News & Views

Site visits: Get to know a fiduciary manager before you tie the knot


Too often the focus of a selection exercise is on quantitative indicators such as performance numbers and statistics.

Qualitative indicators, such as the culture of an organisation, dynamics of a team or their ability to communicate – which can be gleaned through site visits – are listed as ‘nice to have’ because of the extra cost and time involved. Neither should be ignored.

Numbers and statistics do tell a story, but you still need to know that the selected firm will have someone to explain them clearly.


Regulators demand better

Following the final orders of the Competition and Markets Authority in June this year, the Pensions Regulator issued draft guidelines for defined benefit trustee boards on tendering for FM.

The ninth key principle of these guidelines specifically refers to site visits, and says these should be undertaken with the final two or three providers as part of the overall due diligence process before confirming any appointments.

If trustees are still wondering why they should bother, rather than just continuing with beauty parades, we argue that the benefits far outweigh any drawbacks.

Visiting a manager at their premises enables trustees to get to know the senior people who will be making the investment decisions. At beauty parades, on the other hand, you generally get the sales people rather than the real decision makers.

During a visit there is more time to observe things such as team dynamics, how junior staff are treated, and the diversity of teams. Trustees can discover how the culture of the organisation affects decision-making or hierarchy, as well as question anything that might have come up.

While separation and divorce is possible, it is expensive, time-consuming and exhausting, and not what either party want.


Start off right

Site visits can lead to a few additional gains:

In contract negotiations, it is easier to settle differences when you have met the decision makers. People tend to move quicker to a middle ground and compromise.

Service levels during the critical transition phase are vital, as costs can be material. We believe that having met the individuals who are looking after you makes them assume greater accountability, responsibility and ownership for your pension scheme and situation – it is human nature.

Fiduciary managers struggle in 2018’s testing  markets

Fiduciary managers significantly undershot their targets in 2018, with underperformance ranging from 6 per cent to more than 11 per cent, according to the first XPS FM Watch report.

Read more


If you trust and know somebody, difficult conversations become easier. After a recent FM selection exercise interest rates fell sharply, and volatile markets meant the manager-elect had to revisit their proposal and receive trustee agreement for a revised investment strategy.

This is not an easy conversation, but having a closer relationship helped and left trustees impressed at the proactive approach from their soon-to-be appointed FM.

In-depth knowledge, understanding each other’s needs and clear communication is a solid basis for any partnership, be it in marriage or between trustees    and their investment advisers. At least this is likely to minimise the risk of a painful, lengthy and costly divorce and make a ’till death (or end of contract) do us part’ scenario more likely.

Donny Hay is a director at oversight and selection specialist IC Select.

This article was published in Pensions Expert, by Angus Peters | October 2, 2019

Selecting a fiduciary manager is just like marriage: you want to take time to select the right partner. Trust comes from knowing people well and seeing them often. Much like selecting a partner for life, you want to know the whole family (firm), not just the edited bits online (the beauty parade that many rely on in selection).


Post Info

31st October 2019