Getting value from consultants

Following the Competition and Markets Authority’s (CMA) Investigation in December 2019 into fiduciary and consultancy services, and the resulting Pensions Regulator guidance report, trustees are being put under even more pressure, now having to demonstrate how their consultants are adding value. 

The Lens Blog is currently investigating how pension fund trustees are planning to address this issue.

The report indicates that the Pensions Regulator is looking for a quantifiable justification, both at the outset from when a consultant is hired, and an ongoing basis.

The area that is key from the Lens Blog’s perspective is the manager selection process:  How does the board of trustees demonstrate that a manager they have been advised by a consultant to select, was on the basis of good advice?  And how do they do this on an independent basis?  So that it is not a conflict of interest, i.e. not taking information from the consultant who provided that advice, or the manager that is running the strategy. 

Was this a good recommendation and a good decision?  And has the manager added value over time?   And how does this manager compare in relation to their peers and/or a manager that a different consultant may have selected?

In both a fiduciary and a governance model, trustees are responsible for monitoring the performance of their managers on an ongoing basis.  Three key themes that stand out are independence; relative performance over time and consistency. 

The Lens’ colleagues at CAMRADATA will host a webinar on 11th February at 2:30pm to explore the tougher rules on investment governance affecting trustees’ responsibilities going forwards.  CAMRADATA will provide information also on how they are currently working with institutional investors and discuss some of the reports that are available to all trustees to help them monitor performance on an independent, ongoing and automated basis, to help meet these new requirements.