Legislation on supplementary pensions, passed by the Norwegian government at the beginning of the year, has created more flexible conditions for employers and employees alike. The latter are understandably pleased with the legislation, which opens the way for defined contribution pensions for the 1m or so Norwegians without supplementary provision. A little further down the chain, but equally pleased, are the consultants who are on hand to pick up related business.
In short, the legislation means potentially enormous growth in the savings market, a swift move to DC provision and, according to Greenwich Associates’ 2000 investment management report, a quarter of all Norwegian pension schemes will be DC by 2010, up from nothing at present.
This boost will continue Norway’s blossoming relationship with consultants. Greenwich Associates’ report says 7% of Norwegian institutes employed consultants in 1999. The corresponding figure for 2000 was 21%, a significant increase but still below the European average of 32%.
In Norway as in Denmark, there’s not yet the ingrained culture of using consultants, but this attitude is changing and new outfits are emerging. Last May, a team of eight left insurer Storebrand to set up Benefit Networks. It has since recruited heavily and is now a team of 32, specialising in benefits rather than investment consulting. In the eight months since its inception the company has taken on over 30 clients and is expanding the operation.
Helen Holthe, a consultant with Benefits Network, says the company specialises in employee benefits in the financial sector. The company is an independent distribution channel and does not produce any products. At present the company isn’t offering investment consulting, but Holthe says it is considering setting up such a team as demand for investment consulting is significant in Norway.
Equally in demand is benefits consulting, not least thanks to the new legislation. “Norwegian citizens can now choose between which product to save for their pensions … people are putting more in mutual funds here and this is the fastest-growing market,” she says.
Also helping the cause of consultants is the structure of Norway’s capital markets. The equity market is small and has skewed weightings in the different sectors while the bond market is pretty much non-existent. Consequently investors increasingly have to invest and diversify internationally. “Under these circumstances you want someone to hold your hand,” says Mats Langensjö, managing director of Sweden’s Wassum Investment Consultants, which recently opened an office in Oslo.
According to Olav Overland, the Wassum man running the Oslo outfit they are also benefiting from the local authorities who are disposing of their utility assets. Estimated suggest municipal assets heading for the financial markets as a result of these sales will rise from Nkr20bn (E2.5bn) to Nkr55bn in the next three years. Overland’s operation is working with 12 municipalities on the long-term investment of Nkr5bn in funds and on fund selection. It has recently received orders from three of the larger Norwegian pension funds to advise on manager selection and strategy.