Italy: awaiting the grand awakening
Developments in the Italian investment consultancy industry during the past year have been very limited. Some even say that the market for this kind of service still does not exist in the country.
“In terms of investment consulting I don’t think there is a market here,” says Atillio Pellero, managing director at the William M Mercer office in Milan. “Pension funds here are still extremely small and they haven’t got the money or the resources to use this type of advice from independent consultants.”
Pellero explains that the advice Italian institutional investors are asking for is more related to the human resources and benefits and actuarial area. “I don’t think there is much to offer in the market of investment consulting products at present and I don’t expect much development in this area in the near future because the size of the market does not allow it,” he says.
Mercer mainly offers advice to multinational corporations on human resources, remuneration and benefits issues. Other international consultancies with offices in Italy, including names such as Watson Wyatt, Hewitt Associates and Towers Perrin, are also focusing on the HR arena.
Local players such as Studio Attuariale Fuccelli, Motivazione and Adelaide Consulting are also awaiting the awakening of the market.
“The pension fund market in Italy is still in a hold position,” says Piero Marchettini, managing partner at Adelaide Consulting in Milan. Marchettini notes that the solution depends on changes in legislation, expected for some time but still not agreed. “We were expecting two major changes to see the market becoming a serious one in terms of size, because it’s still extremely small compared to the size of the Italian mutual fund industry,” he says. The two changes expected are those related to the securitisation of the TFR (trattamento di fine raporto) employment indemnity to the balance sheet and a law allowing employees to enter into open pension funds freely without any limitations. “As long as employees cannot access open pension funds freely there won’t be real competition in the market, which is crucial to its development.”
“As in any other market there is also a need for better tax advantages,” he adds. In this respect there have been some recent developments, but there are still not enough.
Taking into account this situation it is not surprising that the consultancy market is still very small. “Local consultants are still prevalent because there is not enough money to support international consulting firms,” Marchettini says. “There is not enough money to attract their investments.”
Marchettini adds: “The pension fund industry in Italy is mostly unsophisticated. You have to bear in mind the difference between the advice provided by someone linked to a money manager and that provided by an independent consulting firm.” In this respect the Italian institutional investor has two options: “When you need advise on the investment side you could either rely on your know-how and use beauty parades to get the information they need or pay for independent advice. Unfortunately the costs issue is a very important one and investors usually opt for the first option.”
And for the time being it seems that the situation is not going to change, although some opportunities such as advising foundations on how to invest their assets could give a more significant role to the investment consulting arena in Italy.