The German market is getting more sophisticated and investment consultants are playing an increasingly important role. Although the size of the consultancy industry is still very small compared to that of other European countries, their presence has become crucial at a time when new developments in legislation and changes in asset allocation are defining the shape of the future pension environment in Germany.
Contrary to what happens in other markets, the German institutional arena is dominated by domestic firms.
“The market for our services has just started to develop and we are still at a very early stage,” says Hartmurt Leser, managing partner at FERI Institutional Management in Bad, Homburg. “The differences with other countries is that here the domestic players dominate this field.” Leser mentions the three type of consultants present in the market: “On the one hand you have banks offering consultancy services, although I believe this is not the kind of consultant you want to hire if you are looking for neutral and objective advice. On the other, you have a group of individuals who having worked in the industry for a long time, give advice to a small number of clients, but do not have the size nor the resources to handle ALM studies.
“Finally, there is a third group to which we belong who are only focused on the consultancy business and can offer all the services that our clients demand,” he says.
In 1999, FERI created a joint venture with Buro Dr Heubeck to develop its pension asset consulting arm, providing asset-liability and investment management services to all type of institutional investors in Germany.
“I think that everybody in the industry agrees on this: the consultancy market is growing, and it is very important for the both the asset managers and the investors,” Leser says.
And indeed, everyone in the industry agrees: “Although the market for consultants is not as developed as in other countries, their presence is dramatically increasing, and I think this trend will accelerate even more once we have the final details of the regulation on the new Pensionsfonds,” says Marc Bechtel, managing partner at DG PanAgora in Frankfurt.
“We like consultants very much because they are helping us to access a wider range of clients,” says Olaf John, responsible for institutional business at Fidelity Investment Services in Frankfurt and at one time an active consultant. “They help us to communicate with our clients and in a way we see them as a very important distribution channel for our products.”
The general opinion is that consultants are opening the market to new investment strategies and, of course, new players in the asset management field. “We had discussions with consultants at a very early stage some years ago in the beginning nothing happened,” says Klaus Karl Esswein, managing director at State Street in Munich. “But now it feels that the few consultancy houses who are operating in the market are more and more inviting us to give presentations because there are some investors, especially those who are starting from scratch, that are more open for consultants’ advice and also because the consultants themselves are more interested in indexing,” he says.
RMC Risk Management Consulting, another important name in the consultancy industry has also experienced an increasing demand of their services from institutional investors. “The most important factor that our clients have to take into account is the need for an strategic asset allocation, and more and more German investors are aware of this,” says Bernd Rose, managing partner at RMC in Frankfurt. “Clients come to us to find out what is the best long-term asset allocation they should be looking at. We look at the future cash flow and set up the best investment strategies to match their liabilities and we assist them all through the whole investment process. This is helping the market to become more professional and sophisticated.”
During the recent discussion in the German metal and electronics industry to set up a retirement savings scheme for its around 4m workers, consultancy firm, Dr Heissmann, has been consulted on all aspects of the new scheme and it is expected to continue this role once the scheme is active. A spokesperson for the new scheme described the presence of a consultancy firm on all levels as essential, all through the negotiations.