A shortage of consultants is prompting William M. Mercer Inc.'s investment consulting unit to consider dropping some clients and raising some fees.
In a blunt internal memo obtained by Pensions & Investments, Asghar Alam, national practice leader for William M. Mercer Investment Consulting, said Mercer will fight the talent drain by focusing extra attention on attracting and retaining consultants.
Part of that strategy includes ending relationships with unprofitable clients and looking at the pricing structure to make sure Mercer receives appropriate compensation. That way, the memo said, employees and shareholders can be fairly compensated.
"Charging appropriate fees for the work we do" is the first step, Mr. Alam said in his memo.
The talent shortage is the result of consultants being lured to higher-paying jobs at money management firms in record numbers. The pool of experienced consultants is shrinking. "Money management organizations are continuously recruiting investment consultants," said Mr. Alam, who has 200 consultants in his practice. "And because compensation packages at investment management firms are traditionally richer than what we can offer, it adds an additional challenge for consulting firms in this fight for talent."
In a an interview, Mr. Alam said Mercer recruits experienced consultants from other consulting firms; most consulting firms do the same. That means money management and consulting firms are chasing the same pool of workers.
Executives at other firms acknowledged problems, but didn't appear as worried as Mr. Alam.
Philip Schneider, managing director at Watson Wyatt Investment Consulting, Chicago, said Wyatt's searches for new consultants "now take a little longer."
At Frank Russell Co., Tacoma, Wash., which has long been viewed as one of the best places to work, recruiting takes longer than in years past.
Industry sources say a typical consultant receives $200,000 to $300,000 in salary, plus a bonus of 50% to 75% of base pay.
A former Mercer consultant now with a money management firm said consulting firms with no asset-based fees are not profitable enough to support stand-alone investment consulting practices. "There aren't many organizations that are making money on investment consulting alone," he said. "And that won't change unless clients are willing to pay high fees for investment consulting services."
Mercer is making a concerted effort to make consulting more interesting for its employees while providing "value added consulting services, not just number crunching," Mr. Alam said in the interview.