Pensions World

Reviewing your advisers need not be a long and painful process and can benefit everybody suggests Ellen Kelleher, PricewaterhouseCoopers

Continuing changes in legislation, scheme closures, increasingly complex investment structures and challenging proposals from employers (ETVs – enhanced transfer values)/PIEs – price increase exchanges) etc mean that trustees are requiring broader types of advice and are relying on their advisers more and more.

As a result, reviewing their advisers should be seen as a priority for trustees, not only from a good governance standpoint but also to ensure that they are getting the support they need at the right cost, whether this is actuarial, investment or legal advice.

No need to change advisers

This does not mean a full market review –which can be required following significant changes such as appointment of a fiduciary manager or scheme reorganisation – but a lighter touch review is useful (see Box).

As a result, this should not be a long and painful process and will not necessarily mean you will change your advisers. This type of review can inform trustees about:

What else is available – services may have moved on since your current adviser was appointed and firms are not always proactive in bringing new ideas to their current trustee clients.

How you work together – the adviser can bring valuable insights into how the way they work with your board varies from others and the ways that you might work more effectively together.

Your fee structures – it is notoriously difficult to benchmark fee rates as every scheme and every trustee board is different. That said, there may be ways in which the fees could be structured to give a greater degree of certainty and improved efficiency (eg the use of retainers, fixed fees for meetings, discounts over certain fee levels).

The adviser team – you might be very happy with the day to day service, but is there a risk around, for example, resourcing or succession planning? Is it clear who would replace your main contact if necessary? Does the firm have a strong enough team to support peaks of activity or special exercises?

How the relationship is managed – is it clear who is authorised to commission extra work and how this is controlled? Are budgets for project work always provided and agreed in advance?

Whether you are too dependent upon your advisers – while a strong working relationship is beneficial to the trustees, there can be risks if an adviser holds too much of the scheme knowledge or history. Although trustees can delegate duties to their advisers and service providers, they remain responsible for the work carried out on their behalf.

How your needs have changed over time – if the scheme is now closed and there is a different range of trustees in place (more pensioner or independent trustees, for example), the advisory needs might have changed, but it is possible that a long term adviser might not have adapted its service accordingly.

Whether the advice is in the best form and structure – there will, of course, be circumstances where the trustees need to be provided with all of the detail of a particular legal, actuarial or investment issue, but that is not always the case. The adviser might be producing balanced reports giving all the options when the trustees would prefer a summary and recommendation – a review provides the opportunity to open that discussion.

Ongoing management

In theory, these are all areas that should be covered through good, ongoing management of advisers, but we are all busy and the urgency of getting the job done often outweighs the importance of taking a step back and considering the longer term relationship.

A review of advisers enables trustees to gather this information and implement changes in the way they work with advisers which will ultimately benefit all parties.