So where does all this activity leave the consultants? The move to DC is not only a driving factor for the asset management industry but is of paramount importance to the consultants whose traditional role of advising on manager selection is facing a radical overhaul, albeit over a substantial period of time. Investment consultants in the US have secured a stranglehold on the DB market with a very high percentage of pension mandates sourced through them, even more so than in the UK. But with the traditional manager turnover seen in DB plans being frequent enough to keep consultants busy, their new role in the DC market of selecting the administrator / recordkeeper ends right there - few DC schemes change their administrator once the decision has been made.

So at first glance it appears that the consultants will have some problems of their own as once they have recommended a recordkeeper and the plan accepts it, the job is pretty much done. Once they set the line-up, it doesn't change that often," says John Grady, principal at SSGA in Boston. How the role of the consultant looks set to develop is still in question, though one possible route could be offering a bundled approach á la Frank Russell or advising on the mutual fund side. For the former approach of course, the same necessity for economies of scale applies just as much to the consultant industry as it does to their asset manager counterparts. And the consultant industry is not known as a high margin business, to say the least.

Of course, the size of the US market being what it is and the rate of interest being witnessed in DC conversions or new set ups, the consultants will have more than enough work on their hands for the foreseeable future simply in the recordkeeper selection. But the mass exodus from the recordkeeping side of the business in the past few years, however, signals that the majority of consulants are not planning to offer this service themselves.

Notable examples of this departure from administration include: Howard Johnson selling to Merrill Lynch; Buck selling to Mellon; Watson Wyatt to State Street; Aon Consulting 'contributing' its pension administration/ recordkeeping shop to Invesco in "unclear financial terms" according to one consultant; and Mercer shifting theirrecord keeping business onto ADP, which is a payroll processor in the US but is moving into pensions administration.

Much of the rationale behind the selling off activity is based on the amount of investment needed to invest in technology which is constantly needing to be updated in order to compete in what is to begin with "a pretty low margin business" says Ernst & Young's William Hogan.

"Most consultants have a background in asset management consulting and have been very slow in developing skills on recordkeeping," points out John Cook, president and CEO of UAM Investment Services in Boston. He adds: "It is a potential incremental revenue source for consultants."

As long as DB exists, however, so will the reign of the consultants. "I think they will always have some large percentage of the DB business, I really don't see everyone going to DC," says Joseph Trainor, managing director at MFS Institutional Advisors in Boston. But all the same the consultants will see the levels of DB business decline and will make sure they will carve their own niche within the DC business whatever shape or form it may take, despite the fact, says Trainor that, "the business does not deliver the same amount of recurring revenue as DB"."

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