GERMANY – The pensions consultants in the US and internationally are under considerable financial pressures, Brian Meath of Lazard Asset Management in New York told the Consultant Day gathering in Frankfurt yesterday. These were pushing consultancy firms to situations where there is a growing potential for conflicts with the interests of their clients.
Investment advisers in the US are increasingly running ‘investment conferences’ where they charge large fees to asset managers, which provides them with access to the clients of the consultancy firms, said Meath. The asset manager firms can each be charged perhaps 50,000 to 70,000 dollars (41,000 to 57,000 euros) to participate, so it can be a significant source of revenue for consultants
“But these events are marketed as an investment conference,” he pointed out. “Is there any conflict of interest in putting clients in front of managers who are chosen by their willingness to pay?”
Meath also pointed to consultants who were advising asset managers about developing their businesses. If there are potential conflicts of interest, it is an area where consultants needed to be clear about what they are doing.
Referring to the move by consultants into multi-manager management activities to earn asset related fees, he queried how they would maintain their position of independence.
Meath warned that clients have to be convinced of the objectivity of the advice given. “If the advice is shown not to be objective, consultants won’t keep their business.”
In welcoming consultants to the ‘Consultant Day’ meeting, Andreas Huebner, who is a managing director, general management, at Lazard’s asset management operations in Germany, referred to changes in the German marketplace. “Clients were dissatisfied with what had been delivered to them over the past three years.” The areas of tactical asset allocation and the question of achieving absolute returns were focuses of attention.
Huebner pointed to the need to meet clients’ requirements. He did not want the situation to arise where clients would take suppliers to court as some Swiss banks had been taken by their clients.
The Consultant Day was organised this year by Lazard, BHW Invest and State Street, who happen to share the same office building in Frankfurt. Altogether some one dozen consultancies attended from both large and small firms, domestic and international. It is the second time this event has been run.