Post on 12-Jan-2016
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Atlantic Connection
66thth Annual Annual Economic &Economic &Financial Development Financial Development ConferenceConference
Consultant Panel
July 13, 2011
Jeanna M. Cullins, Principal
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Consultant Trends - Headlines
2011 – Mercer acquired the bulk of rival Evaluation Associates Inc.'s business from
Milliman Inc…after buying St. Louis-based Hammond Associates in January. EAI buy
just the beginning.…
2011 – Callan will acquire the 10 public defined benefit clients…Evaluation Associates
serves.…
February 2009 – Mercer sought to acquire Callan, but the deal was abruptly called off
a little over a month later.…
2010 – Hewitt-Ennis may change the game…As industry giant is born, independent firms reconsidering their status; M&A talks to rise.…
May 2011 – GBS Investment Consulting, an investment advisory unit of Arthur J.
Gallagher & Co., acquired Independent Fiduciary Services. GBS also owns Yanni
Partners, another investment consulting firm.
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Some Reasons Why…
Bigger market share
Succession issues
Additional analytical tools and access to the talent and resources
Bigger and better economies of scale
Cross-selling opportunities in areas such as actuarial, management, and compensation consulting
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Example
ActuarialAlabama Natural GasAquilaCMS EnergyConsumers EnergyDayton Power & LightDTE EnergyEdison InternationalEFHEnergenIberdrolaNortheast UtilitiesNW Natural GasPacificorpPGEPSEGSW GasSTPTransAltaWilliams Companies
InvestmentsCleco
CENGConstellation Energy
Dynegy, Inc.Integrys
Mid-American EnergyPeabody EnergyPepco Holdings
TECO Energy
Both*CenterPoint Energy
Duquesne LightEntergy
FirstEnergyGenOn
NextEra (FPL Group)National Grid
NiSourceNRG Energy
Southern Company
*Includes actuarial and pension risk consulting
Firm is actuary to 10 of 20 largest utilities in US and 8 out of 15 Dow Jones Utility Average
Firm has engaged in pension risk management studies with 10 utilities
covering nearly $20B in assets
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Checklist of Questions to Ask…
Did you receive a “consent” to assignment of the contract?
Will your consulting team remain the same?
Does the firm or a related company have relationships with money managers that it recommends, considers for recommendation, or otherwise mentions to the plan for its consideration? If so, describe those relationships?
Does the firm or a related company receive any payments from money managers it recommends, considers for recommendation, or otherwise mentions to the plan for its consideration? If so, what is the extent of these payments in relation to your other income (revenue)?
What percentage of the firm’s plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees?
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Checklist of Questions to Ask… Does the firm allow plans to pay your consulting fees using the plan s
brokerage commissions? If so: – a. what steps does the firm take to ensure that the plan receives best
execution for its securities trades?– b. what steps does the firm take to monitor the amount of commissions
paid and alert plans when consulting fees have been paid in full? If not, how can a plan make sure it does not over-pay its consulting fees?
Does the firm have any arrangements with broker/dealers under which it or a related company will benefit if money managers place trades for their clients with such broker-dealers?
Will the firm acknowledge, or continue to acknowledge, in writing that its fiduciary obligation as an investment adviser to the plan while providing the consulting services to the plan?