There have been a number of articles and suchlike about Fiduciary Management and pension trustees lately. The Aon Fiduciary Management Survey 2015 being the latest to hit the in-boxes of trustees and their advisers.
We thought that rather than ‘Why should trustees consider Fiduciary Management?’ we would turn the question around to ‘Why shouldn’t trustees consider Fiduciary Management?’ This seems to us to be much more positive place to start any review of pension scheme investment.
Now we have banged on in the past that no one size fits all, and this applies to FM as much as it does anything else. It seems to us that FM has moved from being seen as ‘Emperor’s new clothes’ to becoming mainstream, and very much part of a trustees toolkit in looking at the issue of how do we get as much as we can, within our accepted risk parameters, get as much return from scheme investments and match liabilities.
In our experience, trustees and their sponsors warm to FM for a mix of different reasons. There is often more than one driver but our mix and match list includes:
- Dissatisfaction with the current status quo of an investment consultant and investment manager(s) either in terms of investment performance or diversification of assets
- Governance issues – are four investment committee meetings a year achieving what was intended and is more importantly, what is needed now? Is there a better way to use the time available?
- Are investment decisions ultimately taken by the full Trustee board which slows down the decision making process
- Trustee knowledge and understanding of increasing complex investment products
- Speed of firstly making a decision and secondly actually implementing this
There are some issues when switching to FM for trustee boards. These include education of what exactly FM is, how trustees monitor the FM manager, fee transparency and understanding exactly what trustees are signing up to. None of these issues are insurmountable and can be resolved.
In a world where trustee boards spend significant amounts of energy looking to resolve issues around scheme deficits, volatility and managing liabilities tools which enable trustees to concentrate on the big picture, and not worry about the day to day management of assets, seem to us to be worthy of a long hard look.
As we say, FM is not for every pension scheme but there appear to be more positives than negatives with this. FM is not to be dismissed as a ‘here today gone tomorrow’ solution.
For a no-obligation discussion about our experience of how we have seen FM work for pension schemes contact us by telephoning 0845 4334 199 or email at email@example.com