On our e-newsletter I&T News, it’s always stories about asset consultants that get the most clicks. So it was no surprise to find the ‘consultant plenary’ at last month’s Conference of Major Super Funds packed to the rafters, and one of the most talked-about sessions thereafter. The gatekeepers are still the go-to guys. The talent on the panel were refreshingly honest about where their businesses are today, and where they are heading. Is it any wonder that Frontier Investment Consulting wants managers to adopt a base flat fee? Its chief, Fiona Trafford-Walker, revealed to the audience that Frontier earned revenue of $10 million last year, on funds under advice of $100 billion.
That’s the kind of margin that Superpartners is used to starving on. None of the consultants are in clover. Ray King lamented that leading up to the GFC, he had been “worried” about valuations, but in reality too caught up in the “day to day” of running a business to conceive and recommend the massive asset allocation changes that would have been required to escape big losses. “Consultants ideally should lock themselves in a room from time to time and just do deep research, but we don’t have that luxury,” he said. JANA executive director John Coombe lamented that his firm, too, had been “too busy running the business” to contribute to debate on policy settings, allowing asset allocation to be outsourced to members, and regulators to impose restrictive “bands” around member investment choice options, which all meant “funds and consultants had their hands tied behind their back” when the crisis hit.
“So let’s bring on Cooper’s universal fund and get back to having a real say on the bulk of members’ asset allocation. Because the way it is at the moment, even if we’d seen the crisis coming, was there anything we could have implemented to save ourselves from it?” It was a rhetorical question. Still, Coombe is realistic enough to know that asset consultants won’t enjoy their current influence much longer. As funds keep merging (Cbus’ diplomatic description of what it’s doing with Connect Super), Coombe predicted that in 10 years, JANA would either be a pure funds manager, or a series of specialised advisory boutiques. Not that consultants’ disappearance as we know them will do much for Jeremy Cooper’s drive to reduce costs.