The brave new world of asset consulting
The investment management and superannuation industry has changed markedly over the last decade. Not only has it grown in size, but it has also had to deal with a wealth of new regulation, a rapidly evolving technology space and a tightening of margins.
Caught in the middle have been the asset consultants - the people that advise the funds on what to do with their money and how to do it best.
At Frontier, Moloney was involved in a restructuring of the business, which resulted in a bigger focus on specialist expertise. He says one of the biggest changes he has seen in the industry has been the increase in staff levels and expertise as funds under management have risen.
"Funds are getting bigger with more internal staff and more expertise at the board executive level," he says.
"And in some cases ... they just want the facts and the research and they make the decision themselves."
"[Funds] want to see everything straight away and they want to see ideas all the time and that's a big requirement." Damian Moloney
Technology has made the demand for data even more time sensitive than it ever was, but better internal resources means that funds can execute some of the ideas themselves.
"They want to see everything straight away and they want to see ideas all the time and that's a big requirement," Moloney says.
When it comes to the kind of people that Frontier hires, they have taken on more investment specialists and technology experts over the past two years than previously.
"I haven't really followed how it's changing although at the time I left the industry there was a move to specialised asset consultants," he says.
"Particularly where the larger funds would hire consultants for specific areas.."
"And there was a also a move by the bigger funds to create their own asset consultant teams in house."
On the technology side of things Frontier has PRISM, an online open architecture platform for investment modelling. Through the service it will model different solutions for clients, which then sit on a data base and are available for other clients to use if they want to.
Frontier hired an IT and quantitative specialist to help with that platform but Moloney points out that even with more specialists, good client relationship managers will always be needed by the business.
"Right now the client advice side is really important so you've got to have people who can talk to the clients," he says.
The investment/consulting industry may have changed a lot, but it has not changed as much as Liling would have liked it to.
"A manager I quite liked was Platinum ... and there was no way I could use them in our funds because their fees were more than double any other fund managers." Ron Liling
At one point last decade Liling made a bid to buy back his asset consulting business (read the Q&A with Ron Liling for more on this), before it was sold to Morningstar in 2009, to try and fulfil a dream to create a performance-fee based business. If he had been successful all parties - staff, fund managers, the consultants themselves - would have been employed on a small retainer, with the majority of their remuneration coming from performance based fees. Such a model would have better aligned the interests of all stakeholders, according to Liling.
"Clients ... would pay something like a small retainer and the majority of our fees would be based on how we performed for the client," he explains.
"It's a very different model because it's a more volatile model but a much fairer model."
This would have enabled the firm to use the best managers, regardless of price, Liling says.
"A manager I quite liked was Platinum ... and there was no way I could use them in our funds because their fees were more than double any other fund managers."
With pressure on all parties involved to offer the most cost effective option, the industry has probably gone in the opposite direction when it comes to fees. Asset consulting is still evolving a great deal in an effort to cater for the increasing demands of its clients.
