News & Views

Moving to Fiduciary Management. Are trustees always getting the right advice?

In some cases, the request for our involvement has originated from the investment consultant, recognising the inherent conflict in their position and concerned that their clients should not take such a major decision without independent advice. In all cases in these appointments, the advice the trustees have received is balanced and fair, sometimes even recommending competing fiduciary managers as competition to the investment consultant’s own offering.

In others, it is the trustees that contact us, concerned that they are being ‘sold’ FM without a proper consideration of the options. Whilst some of the advice where the trustees have contacted us maintains the high standards we would expect to see in investment consultant advice, we have seen a number of examples of advice that is either incompetent or deliberately misleading in order to promote the investment consultant’s FM offering. Typically, this has involved the misuse of risk information supplied to trustees. We have little doubt that if this had happened in the retail sector it would constitute mis-selling. Furthermore, the fees quoted to in these circumstances have, on some occasions, been 50% higher than the same firm would quote in an open market tender!

Based on our experience, the first point trustees need to decide on is whether the trust they have in their investment consultant is appropriate or not. This can most easily be judged by whether the investment consultant recommends independent advice before a switch to FM or whether they seek to manage the switch based only on their, possibly, biased advice.

It is good to continue to keep the challenges involved with a change to fiduciary managemment (FM) at the forefront of trustees’ minds.  In our role helping trustees with the oversight and selection of investment consultants and fiduciary managers we have been requested, on a number of occasions, to assist trustees with the decision on whether to change to FM  and, if they do decide FM is for them, to help find the most appropriate fiduciary manager for their scheme. However, it is the source of the request for our involvement that points to different standards in place at investment consultants that also offer FM.