Fees for investment consulting

That seems a bit questionable. How can they make independent decisions that are in the best interest of the client if the asset manager is paying them to push their products?
 
JonnyDee Wrote:
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> For institutional investment consulting, 5-7bps is
> reasonable. Our clients are usually charged a flat
> fee that is independent of the assets under
> advisement. The fees are negotiated with each
> individual client and some smaller clients are
> probably paying more than 7bps while some larger
> ones are probably paying less than 5bps, but on
> average its in the 6bps neighborhood.
This is right on the money if you’re talking about institutional investment consulting in the US. Hard dollar fee is common, and it typically comes out to somewhere around 5-7bps.
 
That and so many plans being so badly underfunded is why Mercer got out of public db business.
 
5 bps on a $30mm plan is way too low imo. I don’t see how $15,000 even begins to cover your overhead. I work for a boutique IC shop and I can tell you that we would probably be in the range of 25-35 bps.
 
Excuse my ignorance, but what kind of services does institutional IC in the US entail? Is it right to assume that for 5-35bps IC cannot include much more that IPS drafting and manager selection? How about other ‘consulting’ services such as advising on allocations, scenario/stress testing etc.?
 
egal Wrote:
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> Excuse my ignorance, but what kind of services
> does institutional IC in the US entail? Is it
> right to assume that for 5-35bps IC cannot include
> much more that IPS drafting and manager selection?
> How about other ‘consulting’ services such as
> advising on allocations, scenario/stress testing
> etc.?
IPS Drafting, Manager Selection, Ongoing Manager Monitoring, Performance Reporting, Vendor Searches, Fee Analysis & Benchmarking, Asset Allocation Studies, Plan Design Scenario Analysis, etc…
 
JonnyDee Wrote:
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> That and so many plans being so badly underfunded
> is why Mercer got out of public db business.
Mercer got out of the public DB space because of potential risks/liabilities. It makes no sense to risk having a multibillion dollar lawsuit (read: actuarial-related to the Alaska pension plan) when only raking in like $200k per year for services. This fat-tail risk is simply too much to bear…
 
Chuckrox8 Wrote:
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>
> IPS Drafting, Manager Selection, Ongoing Manager
> Monitoring, Performance Reporting, Vendor
> Searches, Fee Analysis & Benchmarking, Asset
> Allocation Studies, Plan Design Scenario Analysis,
> etc…
Thanks for the scope. Now, how do you pay for wages at 5-35bps? Hmm… like 80% systems 20% staff? I am quiet honestly puzzled, especially how people have cash for insurance to cover the potential legal risk?
Looks like a tough business to me!
 
MissCleo Wrote:
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> Chuck Rox DB,
>
> ws, it would be the WW, AON type consultant gig.
> Not actually managing the assets, just setting up
> the IPS and selecting managers.
I see, if that is the case, the typically 15-20 bps. However, most of them provide some manager screening service, if you are doing IPS, 5bps is about right.
 
The slim profit margins is why the big guys have been moving down stream picking up smaller clients than they would have in the past. It’s also the reason that so many investment consulting firms are trying to branch into the outsourced CIO model.
 
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