FTI Consulting Faces Talent Drain as Econic Partners Emerges: A Shift in the Economic Consulting Landscape

FTI Consulting, a prominent global business advisory firm, is currently navigating a significant internal upheaval following the departure of key personnel to a newly established competitor, Econic Partners. This exodus has precipitated a notable 14% decline in FTI's share price, reducing its market capitalisation to $5.9 billion.

Genesis of Econic Partners

The catalyst for this disruption is Jonathan Orszag, a former senior executive at FTI Consulting. After his departure in 2023 due to disputes over profit sharing and control within FTI's economic consulting division, Orszag founded Econic Partners. This new venture has successfully attracted several former FTI professionals, including Dennis Shaughnessy, FTI's ex-chairman, and has secured investment from Goldman Sachs.

Impact on FTI Consulting

The formation of Econic Partners has had immediate financial repercussions for FTI Consulting. The company's recent financial disclosures reveal a weaker-than-anticipated profit forecast for 2025, attributing part of this downturn to the loss of staff to Orszag's new firm. Specifically, FTI anticipates a reduction in operating profit by approximately $35 million this year, a significant figure given the overall operating profit of about $500 million in 2024.

In response to these challenges, FTI's management is confronted with the dilemma of increasing compensation to retain existing talent or risking further revenue losses due to additional defections. This situation underscores the delicate balance inherent in professional services firms, where the value proposition is heavily reliant on individual expertise rather than brand identity.

Strategic Considerations

The economic consulting sector has evolved into a lucrative niche within professional services, offering remuneration on par with investment banking and management consulting for top performers. The increasing complexity of antitrust regulations and the demand for expert economic testimony have amplified the importance of individual analysts over corporate brands. As Orszag aptly noted, clients seek the credibility and analysis of specific experts, rendering the associated brand less significant.

This paradigm shift suggests that diversified publicly traded firms like FTI Consulting may face inherent disadvantages compared to private partnerships, which can offer more generous profit-sharing arrangements. The agility and flexibility of private entities enable them to attract and retain top talent more effectively, posing a competitive threat to established firms operating under traditional corporate structures.

Legal Implications

The departure of Orszag has also escalated into legal confrontations. FTI Consulting has initiated litigation against him, alleging breaches of fiduciary duty and misappropriation of company secrets. Conversely, Orszag has filed a countersuit, claiming wrongful termination and seeking damages. These legal proceedings not only strain financial resources but also have the potential to impact the reputations of both entities involved.

Conclusion

The emergence of Econic Partners signifies a pivotal moment in the economic consulting industry, highlighting the critical importance of individual expertise and the challenges faced by traditional firms in retaining top talent. FTI Consulting's experience serves as a cautionary tale, emphasizing the necessity for adaptable business models and competitive compensation structures to navigate the evolving landscape of professional services.