Pension Consultants Must Identify Conflicts

“Although investment advisers owe their clients a fiduciary obligation – including adequately disclosing all material conflicts of interest – some pension consultants appear to have erroneously concluded that they are not fiduciaries to their clients,” says Lori Richards, director of the SEC Office of Compliance Inspections and Examinations. “It is clear from our examinations that many pension consultants must do more to identify conflicts of interest in their activities, and to take steps to mitigate or eliminate those conflicts.”

The mere fact that a pension consulting firm serves 2 masters may create a conflict of interest which could cloud the consulting firm’s objectivity, SEC officials warn.

SEC officials fear that pension consultants may steer clients to hire certain money managers and other vendors based on business relationships rather than on the client’s best interests, officials write.