EUROPE - Watson Wyatt has admitted that its implementing consulting model is akin to manager of managers.
Having historically shied away from the manager of managers business, Watson Wyatt has in the last year secured eight pension fund clients into its Advanced Investment Solutions (AIS) model. This brings the total AIS client list to 10 pension funds.
Kevin Carter, European head of investment consulting, conceded that conceptually there is “no real difference” between implemented consulting and manager of managers coordinated on a bespoke basis.
He did, however, add that AIS encompasses a “spectrum of services” from individual mandate implementation, to investment implementation of the total fund.
Under an AIS agreement, the retainer fee on implementing consulting is smaller than the fee for advice Watson Wyatt currently charges. But with the performance fee element, there is the potential to earn a higher fee in aggregate.
The investment management contract remains between the manager and the pension fund and Watson Wyatt receives no remuneration from the manager.
The move does, however, raise the question of what other clients outside of the implemented consulting model are getting for their money. Does the client in effect get “better” advice if they pay more for it though an AIS fee structure?
Carter said: “We can’t countenance the notion of second best advice,” and insisted that traditional consulting clients would continue to get top quality advice regardless of the fact that they could be paying less for it.
Carter said that AIS has been developed on the back of client demand for bespoke solutions, more measurement and accountability. He also pointed to the high level of inertia in the way trustees implement decisions. AIS would speed the implementation process up.
He added that the firm’s Advanced Investment Solutions does not replace consulting, which continues to be Watson Wyatt’s core business.
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