“Independent third parties have a far better understanding of the market now and give better advice to the client,” says McCauley. Every arrangement is quite different and there is not yet a sense of common ground on underlying manager fees, what is being charged on top and whether some asset classes, such as hedge funds are included in the fees?
“It’s been an eye-opener for some of our clients.”
Harder, better, faster, stronger
This reinforces the argument – whether a scheme uses an independent consultant or not – that the objectives must be clear and the trustees must be absolutely certain about what they can expect the fiduciary manager to do for them.
“You need to set the level of funding, but the timescale should not be one point in time, but how the funding will develop over time,” says Lace.
This raises an interesting point that if trustees tend to hire a fiduciary manager because they don’t have the time or governance resource to take decisions themselves. But appointing a fiduciary manager – and for that matter, a monitoring consultant – takes time, effort and expertise, so can trustees be sure they can appoint one when they are really short of these commodities?
Anne Kershaw, associate director at Muse Advisory, is convinced the market will grow. The lack of horror stories – so far – from those early adopters of fiduciary management is undoubtedly having a positive impact upon the market, she says.
Trustee boards often are unaware of their lack of expertise or governance blindspots – the classic example of unknown unknowns which may come to haunt them in the future. “Fiduciary managers may not be perfect, but the odds are in favour of them more than trustee boards, certainly in the middle range,” says Kershaw.
“Fiduciary managers will generally prove to be a success, I believe, but whether they help you reach your objectives is what really counts.”