A Beautifully Simple Business
From an investment perspective, the business model is devilishly clever. These firms operate on a subscription basis, charging institutional clients for their research and voting recommendations. It’s a classic professional services play with incredibly sticky customers. After all, if you’re a pension fund manager, are you really going to risk switching to a cheaper, unproven advisor when a bad call could cost you millions and your reputation? I think not.
This creates a formidable moat. The industry is dominated by a handful of established players like FTI Consulting, ICF International, and Huron Consulting Group. They have the data, the reputation, and the relationships that make it fiendishly difficult for any newcomers to get a look in. They are selling influence, and influence, once established, is a very durable commodity.