The rule of modern life that the big get bigger is certainly being borne out in the field of the international consultants.

No sooner has Watson Wyatt created its mega-firm, than Aon moves to absorb Alexander & Alexander, which will have international ramifications, and Mellon to acquire Buck Consultants.

The main driving force behind Aon’s acquisition of a rival insurance broking group was not the benefits consultancy aspect, although its importance should not be diminished. But the Mellon / Buck alliance reflects what is happening in the US consultancy marketplace.

The massive swing to defined contribution and the use of 401k plans have altered the structure of the consultancy market, with harsher times predicted for defined benefit (DB) plans long term. And long term is where actuaries live, in a world of numbers that no longer add up the way they did in terms of DB fee flows.

But money managers are emerging on the 401k scene, notably Fidelity, which has carved out a role for itself by virtually looking after the administration of these plans for employers from the investment management fees.

For other money managers with mutual funds the pensions market has opened up as never before, with employers outsourcing their 401k plans and other benefits. Hence the execellent fit that Mellon sees between it and Buck.

Other consultancies have money businesses in the family, but no one considers that Mercer would be in anyway influenced by the fact that money managers are within the same group.

So for Buck the task will be to ensure that its professional independence is not compromised, while making the most of opportunities that the alliance will bring. This is easier said than done, even with the pledges being given that independence is guaranteed.

Outside the US, these are not yet real issues. Mellon has only a limited presence in Europe and within the Buck offices here these issues will perhaps be of no more than academic interest.

But the issue of consultants moving more into investment management is beginning to raise its head, with ventures such as Frank Russell’s funds and Sedgwick Noble Lowndes’ new fund services for smaller clients. The potential must be for conflicts of interest as more groups venture into these waters.

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