Tips on Hiring a Pension Consultant
The U.S. Department of Labor (DOL) and the Securities and Exchange Commission (SEC) recently published a series of tips to assist fiduciaries of employee benefit plans in reviewing conflicts of interest of pension consultants. The guidance, Selecting and Monitoring Pension Consultants – Tips for Plan Fiduciaries, addresses questions raised by an SEC staff report on potential conflict of interest disclosures by pension consultants.
The tips include a series of questions that DOL and SEC believe plan sponsors should ask their pension consultants. In the interest of full disclosure, we’ve reproduced these questions, and our responses, below:
- 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)?
Yes, Dover Consulting Group is registered with the SEC as an investment adviser. We provide all clients with required disclosures as a matter of regular procedure. If you don’t have our current disclosures, they are available online here.
- 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.
We do not maintain financial relationships with any money managers.
- 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 considered when you provide advice to your clients?
Yes. Here are our procedures for managing conflicts of interest.
- 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?
Not applicable. Our consulting fees are never paid using the plan’s brokerage commissions. However, one client has chosen to pay a portion of its fees through revenue sharing. In this case, we monitor the amount we are paid and notify the client quarterly of any additional fees owed or refund of 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?
No. We would consider such an arrangement inappropriate.
- 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?
Yes, we acknowledge our fiduciary obligation in writing, provided that we are engaged to provide investment advice to the plan on an ongoing basis.
- Do you consider yourself a fiduciary under ERISA with respect to the recommendations you provide the plan?
Yes, we consider our firm to be a fiduciary to our plan clients, as described above.
- What percentage of your plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees?
Zero: We do not receive fees from money managers, investment funds, brokerage services or other plan service providers.