Re: "Delegating authority in manager hiring, firing still rare," P&I, page 35, April 28.
With all due respect to Mr. Findlay of the Missouri State Employees Retirement System and Ms. Everett of the Virginia Retirement System, I must disagree with their conclusion that the employees of the system are the ones who should be making investment manager hiring and firing decisions. The staffs of their respective systems are, I am sure, quite capable of managing the affairs of the systems, but the decisions as to who should manage retirement funds are, I believe, best left to their boards.
The Wyoming Retirement System Board of Trustees, where I serve as the current chairman, has the final say over who manages the funds that are under our care. The Wyoming State Statutes, section 9-3-404(a) state, "The responsibility for the administration and operation of the retirement system is vested solely and exclusively in the Wyoming retirement board."
Granted that we could give our staff the task of hiring and firing managers, I don't believe that would be in our best interests, or, more importantly, in the best interests of the 50,000 members we serve. We would be jeopardizing the vital elements of full disclosure to our members, integrity in the process and long-term corporate memory by handing off our responsibilities to the system's staff.
We hire and fire managers with a great deal of deliberation. We receive information from staff, from our consultant, from personal interviews with the managers and from open discussion with board members. In this case, open not only means unfettered, but open to the public to comply with open-meeting laws. Our decisions are made in the light of day; staff decisions would be made in an office. It is our belief that more disclosure is better.
The administrator's ability to make decisions on hiring and firing can be influenced by the marketing practices of the manager. While we like to believe that a nice dinner or tickets to a ballgame would have no influence over hiring and firing decisions, we all know that they can, and do. When the decisions are left to the staff, one has to wonder how much weight those perks carry. I'd rather not place the staff members in that position. A majority of a board of trustees, on the other hand, is far less likely to be influenced by such practices.
Then there's the question of longevity. Plan administrators quit current jobs to take other ones. That is to be expected, but what of the managers the old administrator hired? Does the new administrator take exception to the managers and fire some or all of them? Does the system discard and disregard all the reasoning that went into hiring the managers in the first place? With the board making decisions, corporate memory is intact. Our board members serve six-year terms, and terms are staggered so there will not be complete turnover in any given year. That goes a long way in planning for the long-term as well as implementing for the long-term.
In my life away from the WRS Board, I work with high-net-worth individuals as an investment consultant. As such, I fully understand and appreciate the need to hire prudent experts. However, the decision regarding the hiring and firing of a money manager is a key element of the responsibilities entrusted to the board by the citizens of Wyoming, and it is not one we should be willing to give up.
In the interests of full disclosure, integrity of the process and maintaining long-term corporate memory, the board of trustees is best equipped to handle this task.
Matthew N. Potter
Board of Trustees
Wyoming Retirement System
Editor's note: Mr. Potter is a certified financial planner and certified investment management consultant