This is part one of a two-part series.

Institutional investors often hire consultants to provide expertise in writing requests for proposals (RFPs) for services required by the institution, as well as to access consultants’ knowledge of investment managers, recordkeepers, custodians and actuarial service providers. Of course, institutional investors cannot hire a consultant to write an RFP for hiring an investment consultant and, therefore, investors will usually complete this step themselves. The goal of the RFP exercise is to find an investment consultant who will become a trusted advisor to fiduciaries; thus, it is critical that the RFP exercise identify the most appropriate candidates who are capable of establishing a strong long-term partnership.

There are few good templates available for institutions to use as a starting point, so I thought I could share some questions (adapted from recent RFPs), as well as others that should be included in more RFPs in the future.

1. What is your firm’s and your consultant’s experience working with other similar institutional investors?

You will want to ensure that both the firm and the individual consultant involved have the necessary skill and expertise to provide the services and advice you require. Both should be established in the industry and be committed to the consulting business. It may not be necessary that they have worked with a client who has the same profile as you do, as long as they can demonstrate how the skills they have applied to other situations can be translated to your situation. Having the comfort of knowing that the consultant has successfully guided another client (or clients) through the same situation you now face is one of the primary advantages of working with a consultant in the first place.

Though institutional investors are often lumped together, consultants require specialized skills and knowledge to work within the different regulatory and organizational confines associated with pension plans, endowments and foundations. Further, there are some consultants who act primarily as data collector, others who take the data they possess and repackage it into a usable form. Other consulting firms offer the first two services but also offer interpretation and advice to clients. Depending on what you require, you’ll want to ensure that the firm possesses the depth of services required to meet your needs.

2. Describe your service model in terms of deliverables for clients and the mechanism for delivery.

You’ll want to know what to expect from your consultant, in terms of level and detail of consulting support. Is the person you are speaking with at the shortlist presentation the same individual you will be working with on an ongoing basis, or a sales consultant who won’t be involved later on? Will the individual consultant be able to attend meetings, present reports and discuss results?

You’ll also want to ensure that the service model aligns with your requirements (i.e., it’s designed to encourage long-term relationships or designed to maximize profit over the short term) and that the process the consultant uses to make recommendations is transparent.

Finally, you will want to ensure that the investment consulting division is a meaningful part of the overall consulting organization—with the scope and scale to purchase or develop the necessary technologies and attract and retain the required resources to meet client needs. If the investment consulting firm is a stand-alone entity, it should be well established in the market and of a size that means it can achieve the same investment and retention requirements.

Occasionally just finding out who owns the consulting firm will tell you a lot about its commitment to professional investment consulting and the potential conflicts that may exists (potential conflicts will be explored in more detail later).

Regulators in some countries, notably the U.K., have been moving in a direction that may result in less cross-subsidization between the actuarial and investment consulting practices within a firm, noting that, as Paul Myners said, “contracts for actuarial services and investment advice should be opened to competition separately” (see Keith Faulkner’s paper on “Six key issues that keep actuaries awake at night”).

As Russell L. Olson noted in his Handbook for Investment Committee Members, the “number one responsibility of the (investment consultant is) to provide continuing education to the committee members.” As an evaluator, ask yourself if the service model of the consultant naturally supports this responsibility.

3. How do you ensure you retain your best professional staff?

A service business such as consulting can be only as good as its people. The response to this question should discuss how the mission and culture of the firm supports retention of professional staff, how the firm provides opportunities to work on challenging projects and how the firm offers opportunities for advancement.

The response should discuss how the ownership structure and stability—along with the overall work environment—support retention goals. As well, the compensation structure should be explained to show how it meaningfully supports retaining the best employees.

Having said this, it is difficult to retain the best people and offer the supportive environment if the investment consulting business is not growing. While explosive growth can lead to its own issues, more often it is a lack of growth that creates organizational instability and possible retention issues.

Read part 2

Ryan Kuruliak is a Toronto-based vice-president with Proteus, an investment and governance specialty firm. He has more than 14 years experience in the pension and investment consulting industry.

These are the views of the author and not necessarily those of Benefits Canada.

Copyright © 2021 Transcontinental Media G.P. Originally published on

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