Archive for June, 2011
Ten Simple Questions to Determine Potential Conflicts of Interest
Sometimes, old news is worth repeating; An SEC study documented in 2005 and entitled SEC Discovers Pension Advisor Conflicts of Interest concluded that the business affiliations among pension consultants and money managers can give rise to serious potential conflicts of interest under the Investment Advisers Act that need to be monitored and disclosed to plan fiduciaries. Based on the SEC study, the Department of Labor (DOL) issued the June 2005 article entitled, “Selecting and Monitoring Pension Consultants – Tips for Plan Fiduciaries”.
The DOL guidance suggested asking the following 10 questions to assist plan fiduciaries in evaluating the objectivity of the recommendations provided by a pension consultant. We believe these ten questions should be addressed by every plan sponsor concerning their pension consultant. In fact, many public plan RFPs contain these or similar questions. We’ve included our response with the questions below.
1. 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)?
ASPS’ Answer – Yes.
2. 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.
ASPS’ Answer – No.
3. 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)?
ASPS’ Answer – No.
4. 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?
ASPS’ Answer – Yes. (But we don’t have any conflicts that need to be addressed).
5. 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?
ASPS’ Answer – No. We don’t use commissions (or any other indirect means) to pay our fees, so there is nothing to monitor.
6. 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?
ASPS’ Answer – We don’t do this.
7. 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?
ASPS’ Answer – No.
8. 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?
ASPS’ Answer – Yes, of course.
9. Do you consider yourself a fiduciary under ERISA with respect to the recommendations you provide the plan?
ASPS’ Answer – Yes. We act as co-fiduciary with all our clients.
10. What percentage of your plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees?
ASPS’ Answer – None.
Asset Strategies Portfolio Services, Inc. is an independent, institutional, investment consultant located in Auburn Hills, Michigan. For more information, please call 248-373-9900.
George leads Roundtable Discussion at MAPERS Spring Conference 2011
George Vitta led a breakfast roundtable discussion at the Michigan Association of Public Employees Retirement Systems conference on Tuesday, May 3, 2011. The MAPERS Spring conference was held at the Grand Traverse Resort in Acme, Michigan near Traverse City. The theme for the weekend was the old west. Discussion with conference attendees focused on the role of the investment consultant, current themes in asset allocation strategy, capital market opportunities and risk management techniques. The table was full with twelve participants, who had a rare opportunity to ask any question of a consultant and not get billed. Free advice . . . priceless!
Auburn Hills based investment consulting firm Asset Strategies Portfolio Services, Inc. has been a MAPERS member for 20 years. For more information please call 248-373-9900.
May 2011: Capital Markets & U.S. Economic Monthly Update
Capital Mkts & US Econ Mthly Update May11
Asset Strategies Portfolio Services, Inc. is an independent institutional investment consultant located in Auburn Hills, Michigan. For additional information please call (248) 373-9900
