Frankfurt was the location last July for the first meeting between the asset managers and the consultants who act intermediaries between the investment sector and institutional investors.
This meeting had been arranged by our organisation for a good reason.
The situation of the German market is undergoing substantial change. The tradition of relationship banking is increasingly being replaced by professional intermediaries, the consultants.
They have come into play as institutional investors have raised their expectations regarding achieving performance. Now more objective decisions are required and as a result investment consultants are emerging, who want to get the best asset allocation strategy and implementation for their clients.
In a developed market of over 200 domestic and foreign asset managers German investors are increasingly facing the problem of whom to choose. Currently, investment consultants in Germany have a growing market share of just over 20% of the mandates issued by institutional investors.
This compares with the UK, for example, where investment consultants dominate almost the whole market.
The German investment sector is facing an increasingly complex situation. Because of the multitude of domestic and foreign asset managers, which are in a highly competitive relationship to each other, and with more than a 12 firm-strong consultancy sector, both sides are in need of information and are calling for transparency and exchange of information.
The BVI’s initiative is one which was long overdue, with the objective of initiating a long-term dialogue on questions of interest. The joint platform for dialogue that has been established has various aims:
First, a wide-ranging dialogue between the two sectors. This is an aim in itself and wants to highlight all the issues in the relationships between the asset management and the consultancy sector. This in turn will help to increase professionalism in the German capital market.
We at the BVI and the companies we represent hope to be able to optimise the exchange of information through such planned dialogue.
In the future, information can be passed on much more quickly within the sector and be discussed with all of the market players.
In the interest of clients, good relationships between consultants and investment managers as suppliers of products are very important. The question of transparency is only the first step in this dialogue designed to initiate a long-term communication process between the sectors.
In the course of the dialogue problems within the sector and questions of daily cooperation can be clarified. Advisers of institutional investors have called for talks on the question of a clear separation of asset managers and consultants, as well as the possibility of improving information about asset managers, for example in respect to supplying data in a standardised and agreed form.
In turn, asset managers are getting a better insight into the work of consultants, as to what points are important in their selection and what issues are key for them when looking at asset allocation. This enables asset managers to precisely target the product requirements of consultants and their clients.
To better promote dialogue within the investment sector, a questionnaire was developed, designed to lead to more transparency about the consultancy market.
This questionnaire is to be revised together with the consultants. The BVI wants this questionnaire to help achieve a high degree of in depth information regarding the business models, the organisation and the methods applied by the consultants. This will also provide clients with the possibility of comparing the different consultants. International consultants are more open and willing to give out any information needed. But also the German consultants that have been talked to are increasingly convinced of the importance of dialogue and such an initiative towards transparency.
This questionnaire is to be seen as a first step within a long-term exchange of experiences and is a landmark achievement on the way to long-term cooperation.
For the dialogue to be useful, it is important to keep the common goal in mind: to make the German marketplace interesting, attractive and competitive within an international setting.
Rudolf Siebel is managing director at BVI (Bundesverband for investment and asset management) in Frankfurt