Investment consultants with practices dominated by big corporate defined benefit plans say the drive by clients to fully fund and immunize their liabilities will make it more important than ever to diversify into areas such as fiduciary outsourcing and defined contribution.
While corporate plan sponsors are pursuing a wide range of approaches, the general push toward “the promised land” of having a “DB program that isn't a tail that wags the proverbial dog” could change the landscape for investment consultants, said Timothy Barron, CEO of Rogerscasey LLC, Darien, Conn.
Anticipation of that new terrain has found consultants increasing their focus on the fast-growing defined contribution space, and adding resources to advise non-pension related asset segments, such as endowments and insurers.
Recent merger and acquisition activity has helped leading players fill gaps:
c Mercer Inc.'s January purchase of Hammond Associates strengthened the corporate consulting giant's profile in both the wealth management and endowment and foundation segments.
c Hewitt Associates Inc.'s September purchase of Ennis Knupp & Associates helped Ennis jump-start a fiduciary outsourcing business.
c The January 2010 merger of Towers Perrin and Watson Wyatt Worldwide gave Watson an entry into the insurance consulting market.
The current business environment will reward the nimble, said Carl Hess, the New York-based global head of investments at Towers Watson & Co. Mr. Hess said his firm has “added more DC business to the mix,” as well as sovereign wealth funds, endowments and foundations, and insurers.
Kevin Turner, managing director, consulting, with Seattle-based Russell Investments, said his firm — which led the industry in fielding a diversified mix of consulting, asset management and implemented consulting services — set up a dedicated DC advisory team in 2009. The move reflected corporate clients' interest in constructing defined contribution plans that have defined-benefit-like characteristics.
Meanwhile, consultants say serving corporate DB clients as they “de-risk” — or move to ensure that pension funding volatility won't disrupt the plan sponsors — will remain a crucial, and even a growing, business segment for them over at least the next five years.