One employee benefits consulting firm has tackled the thorny question of conflict of interests in the selection of defined contribution service providers: It completely exempts itself from the bidding process.
Sedgwick Noble Lowndes, with U.S. headquarters in Memphis, Tenn., has offered a completely independent 401(k) plan consulting service during the past year, even though the firm offers a separate bundled 401(k) program.
Plan sponsors complain frequently about the lack of objective consultants in the defined contribution plan marketplace. The major employee benefits consultants, with the greatest experience with complicated record-keeping issues, may create a conflict of interests when they conduct 401(k) plan vendor searches because nearly all now actively market their own bundled 401(k) plan services. But traditional investment management consultants usually lack depth and expertise in record-keeping evaluation (Pensions & Investments, June 13).
Sedgwick Noble Lowndes helps plan sponsors evaluate their existing plan design and service providers from both the record-keeping and investment management angles. Its Preferred Provider list for defined contribution plans includes 25 different bundled service providers, and excludes its own services, unless a client insists on its inclusion.
The Chicago office alone has provided independent defined contribution consulting services to more than 10 plans, including those of candy-maker Brock Candy, Moorman Manufacturing Co. Inc., Habitat Co., Chicago, and AGA Gas Inc. The firm's New Jersey and San Francisco offices also offer the independent provider search service.
"We're filling the niche defined contribution plan sponsors have created - a need for independent consulting," said Anne Murdoch a defined contribution plan consultant in the Chicago office. "By taking ourselves out of the search process, we gain both credibility and objectivity."
