To encourage the disclosure and review of more and better information about potential conflicts of interest, the Department of Labor and the SEC have developed a set of questions to assist plan fiduciaries in evaluating the objectivity of the recommendations provided, or to be provided, by a pension consultant.
Below, we have listed questions from the article, “Selecting and Monitoring Pension Consultants: Tips for Plan Fiduciaries”, or you can view them with additional information on the Department of Labor website, at www.sec.gov.
- Are you registered with the SEC or a state securities regulator as an investment adviser? If so, have you provided me with all the disclosures required under those laws (including Part II of Form ADV)?
- Do you or a related company have relationships with money managers that you recommend, consider for recommendation, or otherwise mention to the plan? If so, describe those relationships.
- Do you or a related company receive any payments from money managers you recommend, consider for recommendation, or otherwise mention to the plan for our consideration? If so, what is the extent of these payments in relation to your other income (revenue)?
- Do you have any policies or procedures to address conflicts of interest or to prevent these payments or relationships from being a factor when you provide advice to your clients?
- If you allow plans to pay your consulting fees using the plan’s brokerage commissions, do you monitor the amount of commissions paid and alert plans when consulting fees have been paid in full? If not, how can a plan make sure it does not over-pay its consulting fees?
- If you allow plans to pay your consulting fees using the plan’s brokerage commissions, what steps do you take to ensure that the plan receives best execution for its securities trades?
- Do you have any arrangements with broker-dealers under which you or a related company will benefit if money managers place trades for their clients with such broker-dealers?
- If you are hired, will you acknowledge in writing that you have a fiduciary obligation as an investment adviser to the plan while providing the consulting services we are seeking?
- Do you consider yourself a fiduciary under ERISA with respect to the recommendations you provide the plan?
- What percentage of your plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees?
Source: “Selecting and Monitoring Pension Consultants: Tips for Plan Fiduciaries”, (2005). Retrieved from: http://www.sec.gov/investor/pubs/sponsortips.htm