1. www.theplenumgroup.com
Conflicts of Interest in the Pension World
There is much talk in the pension fiduciary management market of conflicts of interest.
• Asset managers who provide “fiduciary management” using their in-house funds stand accused of being
conflicted.
• However it is consultancy firms who provide “implemented consulting” who seem to come in for greater
criticism for utilising their position as “trusted advisor” to endorse their own implemented solution.
So prevalent is the discussion about conflicts of interest in implemented consulting, that we may be in
danger of comparing the current situation to some previous non-existent perfect world. The reality is that
consultancy firm have a long history of successfully managing conflicts of interest.
A very senior consultant recently put it to us in very simple terms:
• “Consultancy firms have never been independent.
• When a consultancy firm advises its pension client to have an ALM exercise carried out, it does not then
suggest that this ALM work goes to tender, just in-case another consultancy firm has a stronger
ALM function.
• Similarly when a manager research exercise is required, this would be automatically be conducted by
the manager research team of the incumbent consultant.
• Implemented consulting, or directive consulting is simply an extension of this: consultants endorsing
their internal capability for the good of the client.”
Whether or not one subscribes to this, it is an interesting reminder that being a trusted advisor is not and
has never been synonymous with true independence.
From Plenum’s perspective, the key issue seems to be not whether potential conflicts of interest exist, but
an organisation’s ability to be transparent about conflicts, ensure the clients’ understand their position and
allow the client to make an informed decision in their best interests.
To discuss further please contact TC Jefferson tcjefferson@theplenumgroup.com
Plenum 2011 – Financial Services Executive Search