While it might be tempting to opt for a quick box-ticking exercise when it comes to a review, we think there are three important questions you should be addressing.     

Following on from the CMA’s review into investment consulting and fiduciary management (FM) 10th June 2021 is an important date. If you appointed a FM before 10 June 2016, without a competitive process, to manage more than 20% of your pension scheme’s assets, then you must complete a review by this date. Many schemes affected have already been through this process and many others are working out how to get this done in the next few months. 

The CMA says that Trustees should obtain bids from at least 3 FMs. So simply complying with the CMA Order is relatively straightforward, with limited specialist investment input required.   
We’d suggest basic compliance probably isn’t in the spirit of the behaviours that the Order is aiming to encourage. If Trustees appointed a FM (perhaps from an incumbent adviser) without a competitive process, or without independent advice, it’s clearly very important to test whether that arrangement is competitive and appropriate for you as: 

• FM contracts are high value items; and  
• For most schemes, investment outcomes are a key determinant of success in ensuring benefit security for members.  

That’s why we would encourage any review to answer these three questions: 

1. Can any aspect of your investment arrangements be improved?
2. Is it delivering you good value for money? 
3. Has your FM provider delivered you good investment outcomes? 

Investment arrangements 

The CMA defines FM as ‘a governance model through which trustees delegate the day-to-day implementation of their investment strategy to a FM’ and ‘in addition the FM also provides advice’.  As new governance solutions evolve and firms jostle for position, defining what is and isn’t FM may not be easy, with some consulting firms moving into fund management and some fund managers moving into giving advice. We continue to offer Trustees and companies independent advice on what matters from an investment perspective, regardless of the structure.  

Value for money  

Paying the lowest fee doesn’t necessarily translate into good value. Given the complexity associated with layered FM fee structures, a careful eye is required when assessing value for money. Professional support can help you to understand what you’re paying, what you are getting for those fees, and how they stack up versus others. This will help you decide whether it represents good value.  

Investment outcomes  

Surely this is the most important measure of success and (inconveniently) the most difficult to measure, as every scheme has its own features and requirements. An independent perspective can help you obtain better data from your FM to aid assessment, plus provide the all-important broader market context. You should judge your FM based on their success relative to the objectives you set, the factors within their remit, and fair comparators across the market to give you the full picture.

Undertaking a review that is still efficient yet thorough will help give you a better picture of how your FM is doing. Our FM healthcheck service is designed to help you answer these specific questions, and to complete the competitive tender in an efficient way.

Further insight

To read the results of a survey we conducted following the deadline for many schemes to retender their fiduciary management mandate, click here.