Lonsec maintains its lead over rival ratings houses

Lonsec has yet again emerged as a favourite among dealer groups with its back-to-back victory in Money Management’s Rate the Raters survey, while van Eyk Research grabbed the second spot, writes Mike Taylor.

Lonsec has been named Money Management’s Ratings House of the Year for 2011.

It is the second successive win by Lonsec, based on responses from both fund managers and financial planning dealer groups as part of Money Management’s two-stage Rate the Raters survey.

While Lonsec again emerged as a clear-cut winner across both dealer groups and fund managers, the 2011 survey process revealed what appeared to be the beginning of a recovery by van Eyk after nearly a year of negativity based around key personnel departures, including that of founder, Stephen van Eyk.

Since Money Management conducted the two surveys it has been announced that the ownership of Lonsec has changed hands, with the ratings house now a part of the Mark Carnegie backed Financial Research Holdings which also houses superannuation ratings house, SuperRatings.

The 2011 process also highlighted a serious divergence in attitudes between fund managers and dealer groups with respect to particular ratings houses, with the most extreme case being that of Zenith which – while struggling to gain support among fund managers – was strongly regarded by financial planning dealer groups.

In a closely fought battle for runner-up as Ratings House of the Year, Money Management handed the prize to van Eyk, based on the comeback it recorded in the eyes of both fund managers and dealer groups.

Indeed, there was much for van Eyk to feel pleased about from this year’s Rate the Raters process, with dealer groups in particular strongly supporting its processes while marking the company down with respect to staff and client service.

The Money Management survey process revealed that van Eyk was particularly poorly regarded with respect to client service and staff – something which clearly dragged down its overall score with respect to becoming Ratings House of the Year.

Two of the companies to improve markedly in the 2011 Rate the Raters process were Standard & Poor’s and Mercer, with the latter gaining particularly strong support among the dealer groups, based on the quality of its research and client service.

Morningstar was better regarded by respondents to this year’s Rate the Raters survey process, notching up improvements in terms of staff and client service, but appeared to still struggle with respect to the overall quality of its research when compared to the industry front-runners.

Zenith – the smallest of the ratings houses – struggled in the fund manager segment of the Rate the Raters process, with the results well down on those of last year. However, in the dealer group segment it ran neck and neck with Lonsec on almost every criteria.

What’s more, Zenith was the only ratings house in the dealer group survey not to record a negative vote, with its clients rating it as either “good” or “excellent”.

Lonsec head of research Amanda Gillespie attributed the company’s back-to-back titles as Ratings House of the Year to its business model.

“It is extremely pleasing that the hard work and focus of Lonsec’s research team over the past year has been acknowledged. Most importantly, our focus has remained on delivering timely, quality and objective research to our clients, while at the same time ensuring that the research product and service is specifically tailored to meet their needs,” she said.

Gillespie said there had been a lot of debate around business models in the research industry but added that “Lonsec would not have a successful research business if we compromised on the quality or objectivity of our research”.

“Emphasising the objectiveness of the research process is important because, at the end of the day, our clients would not tolerate biased research,” she said.

Gillespie also attributed the success to Lonsec maintaining a large and stable research team.

She said this enabled the company to deliver in-depth research on a broad spectrum of products, proactively respond to growth in certain segments of the product market (ETFs, emerging market and income fund coverage, for example) and importantly, help to meet the different needs of a diverse advisory client base. 

Commenting on his company’s runner-up status in the 2011 Ratings House of the Year, van Eyk chief executive, Mark Thomas, paid tribute to a successful rebuilding effort and the recruitment of quality people into key roles.

“We continue to keep investing in the business,” he said.

“It is true that we went through a period that challenged the culture of our business, but the culture has won,” Thomas said.

Looking at events over the past 12 months, he said there had been a number of turning points, and amongst those had been the retention of the Genesys mandate and the company’s solid performance in the fund management element of Money Management’s Rate the Raters series.