While the overall impression is that everyone is winning market share in Germany, the consultancy sector remains relatively fragmented as firms exploit their niches.
Hans-Juergen Reinhart, managing director at Frankfurt based RMC Risk Management, says the most recent consultant forays have been into ALM, strategic asset allocation and risk management.
"We have seen an increase in institutional clients for these products, but banks and insurance companies are also starting to accept external consultants to analyse their capital structures and formulate strategic asset allocation plans.
"Many have a big budget to analyse Spezialfonds but have experienced benchmark planning problems. The step forward is to have a strategic asset allocation for external mandates."
Further trends in the German market include an increase in actuarial tie-ups, such as that between domestic consultants FERI and Heubeck. Greater acceptance of beauty parades for investment manager selection is also drawing Germany away from traditional ‘relationship’ based market practices.
In terms of performance measurement Deutsche Performance Gesellscahft (DPG) and WM have carved out strong positions.
Dirk Popielas, an executive at Goldman Sachs in Frankfurt and formerly with Mercer, says that for the multinational consultants in Germany such as Mercer, Watson Wyatt, Hewitt Associates and Aon, the hot topic is merger and acquisition work and the redesign of historical company pension schemes into single entities.
"The work mostly concerns legal, tax, administration and actuarial issues. Consultants need the size to do this sort of work. Most German companies are preparing themselves for the global market and seeking to reduce costs by consolidating the employee benefits and pension schemes of their various operations."
Popielas says that the funding of pension liabilities is the domain of the domestic players such as FERI, RMC and Alpha Portfolio Managers, along with Frank Russell.
He adds: "The problem is though that while big companies are using consultants, there is little happening across the German market as a whole. This market is still not consultant driven like in the UK or US."
Jochen Kleeberg, managing director at Bad Soden based Alpha Portfolio Managers, believes the local groups still have the upper hand going forward. "Anglo-Saxon consultant companies do have a disadvantage in the German market. On the one hand German institutional investors don’t want to be told how they should have done their business over the last 20 years.
"On the other hand language is still a problem and when we are invited to beauty contests ourselves we are mostly with other German companies."
However, the alliances over the last few years of the traditional German actuarial consultants, Heissman and Hubener to international networks Buck and Aon respectively, may prove to be a precursor for consolidation in the German market - where predictions are that a one stop shop consulting package could be the focus for growing client demand and sophistication. Hugh Wheelan