In this article I’m proposing that investment consultants are subject to the same degree of scrutiny as the other service suppliers to trustees. Investment consultants should be subject to a Value for Money assessment).
This morning I will be hearing about the latest thinking on value for money for the consumer. The PPI have been commissioned by Standard Life to help take forward the thinking on how IGCs should consider VFM from the providers they govern.
I’m a big fan of the PPI and would be very happy to work with them towards a solution to this thorny problem. The consumer has neither the information or the toolkit to make sense of the information; which is what the IGCs are there for.
That the IGCs don’t have the data is more worrying, that they are still worrying about what data they need, is shocking. Hopefully things will move forward this morning (though you won’t know much more as Chatham House covers most of what will be said!)
It seems strange that, at a time when Transparency is the watchword, we are still under “non-disclosure” restrictions in a public meeting!
I spent a little time on this yesterday, especially when put under pressure by Andy Agethangelou for questions to put to the FCA at a forthcoming meeting of the Transparency Task Force.
What would I want to see coming out of the FCAs thematic review into (inter alia) investment consultants?
Well I’m not putting myself under a non-disclosure agreement! I would like to see investment consultants subject to the same degree of scrutiny as any other service supplier to a trust board (or indeed an IGC!).
Investment Consultants should be subject to a value for money assessment , carried out at least every three years (and preferably every year) by the trustees of the occupational pension schemes they advise.
The assessment should be conducted by the trustees who appointed them and the results of the assessment should be simply printed in the Chairman’s report with a green, amber or red sticker attaching.
Green would imply a clean bill of health – nothing need be done by either side but BAU
Amber would imply deficiencies in the service supplied – a clear list of these deficiencies should be delivered to the consultants with an action plan for remedy
Red would imply an unsatisfactory performance from the investment consultants and an immediate market review to establish if the trustees could do better.
The assessment would be carried out by the trustees (or a sub-group) and would be assisted by a template of probing questions the trustees should ask themselves. On no account should the investment consultants be invited to complete this questionnaire though the trustees might consider asking the consultants the questions to their faces.
That this be a mandatory part of the trustee’s duties , should come as no surprise to many trustee boards who do this anyway. Though perhaps not in a formal way.
Investment consultants should have no objection, they are proposing exactly this kind of thing on other service providers (particularly the fund managers).
The Regulators, to whom these reports would needs be submitted, would have an invaluable source of data. Whether by tPR or FCA, the analysis of these reports would build a picture of where value for money was being delivered, by whom and in what measure.
But the greatest benefit of all would be to the Trustees (and those they act for). Trustees have difficulties with consultants. Too often they are the supine recipients of advice, too rarely do they push back. Considering the performance of those who deliver performance reviews, puts Trustees back in control – as they should be.
And when we’ve done with them, the trustees might move on to the actuaries, lawyers and auditors…
For the most part, these service providers are invisible to the ordinary members. But when waters get choppy, they become accountable. This from the Mail
A spokesman for Arcadia, Green’s family firm, said: ‘We have no involvement in the trustees’ decisions, their investment strategy, who they talk to, where they put the money. They’re totally independent.
‘They’ve got advisers. They had a lawyer. They’ve got an actuary. Well, where the f*** are all these people?’
Those that need accountable strong advisers most, are of course the pension scheme members
Which is why the FCA is carrying out its thematic review!