OUR VIEW
The fact that Mercer came out on top of the portfolio institutional consultant study illustrates the company’s consistency across the board.
The firm also topped this magazine’s 2011 consultant survey. The result will come as no surprise to some, and many might expect a firm which operates in 40 countries across the globe and has more than 20,000 employees to have high standards across due diligence, flexibility and research capability. Similarly, the same could be argued for Towers Watson which came second and is another example of a global player with some 14,000 employees.
Yet the overall results did not indicate that size was the deciding factor. LCP, which has around 400 staff and operates solely on UK soil, and Hymans Robertson, which has some 600 employees, overall ranked third and fifth respectively, which suggests size and reach does not always matter. This is also true when you consider Aon Hewitt, which ranked sixth overall, has more than 10,000 clients and a head count of some 29,000 globally. In addition, Redington, a relative newcomer in the UK market, is only 54 large and came top in the ‘willingness to take on board ideas or products’ category.
Elsewhere, it was interesting to see in the DC category the emergence of other consultants higher up the ranking. For example, bfinance made the top three, P-Solve ranked sixth and Capita Hartshead came in eighth, the latter placing in the bottom two in each of the three other categories. Russell Investments, strong in other categories and fourth overall, dropped to tenth here.
Considering the rest of the field, in most categories the top three consultants varied. Towers Watson and LCP both broke into top three on two occasions each, but Towers Watson pipped LCP into second place overall because it notched up a combined score of 12.80 versus LCP’s 12.50. In the 2011 survey LCP came sixth.
At the foot of the rankings two consultants consistently occupied the bottom two: Capita Hartshead and Stamford Associates ranked 14th and 15th overall, respectively.
Neither firm responded when asked for comment.
Conducting a survey usually throws up controversy and portfolio institutional is aware asking asset managers to rate consultants on a scale of one to four based on certain criteria can never provide a full picture.
We decided to target the asset management community (heads of consultant relations or institutional business) as we believe they were best placed to give an overall assessment of the industry given their firsthand experience of working with many different consultants. Ideally, we would have spoken to every trustee in the UK to gauge the end-user or client experience (which is likely to be more important to consultants than the asset managers’ opinion), but as most pension schemes usually only use one investment adviser, this would not have given us the same breadth of opinion.
We also concede that the survey does not touch on, for example, situations where an asset manager’s fund or products are not ‘buy-rated’ by a certain consultant. In such cases is that manager really going to be inclined to rate that consultant highly in a survey? Similarly, a consultant’s ‘slow’ pace when rating funds might be seen as a negative by one asset manager, while another might view a slower research process as more in-depth and considered.
Another interesting angle to consider is the fact that anecdotally certain consultancy firms have clamped down on how much corporate hospitality they can accept from asset managers. This potentially means being entertained by asset management firms will have reduced the regularity of contact and in turn fed through to relationships with consultants diminshing or falling off the radar.
portfolio institutional tried to be as fair as possible by only taking into account answers from asset managers who were familiar with consultants, but there are undoubtedly many other factors and nuances that are not addressed in the survey. However, what should ultimately matter is the individual relationship between the consultant and the client and the quality of service being provided. Many consultants will be nurturing successful and productive relationships with clients regardless of the findings.
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