Fiduciary Management: the Independent Voice in the Room

Fiduciary management is becoming more and more appealing for some trustees. Access to a team dedicated to the day-to-day running of the pension scheme’s assets is an attractive solution. This is particularly apt for trustees who find it difficult to make and/or implement decisions as things currently stand.

However, caution must be used when delegating so much responsibility to a single entity. Trustees are still responsible to members for reaching the end-game.

However, there were some concerning stats that emerged:

  • Only 3 in every 10 clients monitor their fiduciary manager using an independent provider. Most trustees who have delegated responsibility to fiduciary managers only hear the story of how well they are doing from one (potentially conflicted!) external source.
  • Less than a third of clients review their fiduciary manager on an annual basis, with 35% of clients having no formal review process in place at all!
  • At least one-third of current arrangements were not selected through an open tender process. These appointments appear to have been made via existing relationships and direct recommendations.

This throws into sharp contrast the degree of risk trustees might be taking by remaining in unsuitable arrangements. As well as the more complex nuances of the various investment styles, even areas such as fees may never have been properly negotiated.

Fiduciary managers have come a long way in recent years and, for certain trustees, handing responsibility across to a fiduciary manager may prove to be the saving of their funding level. However, this decision needs to be given suitable scrutiny. The danger remains that ignoring the ongoing suitability of the manager creates the potential risk of the saving of the funding level becoming the downfall.

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