Germany’s decision to pass it long overdue pensions reform will prove a real boon to the consultants market and Mercers’ Jacques Goulet believes the German market will draw a lot of attention thanks to the changes. Historically companies with an emphasis on actuarial services like Heissman and Heubeck market have dominated and investment consulting and plan strategy has lagged. “The German market has traditionally focussed on actuarial issues and it has not been such a developed market from a broad consulting perspective as some other countries like the UK and Ireland,” says Goulet.
In other markets such as the UK, Ireland and Canada, much of the consulting work is driven more by strategic issues such as plan design and the impact of mergers and acquisitions on pension plans. “I see the German market evolving this way because all the companies are trying to work out how to react to the reform,” he says.
Alan Botterill at Towers Perrin is another excited about reforms in Germany. Traditionally the emphasis has been on defined benefit schemes but he believes the new legislation is making many scheme sponsors aware of risk management. Defined contribution and cash balance plans are in the ascendancy. One of the subtle implications of this is that the administration of pension funds is becoming more complex and employers are now thinking about how to put together an efficient and accessible system to meet their employers increased interest in how the plan runs.
Changes to the tax laws also mean more mergers and acquisitions, staple work for consultants who are brought in to combine often very different plans. “Germany is basically moving from a fairly stodgy, carefully-controlled market to a far more liberal one. It will take some time but there is a lot of pressure from within the system and there is a great shortage of pensions expertise in this market,” says Botterill.
But external consultants unanimously express great respect for their German counterparts. Rather like the relationship between Switzerland’s consultants and pension funds, so the German equivalent tends to be long term and stable. Nor, says Botterill, are they to be underestimated. Although most local consultants have probably not had much that much demand for plan design, this does not necessarily exclude them. “They are very adaptable and I’ve a lot of respect for them. The cultural dimension and technical knowledge is important so it’s not an open book for an external company to come in and say they have all the ideas.” This is the reason behind the recent joint venture in Germany between Rauser and Towers Perrin.
Nick Fitzpatrick at Bacon & Woodrow says it is an interesting market but one that appears very tricky to get into. Siemens recently launched an investment consultancy. “The other main investment consultant is FERI which is strongly related to the Quant family so the investment consulting activity seems to be done in the corporate sector somewhere. How that is going to work in the future we don’t know. Yes it is going to be interesting but I cannot see clearly how it is going to develop,” says Fitzpatrick. At the moment Bacon & Woodrow services the market through PPCMetrics which is part of the Hewitt Network.