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Consultants’ importance grows in Europe – report

EUROPE – A new report from Morgan Stanley says it expects many European asset managers to try to become “consultant compliant”.

“We see many European asset managers seeking to become ‘consultant compliant’ and many Anglo-Saxon firms seeking to follow the consultants to Europe,” said Morgan Stanley analyst Huw van Steenis.

“Whilst we believe that consultant will grow in influence globally, this process may take quite some time, and alone would not be enough to fuel the growth of asset managers in Europe.”

The comments come in a 59-page report entitled "European Asset Management Industry Update - Performance is Still the Product".

Van Steenis says that local consultants dominate in Germany and Switzerland – though Scandinavia and the Netherlands were “bright spots” for ‘Anglo-Saxon’-style consultants.

He said that, according to interviews Morgan Stanley has conducted, continental European trustees and plan sponsors do not believe that actuarial consultants “have necessarily aided returns on the Anglo-Saxons”.

“Without a regulatory push, we do not anticipate fast penetration,” he said.

The report also says that many clients are looking at multi-managers due to “dissatisfaction with the traditional consultants”. A good offer means that many clients are looking at multi-managers with interest, the report says.

Elsewhere, the report says that a further “step change” is needed in most asset managers’ costs. Key rationalisation areas were: focusing product portfolio, the integration of the investment process, scale and outsourcing and the management of distribution and sales.

Consultants’ creation of quality standards, the report adds, has fuelled already intense competition for mandates. “The costs of competing in this climate are high, making profits ever harder to achieve.” The pressure on margins means that the “minimum scale” an asset manager needs continues to rise.

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