Specialized Investment Consulting in Demand
The increased need for specialized investment consulting services is
driving many of the top brokerage houses to reduce their reliance on
the large, general consulting firms, a recent study shows.
The study, released Tuesday by Boston-based Cerulli Associates, says
brokerage firms are using more consulting services than ever, but they
are being much more specific about what the engagements are designed to
achieve.
"Firms are parceling out responsibilities to a lot of smaller firms,
because they’re hiring out for the things they don’t
necessarily do best," says Kathleen O’Connor, a director at
Cerulli and the study’s author. "There are a lot of new firms
spinning out of old firms, focusing on certain individual
aspects."
The net result of this trend, O’Connor says, is to reduce the
overall influence of the largest consulting firms, including Mercer
Investment Consulting and Cambridge Associates. "It’s definitely
reducing the market share of some of the larger firms, and we
don’t see it changing any time soon," she says.
Other major findings from the study:
* Bigger plans deploy more consultants. More than 50 percent of large
individual asset allocation plans—those with more than $10
billion—employ multiple consultants. By contrast, only 9 percent
of plans with $100 million or more did so.
* A typical firm/consultant relationship lasts seven years.
* 90 percent of investment consulting firms have centralized research
departments, and 62 percent have formal search committees.
* On average, consulting firms conduct 495 manager meetings a year. And
58 percent of consulting companies have a specific ranking system that
they apply to individual managers.
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