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Professional Pensions: Don't let advisers set and mark their own homework

This article was published in Professional Pensions| 17 May, 2022

In the world of defined benefit pensions, just like anywhere else, pursuing improvement is a continuous process.

Boards of pension trustees will have long ago set out strategic investment objectives for their investment consultant or fiduciary manager, after the Competition and Markets Authority (CMA) made the process mandatory in December 2019. 

But how many of them will have revisited and adjusted those objectives, and how many will have independently assessed how well their investment adviser has lived up to them? For us at IC Select, needless investment underperformance has been the enemy of pension schemes for too long. We believed that the CMA's decision was a potential game changer. In truth, while the rules have changed, too much of the game remains the same. 

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Execution: the right information can cut scheme costs

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Your fiduciary manager will happily tell you how much it costs to execute trades on behalf of your scheme’s investment portfolio. But that doesn’t necessarily mean that you, as a pension trustee, are getting the full picture about whether those trades are being carried out efficiently. 

While it’s easy for trustees to feel overwhelmed by the amount of information their manager provides them with, it’s the quality, not the quantity, that counts. Getting the right detail – whether the trades were aggregated or crossed with others to cut costs, for example – can save a scheme money and so lead to benefits for members. 

Of course, not all fiduciary managers execute transactions in the same way. Those that handle the trading process themselves can and do measure and report the efficiency of their performance; they know exactly how they execute securities deals. 

When a manager uses a third party, it will assess and monitor that third party’s handling of the execution, but in practice it is unlikely that the fiduciary manager will scrutinise its efficiency in terms of costs.

Whatever their approach, all fiduciary managers will report on execution costs, using templates set up by the Cost Transparency Initiative, the independent body backed by the Pensions and Lifetime Savings Association, Investment Association and Local Government Pension Scheme Advisory Board.

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Professional Pensions: Fiduciary managers must come clean about their errors

This article was published in Professional Pensions| January 25, 2022

Being open about making mistakes can sometimes be unappealing, but all too often it’s in the interests of everyone concerned.

When we compiled our latest survey of the operational capabilities of fiduciary managers - the results of which we published today (25 January) for the first time - it was striking how little the market would tell us about what happened when things went wrong.

We asked managers for details about the compensation they'd paid to clients in the wake of operational errors. Payments, when made, are typically small, particularly in relation to the size of the assets that are being managed.

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Professional Pensions Article: "IC Select: FMs hit by glitches in 2020 despite claims"

This article was published in Professional Pensions, bJonathan Stapleton | January 25, 2022

 

More than three quarters of the fiduciary management industry endured control failures in 2020 despite their claims that operational processes ran smoothly in the thick of the pandemic, IC Select finds.

The oversight and selection firm's survey on the operational capabilities of fiduciary managers found that 77% of fiduciary managers suffered an increase in instances where their operational controls or processes went awry at the start of the pandemic.

The total number of specific failures surged by 174% in 2020 compared with the previous year, it found.


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Pensions Expert Article: Fiduciary managers downplay pandemic disruptions

This article was published in Pensions Expert, bBenjamin Mercer | January 25, 2022

More than three-quarters of fiduciary managers endured control failures in 2020, despite “widespread claims” to the contrary, according to a new report from IC Select.

Seventy-seven per cent of these companies saw increased instances of operational controls and processes going wrong at the start of the pandemic, with the total number of failures up by 174 per cent when compared with 2019’s figure.


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