Originally written by Mark Kelly for Cerulli Associates, CERULLI EDGE®, July 2014 Issue #203


Asset managers looking to expand their business look to investment consultants, the gatekeepers for institutional asset pools, as a means to leverage their sales effort to reach numbers of clients that their own direct sales team cannot. Asset managers will develop Consultant Relations (CR) sales teams to tap into this network of advisors that have access to the largest pools of money in the world.

The consultant relations team has a highly specialized sales function within an institutional sales and distribution team—to maintain effective inbound and outbound communications and relationships with investment consultants around the country and, increasingly, globally. The size and shape of a consultant relations team can vary, but it is largely dictated by the demands the consultants make on an asset managers and the willingness of a firm to meet those demands. In building out an institutional business, CR Teams are necessary, can be labor and capital intensive, and not show results for several years. One investment professional at a firm well-known for its mutual funds related how difficult it was to overcome his firm’s mutual fund roots when talking to some consulting firms, despite being 10 years into an institutional business development effort.

Developing consultant relationships is crucial to institutional business development. Plan sponsors and endowments rely on consultants to help with investment manager evaluation, selection, and asset allocation. As sales teams try to leverage consultants’ client relationships to drive business, a client leverages their own time by having consultants screen managers for them. Consultants who favor a particular manager or strategy can push that manager over the top in terms of industry acceptance and asset gathering potential.

Team Structure

A larger team will have a Head of Consultant Relations to co-ordinate the coverage of the consulting firms. This is likely a former CR person themselves and may still retain some of their important consulting relationships. The team would report up into the Institutional Sales/Distribution team [Exhibit 1].

Exhibit 1: Sample organization chart

Consultant coverage could take different forms. A typical breakdown is by geography, with firms broken out by geographic coverage, i.e., East/Midwest/West and outside the U.S. in U.K./Europe and Australasia. Large consulting firms that are spread out across the country, or globally, in regional offices necessitate coordinated coverage so CR Teams do not duplicate their efforts. Consultants like to see the same faces and a single point of contact. Anything that suggests bureaucracy or disorganization is a negative, despite the irony in how they, themselves, might be perceived.

Another way to break down the consultant coverage is by size. The larger, well-established consultants are the ones directing the most amount of money (the ten largest consultants advise nearly five times the assets than the next ten largest advisers [Exhibit 2]), but these are also the most difficult to develop a new relationship with.

Exhibit 2: Top-20 Investment Consultants by U.S. Institutional Assets under Advisement, 2Q 2012 ($Billions)

Largest US Investment ConsultantsU.S. Institutional AUAGlobal Institutional AUA
Total of 10 Largest$11,741.0$22,920.2
Total of 11-20 Largest$2,307.8$4,359.7
Ratio of Largest 10 to Next 105.095.26
Sources: Pensions & Investments, Preqin, S&P Capital IQ MMD, Cerulli Associates
Analyst Note: These figures are self-reported and may include double counting, as large institutions often employ multiple consultants.

Thus, asset management firms starting down the path of consultant relations for the first time should consider cultivating relationships with smaller, growing firms with fewer layers of bureaucracy. While this may not initially bring in new assets, over time these firms will grow comfortable with an asset management firm or products, and it can lead to a mutually beneficial relationship. Consulting firms trade on access to key decision-makers within investment organizations. Firms benefit from the symbiosis of an asset management/consultant relationship.

At the Institutional Sales/Distribution team level, coordination and communications are extremely important. The sales professionals who contact potential clients directly rely on the consultant relations team to put their firm or firm’s products in the good graces of that potential client via their consultant.  If the salesperson contacts a pension fund or other institution, they may be directed to get in touch with their consultant.

The External Facing Role

Consultant relations teams have a focus that in a way mirrors the focus of consulting firms themselves. It’s a combination of sales and client service, sales in the sense that you are trying to generate business from consultants, but client service in that it is a relationship that is built up over a long period of time and can take years to cultivate successfully. Consultants often need information about investment managers that goes beyond simple database responses; the CR professional is there to try to answer those kinds of questions and be able to deliver high-quality (re)usable information. Consultants and their analysts have to justify their decisions to their internal and external clients, so the better the information a manager can give the client, the easier the consultant’s job becomes in “selling” an idea internally. If a firm is lucky enough to have a product that is in demand from consultants, the CR team has to make sure that the firm’s resources are used efficiently to meet that demand.

Another important function of this relationship is to gather and share market intelligence. Consultants are at the confluence of what clients are looking for and what a manager’s competitors are doing. The development of a solid relationship with consultants can lead to good market intelligence, providing sales teams with an important insight into current and future market trends.

Internal Roles

CR teams should be set up to efficiently disseminate data and information to consultants. To support this effort, CR teams will have analysts and possibly a sales support person on its team. It is important that these consultant relations analysts have a basic knowledge of investments and the type of data they are handling.  It is not uncommon for these types of positions to be filled by people who go on to get their CFAs or become sales or investment professionals themselves.

The analysts are generally responsible for populating third-party databases like eVestment Alliance or consultants’ proprietary databases on a monthly/quarterly basis, as well as responding to ad hoc requests for information. The basic types of data they are handling are investment performance, portfolio characteristics, and firm/product assets. CR analysts may also be involved in responding to more formal RFPs, especially if it linked to a particular consulting firm. In a large organization, the RFP team is separate but will work closely with the CR team because both processes rely on the same datasets.

