Consultants have differing opinions on what the outcome of the SEC's investigation of investment consulting will be. Whether the hammer falls with a heavy thud or a light tap, however, business looks set to improve for "independent" consultants who avoid doing business with money management firms.
Some expect a relatively mild outcome: greater disclosure as the price of big pension consultants continuing to earn hefty fees from money managers via investment forums, marketing advice, databases or performance evaluations.
Others aren't so sure. "Wholesale changes? It could happen," figures one California-based consultant who declined to be named. If the SEC is looking to prove just how proactive it can be after months of chasing after Eliot Spitzer, it could come out with strictures that effectively force every plan sponsor to review its consultant relationships, he said.
The battle lines have been drawn between consultants who pride themselves on being "independent" and those who insist they have systems in place to faithfully serve two masters: pension plans and money managers.
Ennis, Knupp & Associates, Chicago, is an example of the former. To maintain its objectivity when recommending money managers to plan sponsors, Ennis, Knupp won't even serve as consultant to a company that owns a money manager, said spokeswoman Harmony Watling.
Callan Associates Inc., San Francisco, is in the latter camp. Asked if the SEC's probe was prompting Callan to review any of its money manager-focused businesses, spokeswoman Deanne Christapulous, in an e-mailed response, wrote: "Callan has never engaged in ‘pay-to-play' relationships. We believe our current corporate governance and oversight has served us and our clients well in managing potential conflicts."