IRELAND – The Irish Association of Pension Funds was warned today about the potential conflicts of interest that may emerge in the new investment advisor landscape.
Emmett Dunleavy of the ESB Pension fund noted that investment managers and investment banks are now advising pension funds, in addition to traditional consulting firms. “Full service providers” were now emerging that offered ‘holistic’ solutions.
“With the market moving to one-stop shops, be aware of the conflicts of interest,” he said. He added: “How do trustees know which advisor to trust if all the traditional lines are blurred?”
Often the investment manager and the investment bank were owned by the same parent. “There are conflicts there,” he told the IAPF’s annual investment conference in Dublin today.
The investment banks offer tailor-made solutions to identifiable risks – “the game has been upped recently”. They offered skill: operational efficiency, implementation and risk control. The advice they offered was “free” until implemented. They were a “significant competitive threat” to traditional consultants.
For their part, consultants were moving more into the investment management space, offering manager of manager services.
Was all this better for trustees? “Maybe, maybe not.”
Dunleavy said the ideal arrangement was “correctly priced unconflicted advice aligned with client interests”. Pension funds should seek to develop an in-house pension resource which encouraged open debate that was not wholly dependent on advice.