The change in the kind of services consultants are providing their asset owner clients has changed the dynamic for money managers, who now are looking to get put on investment outsourcing platforms as well as being recommended by consultants for specific strategies to asset owners.
That's led to a change in how managers reach out to consultants, with less sales and marketing to asset owners and more efforts in consultant relations to get on their researchers' radar screens.
“In general, it's harder to have interaction with researchers,” said Gerry Cosgrove, managing director and head of consultant relations, RBC Global Asset Management (U.S.), Boston. “There's been compression on consulting fees, and consultants are doing a lot more screening of managers. There used to be a more open-door policy among consultants, but now there's more "don't call us, we'll call you.'”
What has made contact with researchers more important is that, through outsourced chief investment officer programs, those researchers' recommendations are carrying more weight at consultant firms, said Andrew McCollum, managing director, Greenwich Associates, Stamford, Conn. Reaching consultants' researchers “is an asset manager problem,” Mr McCollum said. “Research teams are increasingly influential in creating client portfolios. There's a greater emphasis on their recommendations than ever before. So it's even more important for money managers to reach their consulting teams. If it's harder for managers to reach them, that is a problem if managers are trying to get the word out about what they offer.”
Jeffrey MacLean, CEO, Wurts & Associates, based in El Segundo, Calif., agreed. “What is true is that money management firms are increasingly challenged to gain access to clients as never before,” Mr. MacLean said. “Back in the day, managers hired sales and marketing pros to influence the (asset owner) buying decision at the board level; board tells consultant about the firm, consultant does the research, everyone's happy. But more and more, those same marketing pros call a trustee, the trustee tells them to talk to the consultant themselves. So you have all these money management firms calling all their consultants. We have to rationalize exactly how much due diligence that we can actually do on all these managers.”
“More consultant relations people mean consultants are overwhelmed with people calling on them,” Mr. Cosgrove said. “Some of the bigger (consultants) know this and get all their managers together in advance and say, "Here's what we're going to do, what do you have for us?' But if you're not in that group, the conundrum is how can you distinguish yourself with consultants if you can't get a foot in the door?”
Managers like RBC Global have responded by hiring more people in consultant relations and less in sales positions, and the firm also has updated data on its services through venues like eVestment LLC, Mr. Cosgrove said.
“Part of it is because it's just become more evident as to how important consultants are,” Mr. Cosgrove said. “It's really true in OCIO; if the consultant is the decision-maker, don't you want to put your resources there? You really need a lot of people in consultant relations to stay on top of this.”
Mr. MacLean said the increase in managers' consultant relations ranks is “absolutely true. There's a changing distribution network for money managers in the institutional business. That shift is good for consultants, but not so good for money managers.”