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Atlantic Connection 6 th Annual Economic & Financial Development Conference

Atlantic Connection 6 th Annual Economic & Financial Development Conference. Consultant Panel July 13, 2011 Jeanna M. Cullins, Principal. Consultant Trends - Headlines.

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Atlantic Connection 6 th Annual Economic & Financial Development Conference

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  1. Atlantic Connection6th Annual Economic &Financial Development Conference Consultant Panel July 13, 2011 Jeanna M. Cullins, Principal

  2. Consultant Trends - Headlines • 2011 –Mercer acquired the bulk of rival Evaluation Associates Inc.'s business from Milliman Inc…after buying St. Louis-based Hammond Associates in January. EAI buy just the beginning.… • 2011 –Callan will acquire the 10 public defined benefit clients…Evaluation Associates serves.… • February 2009 – Mercer sought to acquire Callan, but the deal was abruptly called off a little over a month later.… • 2010 –Hewitt-Ennismay change the game…As industry giant is born, independent firms reconsidering their status; M&A talks to rise.… • May 2011 – GBS Investment Consulting, an investment advisory unit of Arthur J. Gallagher & Co., acquiredIndependent Fiduciary Services. GBS also ownsYanni Partners, another investment consulting firm.

  3. Some Reasons Why… • Bigger market share • Succession issues • Additional analytical tools and access to the talent and resources • Bigger and better economies of scale • Cross-selling opportunities in areas such as actuarial, management, and compensation consulting

  4. Example Firm is actuary to 10 of 20 largest utilities in US and 8 out of 15 Dow Jones Utility Average Firm has engaged in pension risk management studies with 10 utilities covering nearly $20B in assets Actuarial Alabama Natural Gas Aquila CMS Energy Consumers Energy Dayton Power & Light DTE Energy Edison International EFH Energen Iberdrola Northeast Utilities NW Natural Gas Pacificorp PGE PSEG SW Gas STP TransAlta Williams Companies Both* CenterPoint Energy Duquesne Light Entergy FirstEnergy GenOn NextEra (FPL Group) National Grid NiSource NRG Energy Southern Company Investments Cleco CENG Constellation Energy Dynegy, Inc. Integrys Mid-American Energy Peabody Energy Pepco Holdings TECO Energy *Includes actuarial and pension risk consulting

  5. Checklist of Questions to Ask… • Did you receive a “consent” to assignment of the contract? • Will your consulting team remain the same? • Does the firm or a related company have relationships with money managers that it recommends, considers for recommendation, or otherwise mentions to the plan for its consideration? If so, describe those relationships? • Does the firm or a related company receive any payments from money managers it recommends, considers for recommendation, or otherwise mentions to the plan for its consideration? If so, what is the extent of these payments in relation to your other income (revenue)? • What percentage of the firm’s plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees?

  6. Checklist of Questions to Ask… • Does the firm allow plans to pay your consulting fees using the plan s brokerage commissions? If so: • a. what steps does the firm take to ensure that the plan receives best execution for its securities trades? • b. what steps does the firm take to monitor the amount of commissions paid and alert plans when consulting fees have been paid in full? If not, how can a plan make sure it does not over-pay its consulting fees? • Does the firm have any arrangements with broker/dealers under which it or a related company will benefit if money managers place trades for their clients with such broker-dealers? • Will the firm acknowledge, or continue to acknowledge, in writing that its fiduciary obligation as an investment adviser to the plan while providing the consulting services to the plan?

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