In their eagerness to court increasingly powerful consultants, investment management firms throughout Europe have created consultant relations positions. But the consultants themselves are still not convinced that they are getting what they need.
Like client relationship managers, consultant relations executives are the first point of contact for consultants looking for information and assistance. But they also are responsible for marketing the investment management firm and its expertise to consultants generally and doing all they can to promote the firm during the tender process.
In the European marketplace, the role of consultant relations originated in the UK. “The job is essential in the UK, where the vast majority of clients use consultants as their intermediary,” says Nigel Taylor, head of institutional business, UK, for UBS Asset Management. “In around 95% of our business, a consultant is involved.
“Without consultant rankings, you’re not going to get very far in the UK market,” says Taylor. “It is only once you’ve got the consultant rankings that direct marketing approaches come into their own.” UBS has had full-time consultant relations staff since the early 1990s, and even before that it was a part-time function.
As a new entrant to the market, T Rowe Price recognised this immediately, according to Guen Toste, head of consultant relations, based in London. “The key, particularly in our case as a new player in the market, is to build awareness proactively of who we are, not only our products but the strength of our culture and long-term focus on client relationships.” Toste has been working for the past couple of years to promote the firm among European consultants. This is the first part of a two-pronged process, with more strategic marketing initiatives to follow.
“In the UK particularly, consultants drive the market.,” says Toste, pointing out that it is not always easy to market directly to pension funds. But she noted that even in the rest of Europe, the influence of consultants is growing. “Restoring investor confidence in the current environment will increase the influence of consultants in Europe. Our strategy since the beginning has been to ensure that consultants not only know our investment capability but also understand our culture and meet our people.”
And as other European markets have followed the Anglo-Saxon model and have become more consultant-driven, asset managers have followed suit and made consultant relations appointments. While some local firms of consultants have come to appreciate the standard of service expected by the big multinational groups, at the same time the big firms are establishing local presences throughout Europe.
“Consultants are part of our life,” says Nathalie Boullefort-Fulconis, global head of institutional business for Axa Investment Managers in Paris.
“Even though investment consultants experienced strong business wins over the last two year, they do not have such a stranglehold in Germany yet,” says Andreas Krebs of Cominvest, “but we will soon end up with a market where the consultants have a strong say in around 50% of the business.”
London is the base for much consultant relations activity, especially where global business development is concerned. Axa, for example, posts its consultant relations staff there, as does UBS. “Although some of the big houses are making pushes into Europe, the centre of research is still London,” says Taylor of UBS. “So we have a lot of people here, and the running of research is done in London.”
As T Rowe Price’s Toste also explains, “The big consultancy firms are globally focused. They have field offices but often manager research is based out of the UK.”
Krebs, however, stresses that a local presence is still important. “I have the feeling that even though the large consultancies are in London, and multinational business is handled in London, there is still a very strong domestic bias.”
Among the consultants themselves, there is a vast difference of opinion about the importance – and the usefulness – of the consultant relations function.
“What has surprised me is the degree to which investment management firms put efforts into consultant relations rather than client relationships,” says Nick Fitzpatrick, head of global investment consulting at Hewitt Associates. “Their sales efforts would be better served talking directly to clients. After all, they are the clients – and we are not the investment manager’s sales force.”
Like Fitzpatrick, other consultants also find they are in the position of communicating their clients’ needs to the investment management firms. “I think consultant relations is useful insofar as many investment houses have a different view of the world than investment consultants do,” says Alvar Chambers, a London-based principal of Aon Consulting.
“I don’t want just someone very sociable, who takes me out to lunch,” says Chambers. “They need to understand and explain, but also they need to communicate my view back to the investment managers. This means that they need to have respect also within their own organisation.”
But the usefulness of consultant relations departments “varies from one company to another”. He has found that the large and successful investment managers offer more effective consultant relations. “It may be that they recognise the importance of consultants in maintaining existing client relationships.”
But the fact that consultants are necessary intermediaries to maintaining the client relationships is a fault, according to Fitzpatrick. “The investment manager needs to get a firsthand understanding of their client’s needs. I think the fund managers will regret putting effort into consultant relations at the expense of client relations.”
For the big investment companies, the consult relations function is important, maintained Michel Piermay of Fixage in Paris. This is simply because information is dispersed and it is useful to have a single point of contact. In his view, the investment managers are not responding to a well-defined demand by consultants, but rather are remedying difficulties in their own internal structure. “In fact, we consultants don’t need anything. The organisation of their company is their problem.”
Bodo Dooze, of Georg Seil Consulting in Germany, also has mixed impressions of the function. He believes that consultant relations executives have a role to play, but primarily once while a selection process is underway, and he is dismissive of the general marketing efforts made by consultant relations. “Usually the investment managers are the first to make contact with us, and they want to do a general presentation. But we are a small firm and we don’t want to spend all that time in presentations. They should send information to us via e-mail, and we’ll review it.” However, the firm naturally invites presentations once the beauty contest is taking place.
Piermay of Fixage agrees that not all consultant relations departments are as useful as others. “Some people have good knowledge of their company and then they are useful. Others are just there to protect management from consultants,” he says.
Fitzpatrick agrees. “I feel sometimes that we have difficulty getting access to the chief decision makers, and there are times that we need to. Consultant relations do a good job feeding us with regular news updates and background data. But in terms of how do we effect change, they are not the right level.” He has found that they are fine at selling the existing product range, but cannot help in devising solutions for specific client problems.
Experience counts for a lot in Piermay’s view: “if they are in the same function for a long time, they are generally efficient. Some have frequent staff changes, and this is not helpful for us.”
Staffing and recruitment is a big issue in consultant relations. Because it is a new speciality it is extremely difficult to find experienced staff. Some of the best consultant relations executives are former consultants, who have a clear understanding of consultants’ needs as well as the technical side of the business. “Consultant relationship managers have to be business development people, with the ability to drive relationships, but they also have to have a sound technical background in order to have a good dialogue with the consultants,” says Boullefort-Fulconis of Axa. “It is not that easy to recruit. We have to train people.”
What is true in London is even more so in the rest of Europe. “There are few people on the continent with international consultancy expertise, so it is very difficult to hire talent”, says Cominvest’s Krebs. “But even in London, people are very focused on the UK.” The language gap is also a difficulty when recruiting out of London.
In a job with such varied responsibilities, evaluation becomes tricky. Most consultant relations professionals are evaluated like salespeople, judged by the number of meetings completed, or the number of new mandates pitched, Some firms look at ratings, establishing threshold rankings, although as Toste pointed out, this can be contentious since “I can’t control how our products are rated.” A softer side, such as a consultant audit process implemented by the client audit department, is added to the evaluation process at UBS, says Taylor.