Whenever conflicts of interest exist you can be sure that some people will take advantage of them. The pension consulting business has a laundry list of possible conflicts: Pay to play, proprietary products, revenue sharing, and commissions to name just a few. Disclosure is almost nonexistent, and fiduciaries are generally inept. In theory, pensions are subject to extensive oversight, but legislation and regulatory enforcement badly lag the situation on the ground. With both regulators and plan sponsors asleep at the switch, it is hard to imagine a more target rich environment for a sales organization.
For plan sponsors, the Gordian knot is a simple exercise in comparison to untangling the conflicts embedded in a bundled product pension solution. Half of pension consultants receive compensation from the managers that they recommend. So, it shouldn’t be a big surprise that those conflicts impact both price and performance in a meaningful way. Continue reading