented, but the effects are continuing within the pension funds," he says.

Christian Akselsen, head of asset liability management at consultancy Aon Grieg in Norway, says pensions business is still dominated by the switch by schemes from defined benefit (DB) to defined contribution (DC).

"There are still some of the largest companies that have not done the transition yet, but we believe that will come," he says. There are new rules coming into force in Norway about private pension schemes, and this will trigger more corporations to make the change to DC, he says.

In Norway there is a system of guaranteed interest rates for DB schemes, and the regulations surrounding this are changing as well, with sponsors having to pay an upfront fee for that guarantee in future.

Currently, the insurance company providing the interest rate pledge is able to take much of the eventual surplus that is generated over and above that rate. Under the new system, however, it will be possible to plough back all of the surplus into the pension scheme instead. The Norwegian pensions market is not liability driven in the same way as the UK market, says Akselsen, because of the guaranteed interest rate system.

In Finland, says Olli Pusa, managing director at Pusa Consulting, it tends to be the pension funds rather than the pension-insurance companies that turn to the local independent advisers. "The big insurance companies don't use Finnish consultants… they use the international consultancies," he says.

At any one time, the level of business for consultants in Finland depends on the degree of legislative change the pensions industry has been dealing with, he says.