[Opinion] Conflict of interest queries ironic
In financial services, conflicts of interest will inevitably happen. What’s critical is how we consider, disclose and resolve conflicts, and weigh competing interests.
Wednesday, December 21st 2022, 2:01PM 
9 Comments
by John Berry
By John Berry
An apparent conflict may not be a ‘real’ conflict. Regardless, both the ‘substance’ (is this an actual conflict?) and the ‘optics’ (does it just look like a conflict?) matter.
Here’s a live example. On Linkedin comments have been made suggesting a potential conflict of interest for me personally with a charity called Mindful Money.
I co-founded and am currently CEO of Pathfinder KiwiSaver Plan. Mindful Money gives ethical ratings for KiwiSaver funds. I’m listed on Mindful Money’s website as a ‘foundational supporter’. The implication from the Linkedin comments was that I have funded Mindful Money’s platform and somehow this helps me influence and receive higher ethical scores. The irony of acting unethically to be rated as more ethical is not lost on me.
Here’s why I don’t see this as a conflict.
Firstly, my intent in connecting with Mindful Money was not for commercial gain.
Barry Coates, founder of Mindful Money, cold-called me back in 2017/18 asking for thoughts around his new KiwiSaver screening idea. It was just an idea, with no name or charity registration. I liked his thoughts around transparency and helped by providing feedback. To be clear, we didn’t launch our KiwiSaver until 2019, so this wasn’t about self-interest.
I often share time with people who want to bounce an idea off me. I’m not alone in this, lots of executives in our industry freely do the same. This helps create a better future and is a pay-back to those people who kindly gave us time over the years. (In addition to one-off coffees, I currently also give my time to Men's Health Trust, a church-based investment committee and an impactful education business, Mind Lab).
Secondly, I did help them financially, but as an individual, and with no expectations or strings attached.
I supported Mindful Money with a donation, I paid it personally and did not reclaim it as a business expense. It was small – Mindful Money tell me it was less than half of one per cent of all donations they have received. As a result Mindful Money listed me as a ‘foundational supporter’ on their website.
Giving time and money in their set up was never going to provide me any form of advantage.
I have no influence over Mindful Money or how it operates. They treat my business the same as any other, and they screen our portfolios the same way they screen other managers.
If anything, the influence goes the other way - Pathfinder takes Mindful Money's ethical screens seriously. Mindful Money’s research may highlight concerns about a particular company we hold, which is the same for all fund managers.
What may look like a conflict on its surface, can in fact be quite innocuous. It would be no surprise to anyone who knows me to hear I supported the set-up of Mindful Money which helps investors know what they’re invested in.
We don't always agree with them, but we’re grateful tools like Mindful Money and the Responsible Investment Association’s fund screening tool exist to help make the finance sector more accountable. It’s not a conflict to support them setting up.
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Comments from our readers
In the spirit of Xmas I offer a possible way through if the parties are having a rethink. Mindful Money could repay John his donation - 1/2 of one per cent of donations shouldn't break the bank. Mindful Money would remove John's name from their foundation supporters list. And they could make a joint public statememnt reinforcing their undoubted commitment to ethical behaviour.
Any storm would then leave the teacup and things would go back to the way they were before.
I do question the various industry awards process, & its relevance - irrespective of the donations that they have received.
As with many industry awards, contestants are invited to submit/confirm information in order to be eligible to be considered. This invitation list is often narrow, & is reliant upon the contestant accepting the nomination.
Where the ‘fun’ starts, is when the contestant has been recognized in the awards ceremony - with a first or top three placing. Upon accepting their independent award, the contestant is then ‘invited’ to pay a sum of money (licensing fee) in order to promote their success to a wider audience. These licensing fees form a significant part of the awarding entities revenue for the year.
My ethical dilemma (aside from the negligible influence that these awards have) is whether the eligible contestants represent a relevant universe across various categories, and whether the community is receiving a reliable appraisal from the scattering of contestants who actually choose to promote their success.
Perhaps a fairer approach would be to consider the full sample of capabilities that are available in each category, & then promote these, without any expense to the successful candidates… but then, this is difficult to profit from.
Personally, I'm struggling to find something to eat that the Orwellian committee will approve of. Rice is a major methane emitter, my water sucking almonds come from drought ridden California and I can't guarantee might high food miles Soybeans don't come from land that used to be prime Amazonian rain forest.
Personally, I'm struggling to find something to eat that the Orwellian committee will approve of. Rice is a major methane emitter, my water sucking almonds come from drought ridden California and I can't guarantee might high food miles Soybeans don't come from land that used to be prime Amazonian rain forest.
A tad prescriptive, I grant you, but to be honest, the difference between appearance and reality in considering conflicts of interest is wafer thin.
Once accepted, the focus is on how to manage, minimise, and eliminate (if possible) any impact that suggests prejudice to the interests of stakeholders. Full, unqualified, and unabashed disclosure goes some way along the path but be prepared for stakeholders to choose not to proceed on the basis of such disclosure.
If ethics is defined as what you do when nobody is looking, I wonder if anonymity is appropriate?
The awards are not just from those invited - they are open to any New Zealand retail fund, and to overseas funds distributed in NZ. We contact all funds directly to encourage entries and include notices in this excellent publication.
There is no payment for award winners to publicise their awards. They are encouraged to do so for free.
The judges are well-qualified, independent and a list is included on our website.
We anticipate awards entries opening in late March and look forward to even more entries than in previous years.
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The pointy heads in our industry put great score on ethics, and this example gives us a real life situation to debate.
So let me put out my 2 cents worth aon two matters raised in the defence and then put on a hard hat and duck down behind the barricades.
For the critics of my view, I get it that John is a really nice guy, that he really believes in ESG/RIAA or whatever other name ethical investment goes by these days, and that he does do a lot for the industy. But I have to say that just doesn't matter - ethics does not depend on who the person is.
I don't think it matters whether a donation is big or small when it comes to ethics, Its not a case that it's OK if the amount is only $500, but it's not OK if the amount is over say $500. Like pregnancy you either are or you aren't, you cant be ajust a little bit pregnant. So IMO any sized donation should be measured against the same criteria.
Second, I don't buy the argument that when a man wears many hats, he can choose which hat he is wearing in any particular circumstance, and ignore the implications for those other hats..
So to me it doesn't matter which hat John claims. When you wear many hats as indeed John does, every action can affect every hat.
I don't know how many times I have heard a platform speaker remark "perception is reality". And we should all remember it is not our own perspective that matters, it's our audience's perception.
With hindsight, I would think if John had wanted to support Mindful Money, he should have done that anonymously. Some shield themselves behind a blind trust. And it seems to me he was let down badly by the recipient who advertised John as a foundation supporter - apparently without a thought as to the dilemma it might raise for John.
Lessons to be learnt? When you wear many hats, think every action through the lens of each and every hat.
When you give money to something that might be close to the line, give it anonymously and certainly don't let the recipient publish the fact to the world if you disobey the first part of this rule.
I won't be holding my breath for a lot of response....unfortunately as this is a real live case for a debate on ethics.