Asset consulting, also known as investment consulting, refers to advisory services provided by asset management consulting firms to institutional investors such as pension funds, endowments, foundations, insurance companies, sovereign wealth funds, and family offices. Asset consultants help these institutional investors with developing investment strategies, selecting and monitoring investment managers, and providing advice on governance and operations. The asset consulting industry has grown rapidly along with the rise of institutional asset owners globally. In this article, we will provide an overview of major asset consulting firms in the investment management industry.
Leading asset consulting firms by AUM advised
According to data from Casey Quirk, a management consultancy, the top asset consulting firms globally by assets under management (AUM) advised in 2019 are: Mercer ($16.2 trillion), Willis Towers Watson ($14.7 trillion), Aon Hewitt ($10.8 trillion), Cambridge Associates ($10.5 trillion), Russell Investments ($2.4 trillion), and NEPC ($1.1 trillion). These top firms advise on over $55 trillion in institutional assets, representing the majority of the asset consulting industry. The largest firms have built their AUM through acquisitions, expanding into new services like outsourced CIO, and winning new clients across the institutional investor spectrum.
Key services provided by asset consultants
The core services provided by asset consultants include: investment strategy advice, investment manager selection, performance measurement and attribution, risk management, asset allocation modeling, governance and operational reviews. Leading firms have branched out into adjacent areas like outsourced CIO, OCIO, ESG consulting, dynamic asset allocation tools, and specialty consulting for particular asset classes. By expanding their capabilities, asset consultants aim to capture more of the value chain and build stickier relationships with their institutional clients.
Business models and fee structures
Most large asset consultants operate under a partnership model, where senior consultants hold equity stakes in the firm. The typical fee structure is an annual retainer fee based on a client’s AUM or projected spending. Additional fees are charged for special projects and outsourced services. The fee percentage decreases as AUM increases. Consultants aim to provide advice that leads to positive net returns for clients, justifying their fees. There is some debate around consultant conflicts of interest, as they are compensated based on client AUM rather than performance.
Industry trends and competitive landscape
The asset consulting industry has consolidated recently, with mergers like Aon Hewitt acquiring Townsend Group and Mercer combining with Hammond Associates. There is also growing competition from investment managers launching their own consulting groups. Wealth managers like UBS are looking to enter the OCIO space as well. On the technology front, consultants are investing in fintech to improve analytics and harness big data. They aim to provide more robust advice through better modeling and benchmarks. Overall, the industry remains concentrated at the top with established global leaders dominating.
The top asset consulting firms like Mercer and Willis Towers Watson command the majority of the industry’s AUM and revenue, but face competitive threats from investment managers expanding into consulting. Leading consultants aim to provide robust analytics and advice to institutional asset owners across investment strategy, manager selection, performance measurement, governance and operations.