Mr. Byrne said clients require different executions and different trades, making it difficult to reach a broad-based set of standards. He and others said they are working to raise the level of transparency in their transition management programs, regardless of an industry best practices guide.
"Over the last five years, we've strived to fully disclose how we're making our money and how much money we're making off a transition management assignment," Mellon's Mr. Keleher said. "We feel clarity and transparency are absolutely critical in giving clients comfort when selecting a provider."
Mr. Keleher said he wasn't sure the T-charter would address all the transparency issues. "I'm afraid it doesn't address the root problem (of compensation)," he said. "We can disclose that there's agency trading or principal trading. We can disclose many different things, but it may not help in cost comparisons.
"Clients need to really look under the hood to understand how the transition manager is being compensated," he said, adding that if the transition manager acts as a fiduciary of the assets during the transition, the conflict-of-interest problems and compensation issues can be alleviated.
In the United States, at least, pension funds — or their consultants — appear to be getting that message because more requests for proposals are requiring that the transition manager act as a fiduciary.
Bo Abesamis, senior vice president at Callan Associates, San Francisco, said vendors need to "place themselves in the shoes of the plan sponsors or ultimate beneficiaries." He added that a major reason for the transition manager to be a fiduciary is if the transition occurs over a proxy vote.
"If there was a proxy vote that happens during the transition and you don't have a legacy manager or a target manager, somebody should be able to exercise the proxy if the client is not in a position to do so," he explained. "During the transition process, somebody has to mind the shop."
JPMorgan Chase currently operates its business through its broker-dealer and as such does not offer transition management services as a fiduciary, but Mr. Byrne said the structure has checks and balances that keep risks low. Acting as a fiduciary, he said, would limit the firm's ability to move assets effectively.
"Historically, transitions have been predominantly an equity-based business, but it's now moving more toward multi-asset class solutions," he said. "If we acted as a fiduciary, we wouldn't be able to leverage the assets of the firm, such as trading fixed income as principal."
The firm does use a "prudent expert" standard that "removes or reduces the level of concern around conflicts," he added.
At Mellon, Mr. Keleher said an educated client would trump any industry standard.
"I think that ourselves and a few other transition managers are concerned that this is going to be largely a toothless document that doesn't really help the plan sponsor as much as it could and that a well-educated plan sponsor community is the best thing that could happen," he said. "The T-charter is not, regardless of the outcome, going to relieve plan sponsors of due diligence."