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Impact Investing

IPE special report May 2018

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Consultants: FINLAND

The traditional Finnish relationship between pension instutitions and investment managers is thawing slightly, but the trickle down of investment consulting business to the marginal number of consultants in the market has yet to become a flow.
With asset managers tending to look after the whole investment package in Finland the visible domestic consultants in the market, Elakepalvelu Oy and Oy Porasto, continue to focus on actuarial/employee benefit work.
Tomi Yly-Kyyny, managing director at independent consultant Oy Porasto, comments: "There has not really been much change in this situation. Consultants in Finland are out of the investment side apart from some calculations for risk management."
Yli-Kynny says the market has seen increasing demand for actuarial calculations due to IAS and FAS accounting standards. He also notes a proliferation of prognosis models used by funds to study changes in employment, ageing and the actuarial basis for life expectancy.
"Companies are becoming more of a portfolio of people and with the investment environment changing so rapidly these days institutions like to have these every year and see how they should change investment."
The growing complexity of investment, however, is pushing the third party consultancy option forward, says Yli-Kyyny. "The authorities, which normally give some sort of instruction to funds, can’t really follow the rapid changes in the market. A need is developing for more investment advice."
He believes consultants in Finland will start to become intermediaries between clients and asset managers.
"We could, for example, bring a lot into the number crunching and administration part of the process."
Much will depend though in Finland on whether the country’s independent pension foundations resist the clutches of insurance companies.
Another question will be how far funds/foundations continue to outsource investment, which althoughsignificant at the moment, may change in the future.
Yli Kyyny says a couple of large Anglo-Saxon consultants have been sounding out the potential of the Finnish market. However, he points to the diminutive size of the market as a probable barrier to new arrivals.
Timo Leskinen at Finnish asset manager Opstock, says some of the country’s larger, more professional institutions have been courted by foreign consultants in the last year, but adds: "I’m not seeing the innovation to interest them. Some institutions though have used Anglo-Saxon consultants for overseas investment.
"The Finnish market is still not used to this system. Performance and risk measurement is done directly via the investment managers - it’s the Finnish way to do things."
"The perspective has often been that managers will already provide the value added services the consultants are looking to offer."
Leskinen says the number of consultants will undoubtedly increase in Finland in the coming years, but believes a generational change may be required for the status quo to truly alter. Hugh Wheelan

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