Phil Wadsworth, chief actuary at JLT Employee Benefits
Is fiduciary management right for me? Given the recent press, the FCA study and the CMA investigation into investment consultancies, it is a timely question.
My view, however, is an emphatic “yes”. If you’re considering employing fiduciary management services there is certainly no need to wait as the fundamental benefits remain the same.The first point to make is fiduciary management is not a product, and certainly not a “one-size-fits-all” solution, but instead it’s a framework.
According to the latest Aon fiduciary management survey more than half (52%) of small-to-medium size clients have already taken up fiduciary management services.
Many schemes in this bracket are closed to new employees and therefore they are not the primary focus of HR policies. The sponsor and trustees are therefore looking for effective support to deliver a number of factors to the scheme and its assets:
Expertise: Has the trustee board the necessary skills, best ideas and tools to manage the scheme?
Timely decision making: Can we make decisions without convening a trustee meeting?
Charges: Is the scheme receiving a charging structure enjoyed by the biggest investors in its selected funds?
Reduction of management time: Are we concentrating only on the important aspects?
Diversification and access to all classes of assets: Can the scheme get exposure to all asset classes, economically and effectively?
Effective flight path: The scheme has a strategy in place, but has it got procedures to monitor progress and effect changes in a particularly volatile political and economic climate?
Triggers: The trustees have agreed de-risking triggers, but can they implement changes quickly before conditions revert back?
Fiduciary management is the difference in being able to answer yes to most of these questions rather than no. However, it is a menu and trustees do not have to take all options.
Importantly fiduciary management solutions do allow a whole of market approach, allowing access to the best managers and diversification strategies. For example, if your sole aim is to benefit from the lowest charges without replacing your current managers, this could be achieved simply through fiduciary management.
Sponsor and trustees’ time is precious and needs to be used wisely and effectively. Taking a fiduciary management solution for part, or all, of the investment process delivers better, timelier decisions, wider access to markets, and potential reductions in manager charges.
So, the answer to the question: is fiduciary management right for me? has to be “yes”. The extent to which you wish to delegate is for you to decide in consultation with your advisers.
