Allocators Plan to Boost Consultant Use, Cerulli Says

Consultants, long a key part of asset allocators’ planning, are likely to be even busier up ahead. Over the next two years, 22% of allocators expect to use consultants for the first time and 13% expect to increase their existing usage, according to a Cerulli Associates survey.

Over the same period, 53% plan to utilize them at the same rate as today. That leaves a mere 12% who don’t intend to employ consultants.

“Even smaller clients that typically did not use consulting services are likely to see value in their expertise as the markets and the investment landscape grow more complex,” said Laura Levesque, a Cerulli associate director, in a statement.

There’s little doubt that asset owners increasingly rely on consultants. Another survey of allocators, by Greenwich Associates, found that 80% of them in 2021 counted on consultants as their primary source of investing advice, up from 71% the year before. For instance, in March the California Public Employees’ Retirement System chose Wilshire Advisors as its consultant for the pension plan’s private debt, which it had recently added as a new asset class.

What’s behind the growing popularity of consultants? That many allocators need help incorporating environmental, social and governance principles into their portfolios is one reason cited by Cerulli, which itself is a big presence in the consulting field. Another factor: the greater volatility of markets in the pandemic-ridden world.

Meantime, 77% of Cerulli survey respondents indicated that the major topic they discuss with consultants is reevaluating asset allocation. Other top issues are portfolio risks (67%), portfolio holdings (69%) and capital markets expectations (68%).

A big concern about the allocator-consultant relationship, per the survey, is the hybrid work arrangement so prevalent in office culture nowadays. The Cerulli report notes that lately, “strategies that have worked the best in the past, such as meeting with manager research team members in their office, are harder to rely on.”

“The pandemic has had a significant impact on how many consultant relations teams are able to interact with investment consultant contacts,” Cerulli’s Levesque said. “Consultant relations teams are working hard to adapt to continue building those important relationships.”