US – “Leading firms in the investment consulting business are losing their historic stronghold on the market” – so says a new report by Cerulli Associates.

While competition has been relatively weak in the US investment consultancy arena, and concentration of business high, leading consultants have lost market share over the last three years, reveals Cerulli. This is attributed to the growing trend among pension schemes to hire smaller specialised or niche firms.

Additional competitive pressures have come from new entrants to the markets as the traditional definition of an investment consultant continues to be challenged, says the report. According to Cerulli, actuaries, management consultants, asset managers and custodian banks are all encroaching on functions that traditionally were the role of the institutional consultant.

Demand for consultants is still high and increasing, however, says Cerulli, and fees for services have also increased. The increasing demand and competition is creating challenges for consultants, contends the report, particularly in the areas of recruitment, managing quality and technology.

Consultant relations is also a point highlighted in Cerulli’s report. It is estimated that only around 40% of investment managers do not have a dedicated consultant relations effort. “Establishing a consultant relations team with recognisable goals that work well with the other components of the business is critical,” says Cerulli.

Cerulli is a Boston-based strategic research and consulting firm specialising in the financial services industries.