Although the consultants advised some $13 trillion in tax-exemptU.S.institutional assets, their recommendations underperformed other funds by 1.1 percent a year. Not only that, but consultants did not provide a transparent means of tracking their performance to plan sponsors seeking comparisons or track records.

The funds recommended by consultants certainly benefited, typically experiencing an additional $2.4 billion in inflows. The authors concluded that those dollars, plus the fact that many of the funds recommended were larger to begin with, caused the funds to suffer performance-wise, since such massive inflows could become unwieldy and lose economies of scale.

And because the recommendations were based more on soft factors that had nothing to do with performance, that too played into the poor performance results.

Plan sponsors, though, hold their consultants' recommendations in high regard despite their poor performance. The study cited a 2011 survey in which 23 percent of respondents called consultant recommendations "crucial" to the operation and success of their plans. Another 40 percent said they were very important, and 26 percent said they were somewhat important.

According to the study, "Consultants' recommendations have a large influence on investor allocation decisions and confirms survey data which reports that manager selection is one of the most highly valued services offered by consultants."

What might this mean for plan sponsors, many of whom rely on consultant recommendations as a means of satisfying due diligence requirements?

There's no simple answer to that.

But it could come back to bite them, as Jones pointed out in responding to the question of whether sponsors could be held liable for consultants' poor performance.

While "we cannot speak for the legal position of plan sponsors," Jones said, "it would be natural for plan sponsors to be held to account for their decisions by their own stakeholders."

"If they justify their decisions by appealing to the recommendations they received from consultants, our paper may make it more difficult to do so because, as we have shown on an industry basis for U.S. equities, investment consultants appear not to add value."

So how can sponsors determine which consultants do deliver more bang for the buck?

As Jones said, "The best case would be for consultants to make available their past recommendations so that plan sponsors can judge for themselves whether they added value.

"As a second best, consultants would show the performance, not only of their top picks ('buys'), but of their 'holds' and 'sells' as well. If our industry-level findings are anything to go by, the holds and sells do at least as well as the buys."

Another way is for sponsors to agitate for more transparency:

"Plan sponsors could use the bargaining power they have with consultants (who provide them with services which go beyond fund selection) to insist on full transparency. The obvious time to do this is when the consultant's mandate comes up for renewal. Perhaps consultants would only be required to provide transparency with a time lag, so that they do not give away the intellectual property of funds that they have recently 'discovered.'"

CalPERS, one of those plan sponsors that pays a lot of money ($33 million in 2012) to outside investment consultants, recently adopted a set of 10 investment beliefs that includes not only the balancing of risk, return, and cost as factors in choosing investment managers and investment strategies, but also specifies that transparency of total costs for portfolio management is required of both CalPERS and its business partners.

Asked whether that might provide a way to spur change among investment consultants, Jones said, "It would be natural for the pressure for greater transparency to come from plan sponsors with the greatest bargaining power like CalPERS."

In other words, this just might be one of those rare studies from academics that doesn't collect dust on a bookshelf.