Concentration risk concerns aired over professional trustee market
PP survey shows concern over dominance of largest professional trustee firms
Thanks to Professional Pensions for bringing the issue of “concentration risk” to the fore.
The rise of the professional trustees is interesting, trusteeship is increasingly occupying a space that actuarial, legal and investment advisers called their own. Indeed many pension consultants are now doing the job of professional trustees in much the way they ended their careers as advisers.
Rather than being the representatives of the members, this new class of professional trustee is being called upon to help the corporate execute the end-game of the scheme. The job in hand is align the scheme’s data, assets and strategy with that of the sponsor and the insurer.
If there is concentration risk, it is in this focus on meeting the twin peaks of achievement , a scheme that is self-sufficient of its sponsor and pre-packed for buy-out,
If there is “group think” it is because of the strong messages sent out to trustees by the Pensions Regulator via the consultancies that makes for violent agreement in trustee meetings. It was evidenced in the herding of schemes towards the same LDI solution and it is now being repeated in the long queues forming outside insurer’s doors.
What is also clear is that in all this, the interests of members are being less and less promoted. Witness the fractious disputes at BP and Shell over surplus distribution.
I am not against professional trustees, but I do wonder if they can be sole trustees and exclude the lay trustees from the trustee boards.
So the question of concentration risk is not so much about the group-think of professional trustees, but of the strategic imperative to consolidate, buy-out or lock-down – being the received idea of the Regulator.
