Investment consultants are amping up their efforts to find clients outside their traditional institutional base, as they face a declining pool of corporate defined benefit plans.
Investor groups targeted by the consulting industry include family offices; private wealth management; and registered investment advisers and broker/dealers.
The stark reality, investment consultants said, is that the number of existing corporate defined benefit plans continues to shrink with a steady stream of plan closures and liability and asset transfers, such as the decision by Bristol-Myers Squibb Co., New York, to terminate its $3.8 billion U.S. pension plan and transfer a portion of its liabilities through a group annuity contract.
Adding to their woes, consulting firm executives stressed the level of traditional bread-and-butter-manager search activity has slowed significantly, thanks in part to the increase of advice being offered by money managers and a big bump in the amount of assets managed internally by public pension funds.
"It's fair to say that there are no new pension funds being created," said Jason Schwarz, president of Wilshire Funds Management, a division of Wilshire Associates Inc., Santa Monica, Calif. That pushed the firm to look for investors outside the institutional investor universe.
Among other large consulting firms that have broadened their client bases to alternative sources of consulting revenues are Aon Hewitt Investment Consulting Inc., Cambridge Associates LLC, NEPC LLC and Verus Advisory Inc.
In terms of assets under advisement by the 10 largest consultants, only Chicago-based Aon Hewitt reported a decline — 16.2% in the year vs. 33.4% in the five years ended June 30 — to $3.118 trillion, according to data provided for Pensions & Investments' annual consultant survey.
In aggregate, AUA of the 10 biggest investment consultants increased 2.7% in the year ended June 30 and 27.8% over the five years to a total of $30.1 trillion.
Despite aggregate growth in AUA, data from P&I's consultant survey showed the number of institutional retainer and non-retainer clients served worldwide by the 10 largest consultants fell 21.8% to 5,780 in the year ended June 30, a decline of 27.1% from five years earlier. The actual decline over the one- and five-year periods might be lower because Aon Hewitt did not report institutional client numbers as of June 30.