An increasingly complex array of client needs and a looming wave of generational change are placing the investment consulting industry in a state of considerable flux that could spur further industry consolidation.
This year's biggest combination involved Hewitt Associates' purchase in July of Ennis Knupp & Associates to form a market leader with combined global assets under advisement of $3.82 trillion.
But the trend appears to be continuing as 2010 draws to a close.
Mercer Investment Consulting Inc., with $3.7 trillion in global assets under advisement, announced last week it was acquiring Hammond Associates in a move designed to give the corporate pension plan advisory giant a foothold in the fast-growing endowment market segment. (See related story on page 2.)
Amid the lessons investment consultants are trying to glean from the global financial crisis and the spate of regulatory changes resulting from it, “the velocity of change has definitely increased,” said Janine Baldridge, global head of consulting and advisory services for Seattle-based investment consultant Russell Investments.
That change is spawning opportunities for consultants, but challenges, too, as firms face pressure to add the resources needed to cover the growing range of generalist and specialist topics on which clients are seeking expertise, Ms. Baldridge noted. She cited growing interest in more dynamic — as opposed to traditional static — asset allocation policies as one of the newer trends consultants are working to master.
Clients are considering an unprecedented range of options in structuring their investment programs, and that has left every investment consultant “expanding and growing their teams,” noted Stephen Cummings, CEO of Lincolnshire, Ill.-based Hewitt EnnisKnupp Inc.
Mr. Cummings said Ennis Knupp's tie-up with Hewitt was his firm's means of immediately fielding a deeper, global lineup to meet those client needs. “Everything changed,” he said, with the combined entity's 58 manager research professionals “easily double” what Ennis Knupp had, while adding global coverage and expertise in non-U.S. alternatives.
Elsewhere, executives at firms big and small report significant additions to their research teams since the crisis began in mid-2007. Among them:
c Mercer has added 20 researchers globally year to date, said Jeffrey J. Schutes, Chicago-based president of Mercer's investment consulting business. The research staff has about doubled during the past three years, to more than 80 now.
c NEPC LLC's lineup of professionals entirely dedicated to research stands at 38 now, up from 22 heading into the recent financial crisis, said Richard Charlton, chairman and CEO of the Cambridge, Mass.-based investment consultant. Roughly half of that expanded staff focus on alternative investments, he said.
c Marco Consulting Group, Chicago, has increased its research group to 25 from 12 during the past five years, said Jack Marco, chairman of the Chicago-based Taft-Hartley investment consulting leader.
c Wurts & Associates Inc., Seattle, has 14 research professionals now, more than double its pre-crisis lineup, and the firm's roll should expand further to roughly 20 by mid-2011, said Eric Petroff, director of research.
c Alan Biller & Associates' research team will be nine or 10 strong within six months, up from six two years ago, said Alan D. Biller, president of the Menlo Park, Calif.-based firm.