Switzerland: consultancy still a local affair
Local consultancy firms still dominate the Swiss market although international houses are gaining market share. At a time when new regulations are forcing pension funds to go through an analytical process to put in place an investment strategy that follows the prudent man rule, opportunities for consultants have increased.
Domestic players like Complementa, PPC Metrics and Ecofin have experienced a considerable growth of business during the last year and there is still room for further expansion. “Under the new investment guidelines, published in April 2000, it has become more important for pension funds to deeply analyse different factors before setting up their investment strategies,” says Hans Neukomm, senior consultant at Ecofin in Zurich. “This added to the fact that many pension funds in this country are very small is making the need for help from consultants more and more important.”
“Clients are asking more for ALM studies and reviews of their internal investment guidelines to make sure they are in line with the new legal requirements,” Neukomm says. “Also, the fact that we are seeing a move away from balanced mandates towards the use of specialised mandates and an increasing interest in foreign investments is driving pension funds to use consultancy services more than they used to.”
Mike McShee, managing director of Buck Heissmann in Geneva, says: “The role of investment consultants in Switzerland is still relatively new because this is not a fully mature market. Both local and international firms have been growing recently. Along with William Mercer and Watson Wyatt, Buck Heissmann is one of the foreign houses which has found a place in this market. “I don’t see any new names coming into the market but what is true is that we see more of the existing people who until now were mainly concentrated in other areas of pension consulting offering more services on the investment field,” McShee says.
At Watson Wyatt in Zurich, investment consulting Gioacchino Puglia says: “Although the number of competitors in investment consulting is not large, we do not see additional players breaking into the Swiss market. The market is quite conservative and does not necessarily embrace “newcomers”. Puglia believes his company has achieved a local status after having been present in Switzerland for more than a decade. “But any new firm may face challenges in establishing itself.”
Ecofin’s Neukomm agrees: “In the past some of the foreign consultants had problems trying to positioning themselves in the market because there were not familiar with local conditions like regulations and languages. This might not be an issue when talking about asset management but it is very important when it comes to consultancy.”
As pension funds continue redesigning themselves, setting up new investment strategies and dealing with accountant standards there is a lot scope for consultants to work in both the actuarial and the investment side. “We see more and more pension funds looking to set up more complex and elaborate structures. We are being asked advice in very specialised areas including structure optimisation, implementation of alternative investment programmes or manager selection for very specific mandates,” Watson’s Puglia says.
Along with these companies, commercial banks are trying to compete in certain areas of consulting although there presence still remains marginal. E-consulting is also appearing but it’s still in its infancy, although further developments in this area are expected for the near future.