Vale Russell Consulting… as Liddell departs

Greg Liddell
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(Pictured: Greg Liddell)

by Greg Bright

Russell Investments’ consulting arm hasn’t been formally laid to rest, although the industry has been increasingly concerned about its health for several years. With the latest departure – that of Greg Liddell – maybe it’s time to say goodbye.

Liddell, Russell’s managing director of Advisory Services in Australia, has resigned and left the firm. He is currently involved in a project for the Investor Group on Climate Change (ICGG) and is considering his options for when that is completed, in September.

Notwithstanding a brief resurgence under former global managing director Andrew Doman, an Australian, Russell Investments has been neglecting its consulting arm in favour of its funds management and indices businesses for years.

Australia does not have any of the indices business, which likely drove the Russell planned takeover by London Stock Exchange Group (LSEG), announced this month. But the consulting arm has been allowed to run down, mainly by natural attrition, because of what was seen as the more important dual business aims of greater retailisation and focus on both multi-manager and inhouse funds.

It is unlikely that Liddell will be replaced. This leaves, from a once-proud division, just four people: one senior consultant based in Melbourne, Frank Russo, a young import from the UK, Tim Cook, and two analysts.

Former senior consultants, such as the CIO for Australia, Symon Parish, the CEO for Asia Pacific, Peter Gunning, who is also a former global CIO for the group until last year, and more recently Graham Harman, moved across to the funds management side several years ago.

In terms of consulting clients, Russell now has just three in the institutional space in Australia. They are IOOF, the NSW Parliamentary super scheme, and a Melbourne-based defined benefit scheme. Ironically, the remaining clients have each produced good numbers in the past couple of years.

Steve Merlicek, the CIO of IOOF, appointed Russell to IOOF soon after joining the fund manager from Telstra Super, in October 2009. Russell recruited his former Telstra Super colleague, Nicole Connolly, to boost its alternatives research, which likely clinched the consulting contract. She has subsequently left Russell too.

Merlicek said last week: “We’d prefer not to lose somebody of Greg’s calibre but the reality is that Russell has had quite a high turnover of senior staff in the last few years, so it depends on the depth of the team and their ability to find suitable replacements. The other factor is: how reliant is one on the asset consultant? In IOOF’s case we have a high-quality internal team with lots of experience.”

The funds management industry has probably evolved more quickly than most industries, especially in Australia, which is the fastest growing market in the world. Traditional asset consulting has been under pressure across the board, in all advanced countries, for several reasons. Super funds and pension funds and other fiduciaries have grown to such a size that the staffs of many dwarf that of their former retainer-based consulting firms. They, therefore, tend to employ consultants on specific contracts and, increasingly, these are specialist advisors.

Because of their intellectual property, resources and various capabilities, which Russell still has in spades, the temptation for consulting firms to use that for the higher-paying area of funds management is a strong one.

Liddell joined Russell in September 2009, after about a year of independent consulting. Prior to that he was the director of implemented equities at QIC, and before that he was at Mercer Investment Consulting for 10 years, where he rose to be head of manager research.

At Russell, Liddell’s time started promisingly, as Andrew Doman, a former management consultant, took the reins in Tacoma. Liddell was given the authority to make some important hirings. While he cut costs around the globe, Doman provided some nurturing of the consulting business, which he saw as a necessary provider of both intellectual capital for other activities and a big part of the firm’s marketing effort. Unfortunately, Doman left the role only two years later and became non-executive chairman. Len Brennan, a former Russell veteran who had left in 2005, returned and is the current CEO.

In Australia, Liddell inherited a consulting team which was already in trouble. The alternatives research team, built up by former business head Steve Roberts, had been largely dismantled when rival consultants were continuing to build theirs.

As one former colleague said last week: “Greg [Liddell] nevertheless assembled an excellent team in an attempt to regain the ‘halo effect’ for Russell that consulting offered. He hired Nicole Connolly on alternatives, Raewyn Williams on after-tax consulting, Jerome Lander – who famously picked L1’s [a boutique equities shop] problems before the asset management and research teams at Russell did, saving Australian Catholic Super Fund from significant under-performance – Graham Harman for economic advice and Tom Gillespie on risk consulting.

“But in the end, they either left to join somewhere where they’d be ‘core business’ or, in the case of Graham Harman, followed in the footsteps of Pete Gunning and Symon Parish from over a decade prior and realised that to do well at Russell, you had to become aligned with asset management. Not an asset consultant.”

If one detects a touch of nostalgia in this report, then that is probably true. Russell – then the Frank Russell Company – actually launched the modern era of investment consulting in Australia in 1986 when it opened its office in Sydney.

Frank Russell Co sent a young consultant, Craig Ueland, out from the then-head office at Tacoma (now Seattle) to start the business, which had just one Australian client, MLC. Ueland, who now lives back in Australia with his Australian-born wife, went on to become the global CEO before Russell was taken over by its current, but soon-to-be-former, owner, Northwestern Mutual.

For much of the time since 1986, the firm reigned supreme, almost as the font of all knowledge with respect to investment strategies and their implementation. But insurance companies are not good owners of consulting businesses, at least from the employees and clients’ perspective. Insurance companies and banks – they should stick to their knitting!

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