Updated with correction
Traditional and alternative investment consulting firms increasingly are diversifying their predominantly institutional client bases to tap even further into the faster-growing retail marketplace.
Industry observers said a cadre of consultants are seeking to offer their standard services — including portfolio construction, asset allocation, manager selection, due diligence and outcome-oriented strategies managed with and without discretion — to financial intermediaries including wealth managers, retail investment advisers, family offices, broker-dealers and money managers.
Among the investment consultants working with financial intermediaries to various degrees and/or have launched their own retail funds include Cliffwater LLC; Mercer; Russell Investments; StepStone Group Inc.; and Wilshire Advisors LLC.
"Most investment consultants are well embedded in the high- to midsized asset owner segment — which is mostly populated by defined benefit plans — offering traditional consulting services. They have great market share, but this client segment is going away" as DB plans continue to close or transfer pension risk to insurers, said William "Bing" Waldert Jr., managing director and head of U.S. research at Cerulli Associates Inc., Boston, in an interview.
"The retail market is growing much faster than the institutional market," Mr. Waldert said, noting that the approximately $500 billion that retiring employees transfer annually to retail firms from defined contribution plans represents a good opportunity for consultants to put their portfolio and manager due diligence expertise to work.
He added that "asset manager selection is in high demand by wealth management firms as they figure out how to produce consistent outcomes for retail investors. Investment consultants can certainly help with this."
Tyler Cloherty, senior manager and head of the knowledge center for Casey Quirk, a practice of Deloitte Consulting LLP, New York, said in an interview that the strong demand from financial intermediaries for consulting services is a trend likely to continue.
"For retail intermediaries, the nature of financial advice has pivoted from investment-performance centric to outcome-oriented approaches, which include more financial planning and digital interfaces," Mr. Cloherty said, stressing that the new services financial intermediaries require that consultants also pivot in order to provide them.