Many asset managers covet consultant relationships as a way to gather sizeable assets without having overly burdensome servicing requirements. However, when most managers think about the consultant channel, Tier 1 firms such as Mercer, Callan and Wilshire quickly come to mind. What they tend to forget or not realize at all is the universe of Tier 2 and Tier 3 consulting firms.
Tier 2 and Tier 3 firms tend to have a more regional and smaller client base and are often looking for high-quality managers that aren’t covered or disqualified by the Tier 1 consulting firms. Accordingly, when competing for clients, Tier 2 and Tier 3 consultants can offer investment managers not available at the larger national firms.
Tier 2 and Tier 3 firms also have a higher probability of being independently owned and, therefore, these consulting firms can relate better with smaller asset managers who have more limited resources. From a prospecting and coverage standpoint, since Tier 2 and Tier 3 consultants are mostly overlooked by larger asset managers, conversations can be more easily had, and relationships can be established by smaller asset managers.
At Harborside, we concentrate our institutional efforts on the bottom 150 consulting firms…and for good reason. However, it’s important to realize that success in the consultant channel comes from adding genuine value, and it’s a relationship that has to be built, not pushed. Product performance and risk characteristics, portfolio depth and firm ownership all play a role in whether this forgotten sub-channel represents an untapped opportunity.
