How to set written objectives for pension scheme investment consultants - Quick reads - Gateley
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How to set written objectives for pension scheme investment consultants

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To avoid thinking about setting written objectives for investment consultancy services on defined benefit (DB) and defined contribution (DC) pension schemes the other day, I began to clear out an old desk drawer.  

A tattered piece of paper from July 2009 came to hand. Entitled “Departmental Brolly Log Book” the memento took me back to the dark days of the Credit Crunch when an entire department shared a single umbrella to shelter from the storms of the weather system even if there was no similar shelter from the financial markets storm.

To my surprise I noted that the Departmental Brolly Log Book entries make for a good jumping off point for complying with the Investment Consultant Objectives and Performance Measurement Case Studies in the Pension Regulator’s trustee guide to Setting Objectives for Providers of Investment Consultancy Services where the deadline for compliance is 10th December 2019.

The first case study in the Regulator’s Guide (there are two, the first for DB and the second for DC schemes) lists six key topics comprising:

  • Added Value
  • Specialist processes
  • Proactive nature of advice
  • Compliance and support
  • Relationship and Service Standards; and 
  • Additional Matters.

The Brolly Log Book is almost as exhaustive covering five key metrics being:

  • Clean
  • Re-point
  • Polish
  • Repair and 
  • Re-stitch

The last metric, Re-stitch, reveals a sharper edge to the Credit Crunch recession than I perhaps recall. 

The Pensions Regulator’s Case Study adopts a Balanced Scorecard Approach, breaking each category down into a number of constituent elements ranging from 8 or 9 under some headings (Added Value and Relationships and Service Standards) to just one (Additional Matters which, spoiler alert, basically comprises whatever additional matters might arise). By way of contrast, the Brolly Log adopts a classic Tick Box Method plus brief supporting details. For example, the umbrella or brolly benefitted from a thorough polish on 14th July 2009 at precisely twenty seven minutes past two. 

The Fiduciary Management Market Investigation Order 2019 prohibits trustees from entering a new contract or continuing to receive investment consultancy services as defined in Part 2 of the Order unless the trustees have set objectives in relation to those services. The Guide lists sixteen typical investment consultancy services including a couple of unsung heroes of the trustee support universe such as services around the transition on portfolio re-organisation or changes to investment managers. This is a really good example of a service which, if properly monitored against objectives understood between an engaged trustee and the provider, can result in significant benefits for the scheme.

A well monitored investment transition against objectives like taking steps to: 

  1. avoid trading in thin markets (like Christmas and New Year), 
  2. eliminate out of market risk, 
  3. transition in tranches to avoid one-off trading hits; and 
  4. explore in-specie transfers

This can make a huge difference to the cost of a transition exercise. The Guidance encourages trustees to engage around such opportunities and represents a superb opportunity to raise governance standards and maximise positive outcomes as a result.

Doubtless, the Departmental Brolly Log represented a robust response to the challenges of maintaining an all-weather sheltering solution in those harsh economic times. Similarly, the Pensions Regulator’s trustee guide to Setting Objectives for Providers of Investment Consultancy Services shows trustees how to engage around each and every strand of investment consulting services to deliver greater retirement security for all of their pension scheme members in the future.


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