Reigate-based Watson Wyatt Ltd. has seen a steady stream of departures by senior investment consultants to investment banks and money management firms in the past year, following its acquisition by Arlington, Va.-based Watson Wyatt Worldwide Inc. (Pensions & Investments, Feb. 20).
"For a consulting firm to survive, you need to attract the best talent," said one former Watson Wyatt investment consultant now working at an international money management firm, who asked not to be named.
The staff incentive of a partnership in the firm was removed when the U.S. arm of the business bought out the partners in Watson Wyatt Worldwide LLP in 2005 and made it part of Watson Wyatt Worldwide Inc. Now that the partnership incentive is gone, the firm needs to revamp its salary structure and improve its incentive structures, investment consulting sources said.
"I would not be surprised if there were conflicts there to increase fees. The investment consulting business does require a different business model compared with the actuarial consulting business," said another former Watson Wyatt insider working for a London-based money manager.
It is believed Mr. Carter was keen to raise fees in the investment consulting unit and make it more of a profit center for the firm. He also recognized the need to pay better bonuses to retain quality consultants and maintain the success of the implemented consulting business, a source close to Mr. Carter said. The implemented consulting business, known as Advanced Investment Solutions, charges higher fees for services such as money manager monitoring and creating investment strategies for pension plans with limited resources and expertise.
The source added that Mr. Carter was a man of strong principles who was likely to walk out if he felt he did not have sufficient control over businesses for which he was responsible.
Watson Wyatt spokesman Paul Deane-Williams refused to comment further, saying only that Mr. Carter is leaving for personal reasons.
Mr. Carter joined the firm as senior investment consultant in 2002, after resigning as chief executive officer of Old Mutual Asset Managers, London. He was named head of European consulting in February 2005. During his short tenure as European head, he tried to put Watson Wyatt's investment consulting practice on a more commercial basis and had overseen a 20% increase in staff across Europe, said Mr. Deane-Williams.
He was instrumental in growing Advanced Investment Solutions. Global revenue from WWW's investment consulting operations was $20.7 million for the quarter ended March 31, and now accounts for 6% of total group revenue, according to the firm's earnings statement.
The firm intends to grow its implemented consulting business to account for 15% to 20% of investment consulting revenue, said Mr. Deane-Williams.
Mr. Carter "was leading the company down the route more to do with investment solutions and targeted consulting, which as a business model is much more with the times" as opposed to traditional consulting, said a former Watson Wyatt insider now working as an independent consultant.
Mr. Trickett declined to comment on Mr. Carter's departure. He says there will be no change of strategy, and he intends to "expand the responsibilities we have with clients through structured products and implemented consulting."
He believes he will be able to recruit and retain staff by "growing the business and increasing profitability."
Mr. Trickett joined Watson Wyatt in 1998 from the British Coal Pension Trustees, Sheffield, and is highly regarded by clients and former Watson Wyatt employees.
Former colleagues describe Mr. Trickett as very professional and focused on client work.