A pinch of salt -- thoughts on the Aon/WTW merger

17 September 2020 Posted by: Bart Heenk Posted In: Trustee Boards/Investment Committees, outsourcing, Fund management

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A pinch of salt!

Perhaps it’s because I’ve worked in the financial industry for all of my career?

There comes a time when an event occurs and one needs to speak out.

When a merger or acquisition occurs in our industry it’s typically because “it’s in the best interest of clients”. To be fair, this tends to be a principal rationale used to justify such corporate activity regardless of sector.

Recently it was announced that AON and Willis Towers Watson had agreed to merge their business globally and a key element of the justification was, yes you've guessed it, that it would benefit their clients.

Immediately my colleagues and I decided to do a little bit of investigative work, by hosting a roundtable discussion with a number of large potentially impacted UK pension funds to elicit their opinions.

bad news for pension funds

Specifically in relation to the issue of pension administration, the consensus was clear - this event is seen as bad news for pension funds, at least in the short term. The consulting community, already struggling to provide good quality administration, may now lose one of its largest players.  Having already exited administration in the US and in Europe, the feeling amongst those we spoke with is that AON - who are effectively taking over WTW - may decide to do likewise in the UK.  Not that there wasn’t sympathy amongst our audience; pension administration is a low margin  activity, so such a move might be an entirely reasonable business decision to take.

This is not to conclude that pension administration as a business is doomed, for the disruptive impact that new technologies will have needs to be considered. But changing administrator is not a straightforward process.

Therefore, it can certainly be argued that the merger represents bad news for pension funds in the short-term.

So, unless I’m missing something here, the routine “this move is in the best interest of clients” narrative may be particularly difficult to justify in this instance.

 

More on the aon / wtw merger:

Advice sure isn't what it used to be -- thoughts on the Aon/ WTW merger part 1

Read the full report on the Aon / WTW merger

Is Big Really Beautiful?  Notes on the discussion on  the AON/WTW merger  Download the full report