CR teams have a vested interest in how data is managed and disseminated. It is important that data provided to consultants has an internally agreed upon consistency—that links up historically and currently across all products. For consultants to keep tabs on firms, there is a tremendous requirement to supply them with data. This data requirement can put strains on an organization not properly equipped to handle the demand.

Sales Approach

The sales approach for CR teams is almost not a sales approach at all. It combines elements of client service with soft sales, at odds with the culture of harder selling that permeates the industry. This can be difficult to understand if you have had no experience working with consultants. For CR teams just starting up, it may be several years before any sales traction is developed with a consulting firm.

The process is primarily driven by relationships developed over the course of many years. Within an asset management organization, not understanding the length of the consultant sales cycle can lead to some organizational tension. Sales teams that are focused on quarterly sales goals may not grasp the benefit of building relationships with consultants. Starting out, it may be difficult to even obtain a meeting with a major consulting firm, so a CR team that can do that has a distinct advantage over others that can’t overcome that obstacle. Typically the meetings are with analysts, at least initially, with the goal of getting the firm, and ultimately product on an internal “approved list”.

An indication of how slow and frustrating the “approval” process could be was related to Cerulli Associates by a sales professional about one of his firm’s most successful investment products. Only after assets had reached their internal capacity target of $10billion—and had stopped accepting assets—did a major consulting firm finally approve that product.

Exhibit 3: Triangulating the Consultant Sales Process

Effective utilization of a CR team is done by triangulating with the sales team that works directly with a prospect [Exhibit 3]. In a perfect world, a sales prospect will show some interest in the manager’s product and share that interest with their consultant and a healthy relationship amongst all three will develop. In the imperfect world, where time is precious, the sales person may be redirected by the client prospect to “talk to my consultant.” This can mean anything from “I have no interest in your product” to “I’m interested, but talk to my consultant first. I will then talk to them.”  This is where having good communications among the institutional sales team is important. Having a good relationship with a consultant can help determine the actual need and interest from that prospect and the CR team can nurture that relationship over the long term, via the consultant, and the sales person can move on to prospect where there is greater indicated interest.

Industry Trends

One consultant relations veteran of several firms has noticed a significant change in the relationship between consultants and asset managers over the last few years. Getting a meeting with consultants is more difficult than ever. Many consultants that used to have a somewhat open-door policy have closed that opportunity considerably. What had once been an industry focused on breadth of knowledge, investment consulting is now one that emphasizes depth. Analysts and consultants, in general, have been with firms longer and have become more sophisticated. It was once unusual to have “career analysts”; there are now many who have been with firms for 10+ years, in addition to having long-tenured consultants. This places a great importance on having CR professionals who are intelligent, have good relationship skills, have been with the firm for a long time, and understand their products. This might be someone who has come up through the ranks as database or RFP analysts, or other sales support roles within the firm.

He further notes that with ever-sophisticated databases, there is even a greater reliance on screening managers for desired characteristics, further decreasing the need for face-to-face meetings. If a manager doesn’t have desirable characteristics, no amount of face time will be productive.

Exhibit 4: Outsourced AUM Growth, 2007–2013

 2007 ($MM)2012 ($MM)2013 ($MM)6-Yr Change
No discretion$564,153$1.965T**$794,30741%
Full discretion$90,868$443,209$536,591491%
* Recommends manager selection or replacement subject to prior client approval
** Includes $1.94T from Towers Watson, which did not submit figures in prior survey.

Source: aiCIO Magazine

Another trend affecting CR Teams is the development of the outsourced Chief Investment Officer (oCIO) function [Exhibit 4]. Many consulting firms have taken on the role of CIO for pools of institutional assets—hiring and firing managers. According to one consultant relations professional, while this may appear to be a new opportunity for manager growth, this has further increased the emphasis on depth of research knowledge about managers, and has narrowed the focus to an increasingly smaller group of investment managers. The oCIO team accesses the same internal research teams as the consultants, so the sales approach does not change.


Because of the nature of the consultant relations sales process, CR team members are typically not paid on straight commission.  They are paid on a base salary plus a bonus pool payment based on firm and team goals that are met. In some cases, individual metrics may be drawn up such as number of meetings and number of quality meetings. But unlike the direct client sales team members, they typically do not get the commission plus trailer.

This emphasizes the more client relations–oriented nature of the consultant sales process and puts less pressure on the CR teams to meet specified sales goals, which are difficult to track with consultants anyway. This reduces the pressure placed on consultants, who typically do not respond positively to pressure sales tactics.


That investment consultants provide access to large pools of money is not an industry secret. That the investment business is relationship-oriented is not exactly news, either.  That many firms can’t create the alchemy that makes consultant relationships work is the crux. The successful consultant relationship team will be at a stable firm, will have smart, relationship-oriented people who know their own firm well—combined with investment products of high-quality that are in demand. They will have to understand the consultant mindset, either from years of working with them, or having been one themselves. They also need to be part of a larger sales team that understands the sales cycle and can be patient and willing to demonstrate cooperative selling when it comes to coordinating with the CR team. All of this has to be done with the consultant feeling like he is a client and not being sold to.

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