Retirement fund trustees ought to act with fiduciary integrity when appointing service providers for the fund. The roles of service providers such as actuaries, administrators and insurers have clearly defined parameters with regard to how they service the fund however, pertinent service providers in the form of asset or investment consultants or advisors do not have a clear distinction as to how they service the fund. Due to such ambiguity, it is imperative that we outline what an asset consultant is, what service they offer as well as how an asset consultant will benefit your retirement fund.
A DEEPER LOOK
“Investment consultants are important intermediaries in institutional asset management. Many sponsors engage investment consultants to provide a range of investment services. These include asset/liability modelling, strategic asset allocation, benchmark selection, fund manager selection, and performance monitoring.” (T. Jenkins, H. Jones & J. Martinez) 2011. Where asset modelling is relevant to risk identification and subsequent investment policy development, strategic asset allocation speaks to the type of investment products invested in by the fund. Benchmark selection speaks to the target(s) set for your investment manager by the consultant according to the fund needs. Fund manager selection speaks to assisting, through the provision and interpretation of relevant data, in the selection of investment managers and it is coupled with performance monitoring. Ultimately the final decision with regards to any of the fund’s operational changes rests with the board of trustees.
Essentially the role of such a consultancy and the service provided is advice, expert advice to be precise. The asset consultant is an independent service provider to the fund which, through extensive research and feedback compilation, affords the trustees with vital information relevant to the decision making process. Consider the trustees of the staff pension fund at a steel factory/plant. These trustees, particularly employee elected trustees, would not have the required knowledge to fully comprehend an investment decision which may affect the security of his/her life savings. It is the role of the asset consultant to apply specialist knowledge, dissect and simplify all relevant data in order to enable the trustees make an informed decision. T. Jenkins, H. Jones & J. Martinez (2011) write that “…in many cases, ultimate fiduciary responsibility for the performance of the assets rests with trustees who are non-specialists and require independent and specialist advice.”
In a 2011 survey conducted in the United States of America (USA), it was found that 94% of retirement funds acquired the services of asset consultants. Of the 94%, 23% found the service provided to be “crucial” to the fund and only 4% considered it to “not be important.” Such statistical insinuations play the role of quantifying the importance of asset consultants to your retirement fund as according to those which have engaged their services. J. Pasztor of the Investment Management Consultants Associationwrites “whether clients realise it or not, financial planners and investment advisors are now needed more than ever” (2013)
“Advisors should be educators for their clients…” (J. Pasztor) 2013. This statement summarises the role(s) of asset consultants. It is the consultant’s fiduciary duty to ensure that the trustees are equipped with the most accurate and relevant information in order for them to understand the relevant investment concepts and subsequently make the appropriate decision. As the Swazi industry is in a regulatory shift, it is imperative that retirement fund trustees are afforded with the best industry knowledge, assessment and application tools and thus we implore all trustees and fund decision makers to acquire the services of such consultancies in order to be afforded the opportunity to make appropriate and educated investment decisions.