There seems to be no room for local consultancy houses in Portugal, with a market that, although small, is practically controlled by the multinational consultancy firms that are seeing their business grow. These firms are now providing the kind of services that previously were only done by fund managers and insurance companies.
The main two players, Watson Wyatt and William M Mercer have had offices in Lisbon for some time and others, such as Towers Perrin and Bacon & Woodrow, supervise their Portuguese operations from other offices in Europe.
“Investment consulting activities in Portugal will continue to grow,” says Bernie Thomas, senior actuary at Watson Wyatt in Lisbon. “What is happening here is that there is nothing new or particularly exciting going on in Portugal at the moment. Certainly we have a much bigger and more global market to consider because two years ago domestic meant Portugal and now it means Europe,” he says. “People’s horizons have been expanded and I think the need outsiders’ help especially for international companies like ours. But this has been going on for the last couple of years.”
However, as Portuguese pension funds are getting bigger there is more demand for asset-liability studies. “Pensions funds are trying to get the asset allocation correctly done from a more technical point of view so I think in that area there will be more opportunities for consultants.”
But taking into account the size of the market it seems unlikely that companies which do not yet have operations in Portugal will enter the market in the near future. “I think those already established in the market have the capacity to be able to satisfy the current need,” Thomas says.
In terms of the services clients are asking for, pension funds in Portugal seem to be more concerned about performance measurement and benchmarking. Portuguese fund sponsors are now more interested in finding out more about more sophisticated issues related to their investment strategies to adapt them better to their funds’ liabilities. As a result of this the number of pension funds with specific benchmarks in the market has grown.
“Also, the redesign of pension plans, particularly the move from defined benefit to defined contribution has also been an issue in the market,” says Rui Guerra, consultant at William M Mercer in Lisbon. Similar to Watson Wyatt, Mercer provides a wide range of services including investment, benefits and human resources consultancy. Guerra believes that the global capacities of the multinational consultancies makes it difficult to local players to gain market share in the investment consultancy. “Considering that investment issues are more and more looked in a supra-national perspective, it is natural that companies with more resources and which can combine local expertise with global capabilities may be in a better position to meet client needs,” Guerra says.
Regarding the growth in the investment consulting departments Watson’s Thomas says: “Investment consulting is one of our key areas but we are not planning to increase the number of staff we now have in this division.” He adds: “I think that at this stage we have enough resources to cope for at least the next 12 months.”
“In terms of market share we are probably bigger than the others and people are looking at us as being a bit ahead of our competitors and we like to think like that as well,” Thomas says.