It is true that as a member of the Jewish people (particularly if he is a leader), a tzaddik knows that evil exists.
However, this is not an internal knowledge but an external awareness, just as one can know about the world of animals without being an animal oneself.
A tzaddik knows that evil exists, and he is able to empathize with those who suffer because they are wicked–however, he himself cannot experience these troubles.
Although he recognizes the existence of such a problem, he himself is not a part of that problem.
–Rabbi Adin Steinsaltz