Top consulting agencies are transforming by spreading their talents across different industry segments, a panel at the Investment Magazine Fiduciary Investors Symposium heard on Wednesday.
“Consultants continue to evolve with the landscape,” Frontier director of sector research Paul Newfield said.
“Funds are getting a lot bigger… we’re doing a lot of work on governance, ESG and sustainability, a lot of work on derivatives [and] we’re leveraging technology more,” he said.
In tandem with the evolving market, agencies like Frontier are becoming less reliant on institutions like superannuation funds for their meal ticket.
“The dispersion means we’re increasingly also catering to liability driven funds, wealth management platforms, charities, endowments and universities, so probably only half of our clients today is superannuation,” he continued. “The dispersion of needs is growing in terms of width but also how much depth they want to get involved in and that’s where the challenge lies.”
Also on the panel, Mercer senior investment consultant Emily Barlow described how the broadening of the work spectrum means an increasing degree of specialist knowledge is required.
“There’s no one common thing we’re doing, it really depends on the client sector we’re working in, the clients and particular capabilities and the gaps that they want to plug. It’s a lot more specialised than it used to be,” she explained.
“We’re focusing a lot more on alternatives and, as Paul mentioned, responsible investing is a huge topic now across all client types and sizes,” Barlow continued. “We’re also supporting funds on government projects, business strategy and internalisation-type projects as well as regulation-type projects such as Your Future, Your Super, design and distribution assessments as well as member outcomes assessments.”
The industry-wide trend towards internalisation of functions has brought with it an increase in the importance of governance. According to Newfield, for consultants that means getting adept at quickly figuring out the intent and competitive advantage of those internal teams.
The governance work with internal teams can be different, he says, than the usual consultancy gigs.
“Sometimes its around working as a sounding board for theses or exposures around ideas that they have and just being a counterbalance to that, sometimes its complimenting them in particular niche areas where we’ve done a piece of research,” he explained. “One of the most common ones in recent years – this is lifting the bar on governance and it’s funds driving this, not us – is CIOs, investment committees saying we’ve got internal capabilities which lends itself to specialisation but we want someone to come in with an independent external lens.”
Managing the balancing act of governance and increased regulation can be “tricky”, Barlow described.
“Managing these changes effectively without incurring too much cost while minimising risks is a real balance for all of our clients,” she said. “It’s a matter of working with the clients and managing the resources they’ve got and working out what they can do and working out how you can go about delivering it.”