Mercer manages conflict of interest risk

Running a fund management and research business within the same company requires vigilance to prevent conflicts of interest, Mercer’s New Zealand boss Martin Lewington says.

Tuesday, March 12th 2013, 9:47AM 1 Comment

by Niko Kloeten

Mercer was recently appointed as the research partner for AMP Financial Services (replacing van Eyk) and Lewington said Mercer was keen to provide its research tools to other businesses in the advisory space.

“In New Zealand we’re very keen to move more into the wealth management space doing similar sorts of things to what we are doing with AMP,” he said.

“What AMP has done is a very smart way of introducing some strong governance using really good tools that will give advisers, the customers and AMP the confidence that there’s good investment discipline.”

But he said Mercer’s focus would likely be on the big firms as its offering probably wouldn’t suit small advice businesses.

“Some of the smaller players are more likely to buy a turn-key solution; if they buy the manager research what are they going to do with it?”

Unlike a number of its peers in the research market, Mercer is also a fund manager, with about $25 billion in funds under management in Australasia including roughly $800 million in KiwiSaver where it is a default provider.

And Lewington acknowledged that dual role presented the risk of a conflict of interest, or at least the perception of one.

“There is the opportunity for that perception. We protect and value the integrity of our brand; we make sure that manager research information is made available to all parties at the same time. Mercer clients get it at the same time as Mercer,” he said.

“The whole of our investment business is built on the strength of its manager research and we need to make sure there’s absolute integrity there. If there was an abuse of that position it would be pretty devastating for the business and our customers.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 14 March 2013 at 12:10 am Collin said:

As we have seen over and over again in this industry that expecting firms to manage their own conflicts of interest is a dangerous approach. According to the CFA Institute even the perception of a conflict should be avoided. You cannot be player and referee and multinationals like Mercer and Russel should set an example for the industry and decide in which camp they play in.

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