Amazing Consolidation

As a follow-up to our blog post from August 15th, titled, “But, Is It Good For The Plan Sponsor?”, we went back to do a little research on just how much consolidation there has been among consulting firms since 2006. P&I ranked the top 20 Asset Consultants by world-wide Institutional, tax-exempt assets under advisement as of June 30, 2006.  From that list, we identified nine firms that have been acquired or seen ownership change. These include Russell and Watson Wyatt, which were #1 and #2 in P&I’s ranking at that time. That is incredible change. If you extend the analysis to the top 25 consultants ranked by AUA, you have two more that were impacted.

Leading consulting firms impacted by this consolidation trend included firms such as Ennis Knupp and Associates, Hewitt, Rogers Casey, EAI (my former firm), SIS, Richards & Tierney, and the recently announced Summit Strategies, in addition to Russell and Watson Wyatt. These leading consulting firms had their own cultures and unique insights. Many of them had strong research capability. The fact that these firms have been combined with others truly shrinks the independent thinking that we need in our retirement industry.

Seeking to find economies of scale or capturing liquidity to reward one’s lifetime of work may be good for the consulting firms, but is it truly good for their clients and our industry? Who will be next? Will the movement away from defined benefit plans and the move to OCIO models force additional consolidation? We suspect that it is highly likely.

There are few barriers to entry in the consulting business, which is positive, but most plan sponsors are limiting their selection of an asset consultant to the biggest firms, and not those with the best ideas, which we’ve seen played out among traditional investment managers and hedge funds, with mixed success.

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