Moloney says Frontier is more confident in rating managers if it has met them face-toface rather than rely on reports from colleagues offshore. Chant says the most significant change in Australian consulting has not been the expansion of funds’ investment teams but the global consultants’ adoption of dynamic asset allocation (DAA) strategies. These techniques allow funds to be more responsive to changing market environments by adjusting their asset allocations to take advantage of mispriced assets over three- and five-year periods. Since the financial crisis, Towers Watson, Mercer and Russell have come to market with DAA services. However JANA and Frontier have done this for years. “It’s in their DNA,” Chant says. It has accompanied their longterm investment advice. Funds will need to keep watch on global consultants, he says. “It does take time to learn these skills.” Cambridge sees long-term investment strategies and DAA as being joined at the hip. It is one reason why it prizes the research of its capital markets research team: this work informs the tactical moves Cambridge recommends “so clients don’t get whip-sawed by market moves,” Snyman says.

People in superannuation often murmur about the conflicting interests of some consultants – such as Mercer, JANA and Russell – who provide a blend of advice and funds management known as ‘implemented consulting’. Frontier is committed to advisory only. Towers Watson, meanwhile, oversees more than US$50 billion in ‘fiduciary management’ services in offshore markets. Through this service the consultant sets makes all of the investment decisions but clients hold the contractual relationships with service providers, such as funds managers and custodians. Miller has no intention of marketing this service in Australia any time soon. “JANA, Russell, Mercer say yes we do,” Chant says, referring to the conflicted interests of advisory and implemented consulting, “but they’re manageable.” The consultants say their advice is independent from their funds management businesses. Only they know the truth. But it may not be so bad if some of the discipline of funds management crept into their advice: “It’s different when you have to pull the trigger,” Chant says. “What they say is the downside of the conflict is offset by the upside of being an investor.

This intellectual property is being used by the traditional consulting side.” Elvish agrees. The benefits of providing implemented consulting are stronger understandings of risk management and compliance. “When you’re making investment decisions,” he says, “you’ve got to be accountable for them. So the nature and rigour of business decisions change.” generations Among the major consultants, Chant believes JANA is the most prepared for succession. Evidence of this is Ken Marshman’s move from running the business to becoming the company’s first head of investment outcomes in 2009. This paved the way for Patrick to become CEO. Other JANA veterans – David Holston, Jim Lamborn and John Coombe, who are all executive directors – are no longer heads of research. These responsibilities have been assigned to younger people rising through the organisation. “JANA is very good at bringing up the next generation,” Chant says. A major strength of the two large domestic consultants is their deep roots in Australia. The businesses have been built on the work, experience and – to no small extent – the personalities of Marshman, Trafford-Walker, Coombe and Frontier’s deputy director of consulting Kristian Fok. This is irreplaceable. But Patrick and Trafford- Walker say that successors are rising from within their Melbourne and Sydney offices. Chant agrees.

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