“In the old days they would have tendered for every client, now they are concerned about the profitability of some clients,” he says.
The refusal to tender for every superannuation fund is partly due to the growing complexity of each contract. Where relationships might once look similar and a tender document might need only 20-30 pages, now these documents can need over 100 pages to address properly.
“Clients are far more demanding,” says Mason. “They want bespoke reports and bespoke analysis, not just off the shelf, which 10-15 years ago you could have got away with.”
UK MARKET
In the UK, Willis Towers Watson is well aware of this trend, but is optimistic about the ability to survive it. Its experience of working with large UK funds is that its role has not diminished but expanded into areas such as investment outsourcing and transformational governance.
Paul Battye, chief executive of Moorlands Human Capital, an executive search and talent management consultancy, who has placed investment staff at leading pension funds, also notes the shift away from generalist expertise.
“What has changed significantly in the last five years, both in the UK and overseas is the increased demand for specialists with a deep understanding and knowledge of specific asset classes,” he says.
However Amin Rajan, chief executive of CREATE, believes the trend away from the traditional role of the investment consultant is happening slowly in the UK, unlike Europe. “The creation of the necessary infrastructure of skills and governance is turning into a long drawn out process,” he says. “It’s easier said than done.”
DO PENSION FUNDS HAVE A LEGAL REQUIREMENT TO HAVE AN INVESTMENT CONSULTANT?
There is no specific requirement for the appointment of an investment consultant under trust law, but it is a requirement of the Australian Prudential Regulatory Authority (APRA) that superannuation funds must have an “effective due diligence process for the selection of investments” and must “determine appropriate measures to monitor the performance of investments”. For this to happen, APRA says such funds must ensure that persons applying and assessing the measures are “operationally independent from persons who are responsible for making the investment”.
Maged Girgis, partner at Minter Ellison, a leading Sydney-based law firm, says it has become normal to appoint such advisers in part as it gives scope to sue over mistakes. A fund that has no such advisers has only got itself to blame and it can become harder for the trust’s beneficiaries to have redress in such situations.
