AUSTRALIA - Moves by superannuation funds to build up their in-house expertise, and the increasing dominance of the multi-manager, have led some in the Australian industry to question the sustainability of the "pure" asset consultant going forward.
John Coombe, divisional director for JANA Investment Advisers, forecast an “interesting and difficult” 10 years for “pure” consultants. One of the drivers for change is the mass outsourcing of corporate superannuation plans.
In addition, a recent survey by Global Pensions of the heads of institutional/wholesale at 19 asset management firms in Australia saw many respondents question whether the number of consulting firms in the market was sustainable going forward.
However, Alex Francois, head of sales and marketing at Principal Global Investors (Australia), claimed that while the role of traditional asset consultants was changing: “They haven’t lost any power, they’ve just shifted into other areas.”
This is certainly true of big names such as Russell, Mercer, JANA and MLC, who all operate “implemented consulting” services.
Watson Wyatt remains steadfastly pure, and David Neal, director of Watson Wyatt Australia, said the “independence” of the firm’s advice was an important strength in the competitive consultancy arena.
“The less [independent advice] there is, the higher premium there is on it,” he said. Will Britten, head of institutional business at BGI, added: “I don’t ever see the need for independent financial advice disappearing. Funds are using multiple asset consultants depending on their specialities – I think that’s probably an area we’ll see develop even more.”
With “survival of the fittest” becoming the rule of the game, a trend towards single asset consultants is emerging and Murray Brewer, director of T. Rowe Price Australia and New Zealand, predicted consultants would in future “come in for a specific job rather than manage the whole job”.
Consultants are working to keep one step ahead of market trends and changes, with JANA, for example, in the process of developing a “Direct Investment Group”, to look at offers brought directly to clients.
Nevertheless, it’s not just the consultants that are moving away from their traditional role. Although apparently not designed to challenge consultants, BGI has recently implemented a “client advisory function” in Australia, already present in the UK and US.
Britten said: “[The client advisory function] sits outside of the client service function and is just designed to provide some more access for our clients to investment insights and the ability for them to come to us and ask questions about issues they’re facing, whether they’re about BGI products or about the industry in general.”
Enhanced powers for The Pensions Regulator (TPR) to prosecute and fine company directors who "wilfully or recklessly" put their defined benefit (DB) pension scheme at risk will be hard to enforce, commentators say.
Melrose has pledged to contribute up to £1bn to GKN's pension schemes as part of a final offer to acquire the engineering business.
Existing master trusts will be forced to pay £41,000 when applying for authorisation under the upcoming regime, the government has confirmed.
UPDATE 2 - DWP publishes DB white paper: Stronger powers for TPR, DB chair statements to be introduced
The Pensions Regulator (TPR) will be given the power to fine company bosses who deliberately puts their defined benefit (DB) schemes at risk, the government has confirmed.