eFinancialCareers

A kind of 'Which? Guide to fund managers'.

Investment consultants advise pension fund trustees on what to do with their money. They help trustees decide which mix of assets to invest in and with which fund management firms. They try to predict fund managers' future performance from how they performed in the past.

Trends

Driven by an ageing population and the need to make good corporate pensions funds, demand for investment consultants' services is rising. Consultants' appetite for staff is rising too – Watson Wyatt alone increased headcount 40% between 2004 and 2006.

At the same time, however, investment consultants are coming under pressure from investment banks, which have set up their own lucrative pensions advisory units – and are poaching consultants' staff.

Key players

The European investment consulting market is dominated by two key firms – Mercer and Watson Wyatt, which together account for around 50% of the market. Each is part of a larger network of consulting groups, which advise on everything from staff benefits to computer systems. Alongside these market leaders are numerous smaller firms – Aon Consulting, Hymans Robertson and Hewitt Associates, for example.

Roles and career paths

Jobs usually fall into one of two main categories:

• Asset allocation: asset allocation specialists advise clients on whether to invest in equities, bonds, private equity funds or alternative asset classes. It is a complex role using mathematical models to analyse such factors as interest rate changes, as well as the timing of the pension fund's liabilities and the likely risks and returns.

• Fund selection: fund selection specialists spend a lot of time analysing fund managers and questioning their investment strategy. Days are spent scrutinising pension funds and reporting on their strengths and weaknesses; most firms rank fund managers by their likely future success. There are also roles for relationship specialists, who are the true consultants and are usually more senior.

Most large investment consultants take on a few graduates: Mercer, Watson Wyatt and Aon offer structured graduate programmes, with Watson Wyatt hiring some 25 this year for its UK investment practice. Once hired, you will typically study for a professional qualification, either as an actuary or as a chartered financial analyst (CFA). Actuaries work more on asset allocation, while CFA candidates work in fund selection.

Pay

As investment banks compete for staff, investment consultants are being forced to make their roles more lucrative. In 2006, pay in the sector rose around 8%. Average pay for student actuaries is now £30.5k.

Skills

"Being able to cope with studying and working simultaneously is important, as is displaying evidence of skills associated with consulting, such as communication, project management and team working. However, equally key is having a genuine interest in investment markets and conditions," says Jo Kleanthous of Mercer's graduate recruiting team.

"Effective communication of often complex concepts and subjects in a simple and well-reasoned manner is vital to being a successful consultant. Anyone regarding investment consultants as quiet, dispassionate back-room professionals is quite mistaken," says Mark Powley, a senior investment consultant at Aon Consulting.