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Hands on approach

Europe's multinationals and largest pension funds may be getting more sophisticated in their investment knowledge and reporting, thus negating the need for consultant advice, but for the rest of Europe's schemes it is advisory business as usual.
Indeed, the pensions landscape could not appear to look rosier for consultants going into the next century. As small to medium sized schemes increasingly consider their investment strategies, performance, administration and liabilities, so their need for expert, global orientated advice is increasing.
And as France, Germany, central and eastern Europe and the Iberian peninsular begin to develop, or show increasing signs of developing funding systems - so the market for consultancy would appear fruitful.
Furthermore, the growing US influence in terms of burgeoning defined contribution schemes cannot be ignored. Couple this to the numbers of mergers and acquisitions taking place in the new single currency environment , and the scenario shows more companies looking to keep pensions costs down and switch from their burdensome de-fined benefit arrangements.
The fallout for Europe's consultants is that while business is declining on the plan design side, the market for investment consulting, manager searches and administration is booming.
The downside is that such an en-vironment is bringing market forces to the fore, and where consultant loyalty once blossomed, now pension funds prefer to pool their advisors and ensure they are getting the best deal.
Jan Rennen, head of the investment department of fund administrators Detam Pensioen Services, which manages eight of the Dutch industry schemes, says he has certainly witnessed a sea change in Dutch fund attitudes to consultancy. Over the last year pension funds have woken up to the fact that they can cope with some of the less complicated investment and administration issues themselves or through more experienced investment managers. Consultants are now very much being used for the cutting edge services and statistically intensive administration matters, or for advice on cross-border human resources issues. The consultant is still very much part of the equation though, particularly those with global capabilities, it is just that the figures of the sums are rather different." Geoffrey Furlonger, head of the European benefits team at William Mercer, adds: "What we are seeing is almost a two-tier consultancy system, with smaller players really only dealing with local issues like stakeholder option plans and works council directives.
"Even then, they are entering into co-operation with the larger consultants, because if they don't they are just not getting the referrals for some of the other more technical advisory work and vice versa."
He adds: "We acquired a company called CRG in Budapest to get into the eastern European and Finnish markets, precisely be-cause these networks are more sensible and combine a domestic consultancy approach with international scope and resources."
Likewise, he says, there has been closer examination in recent times by companies in Europe of their pensions and benefits liabilities, with human resources managers getting much more hands on and employing consultants accordingly. Andrea Girardelli, managing director at the Milan-based Italian chemical workers retirement scheme Fonchim, says that although the fund does not currently use any consultants, as the scheme develops he certainly en-visages a change in this situation.
"We are only just beginning to invest the fund's assets and we had our own expertise in manager searches, so no advice was sought in their selection. However, we will undoubtedly need consultants for future performance measurement and a clear idea of how our managers are operating. If you want reliable data and up-to-date market information I see no other way to go for advice."
And Karel Stroobants, deputy general manager at the Brussels-based CPM pension fund for Belgian dental workers, says he sees little change in the consultant/fund domain, either now or in the future.
CPM has two consultants, Brussels-based Pragma and William Mercer sitting directly its investment committee as full advisory members, with Pragma principally advising on manager searches and Mercer mostly helping with strategic asset allocation.
"The euro hasn't changed this and if anything I see the professionalisation of investment markets pushing more pension funds towards the consultants," he says. "However, I would say that the one consultant shortfall I see at the moment is that they are caught in a stampede for advising solely on best possible investment returns, without looking at the bigger picture of risk and liabilities on a global scale.
"This could be lethal for the future of pension funds, which it should never be forgotten are not corporations - so there is no room for complacency in the pension fund/consultancy relationship on either side."
Hugh Wheelan"

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