When it came to retail research, Mercer took the view — if you can’t buy them, join them.
Mercer Investment Consulting (Mercer IC) was launched following the collapse of a deal to buy van Eyk Research in mid-2002. Soon after, Mercer began converting its wholesale skills to consult to retail research clients, picking up AMP, Colonial FirstChoice and Skandia.
Mercer’s head of consulting services — retail and intermediaries Rashmi Mehrotra says it was demand from these clients that was the starting point for an extension of the consulting services.
“What we have been doing now for the last year is provide tailored consulting with an online web site that large dealer groups can take to distribute to advisers,” Mehrotra says.
“Our strategy is fund-of-fund consulting, asset consulting for dealer groups and then the delivery platform is Mercer <IS> [industrial strength].”
While Mercer delivers capital markets research including strategic asset allocation advice, ongoing managed funds research with quarterly ratings, and strategic research looking at long-term trends and issues, Mehrotra says its “tailored consulting” approach really comes to the forefront with its portfolio construction guidance and the customisation and online delivery of model portfolios.
Clients for this service include AMP Financial Planning, AXA Financial Planning and Rabo, as well as high-net-worth oriented boutiques such as Arrive Wealth Management and Tynan Mackenzie. And they can expect very hands-on service from the Mercer IC team.
As with Mercer’s wholesale business, each client is assigned an investment consultant who not only provides all quarterly reports and participates in the client’s investment committee, but is also on hand for any questions or related issues.
Apart from Mehrotra, the team also includes head of consulting Cecily Williams, principal Simon Eagleton, investment consultant Shantanu Tandon, as well as two additional research staff, who all report to Mercer IC national practice leader Christopher Andrews. The group is also looking to replace head of retail research Chris Durack, who recently departed to join Perpetual.
All this service comes at a price.
Mercer charges between $10,000 and $1 million, depending on the client and their needs, but this is its only revenue stream — it does not receive payments from fund managers for ratings.
This business model aligns it most closely with that of van Eyk — where Mehrotra was associate director prior to joining Mercer. The web platform, Mercer IS, has been touted as a major competitor to van Eyk’s iRate tool.
A major differentiator though is that Mercer does not publish its ratings in the broader market — they are available only to clients. But with large groups on board, that guarantees significant distribution of its findings.
And while Mercer is a newcomer to the retail scene, it hasn’t been too difficult to find traction in the market, according to Mehrotra.
“While I guess we’re new to the retail space, it’s instant coverage, you don’t have to wait around for three years until we have rated everyone, we’ve actually had all the information for 10 years or more, so from that perspective it’s an instant quality alternative provider to the market leader.”
Mercer has more plans up its sleeve — some of them leveraging the firm’s global presence.
In response to feedback from clients, Mehrotra is in the process of repackaging the basic “off the shelf” online service in modules — to be used by smaller clients as a compliance tool.
“We’re broadening our research, for example we’ve been doing ad hoc reviews on structured products for our clients, but we’re going to look at that systematically and provide guidance on various product types. I’m also looking at partners where we can’t offer research in-house, partly because of our licensing restrictions, for example with direct shares.
“And we’re also looking at how we can offer research on areas such as agribusiness and property syndicates while we still maintain our objective business model.”
Choice of fund legislation has given an extra kick along to plans to also rate corporate and industry funds, so advisers get a better understanding of these funds when clients are already invested there.
Other longer term plans, such as visual tools to illustrate asset allocations and products in a risk profile and electronic updates that show an adviser any ratings changes at quarterly review time, come back to Mehrotra’s view on the utility of research.
“Whatever makes the adviser look good in front of the client is what’s needed.”
