UK: investment advice part of the package
The UK consultancy market is probably one of the most dynamic in Europe. The large size of the pension fund industry in terms of both number of schemes and assets under management, makes the UK a very attractive playing field for consultancy professionals .
Investment consulting is now seen as an integral part of the wide range of services provided by consultants and more consultancy houses, regardless their size, are developing investment divisions further.
“I think investment consulting is an area where we are seeing increasing interest from pension funds,” says Danny Wilding, partner at Barnett Waddingham in London.
“A lot of pension schemes that have not been particularly interested in investment in the past are more interested now. More and more, even small and medium sized pension funds want to have their own strategies rather than simply follow the strategy that everyone else is following,” Wilding says.
“Our clients want to know how to match their investment strategy to the liability profile of the scheme and get advice on different investment issues such as active versus passive or pooled versus segregated funds.”
At London-based Lane Clark & Peacock, investment partner Paul Haines says: “Pension funds are asking for strategic advice, investment managers selection and advice on AVC arrangements,” he says, in particular in the wake of the troubles of insurer Equitable Life and the forthcoming stakeholder pensions.
Haines believes that the results of the Myners review have not had a significant impact on institutional investors so far. “I think that the review has helped to raise the profile of venture capital but I don’t think is having a fundamental effect at the moment.”
In terms of new players trying to make inroads Haines says: “In the investment consulting area is more difficult for new players to break into the market because it requires quite a high level of research. But there are other areas where people can clearly move into like setting up consultancies specialised, for instance, in custody.”
Wilding agrees: “I can see some specialist players in the market such as internet administration companies or defined contribution-only consultancies.”
The truth is that trustees are now more aware of how their funds assets have to be invested: “Investment consulting in the UK is focused on what the trustees really want and they want to know more about their role in this field,” says Mike Clark, director of client services at Frank Russell in London. “One of the major issues pension funds are looking at is asset allocation, and we are offering both advisory and implementation services through our multi-manager structure,” Clark says. “Where other consultants can only offer advisory services we are able to combine both. This is unusual, though increasingly in demand as pension fund trustees think their role through.”
On who is dominating the UK consultancy industry, Haines says: “I think that in the UK most of the consultancy advice is given by locally-established firms . Here, as in any other market, the big players offer advantages in terms of resources and global reach and disadvantages in terms standardisation.”
Frank Russell’s Clark says: “I wouldn’t say that this company or the other is dominating the market . It’s true that a few big firms have a large market share but given that the structure of the market is changing this dominance might also change.”