UK – The Society of Pension Consultants, responding to comments from the financial watchdog, says there is only “limited” scope for potential conflicts of interest in advising pension trustees and asset managers.
“We suspect that the scope for conflict is in practice limited, since the two sets of advice would typically come from very separate parts of the business,” the SPC said.
“Furthermore, if there are conflicts of interest, in the new environment we can expect trustees to be extremely aware of the need to identify them.”
The society was responding to the Financial Services Authority’s January 25 warning to consultants, asset managers and pension fund trustees to guard against potential conflicts of interest in a highly concentrated sector.
The financial watchdog’s ‘Financial Risk Outlook 2006’ also raised concerns about over-dependence by pension fund trustees on the advice, skill and integrity of “a small number of independent actuarial consultants”.
“There are concerns of potential conflicts of interest between pension fund consultants that offer services to both pension funds and asset managers,” said the FSA report.
But the SPC says the FSA’s concerns “must not lead to more regulation in the already over-regulated pension arena”.
“The FSA has suggested that trustees are becoming over-reliant on their consultants,” said SPC secretary John Mortimer.
“Given the increased complexity and pressure of their position, trustees will often view it as essential, or indeed feel duty-bound, to seek and to follow specialist advice.
“There is at the same time evidence from the Myners Review of Trustees’ Decision Making that they do challenge, and sometimes take a different view from, the advice they receive.”
Mortimer cited Myners as saying the concentration was not due to market failure but to the fact that the services are specialised and relevant to a relatively small number of users.
The comments come as the US authorities are starting to look more closely at potential conflicts with US firms.