Aon Hewitt has said that take-up of fiduciary management by pension schemes is continuing to expand but does so despite some of the myths that still surround it.
Sion Cole, partner and head of Client Solutions at Aon Hewitt, said:
“There remains a perception in some quarters that fiduciary management is failing in terms of performance and in the solution it delivers for some schemes. At Aon Hewitt this is a view regarded as at best a mystery - but it seems rooted in some widespread market myths.
“This situation may be partially due to failings in the partnership and understanding between the provider and scheme – often rooted in the original selection process – and is therefore not a failing of fiduciary management itself.”
Aon Hewitt is releasing a series of videos on the fiduciary myths that are currently alive among pension schemes, including the five key ones below – and why these views are misguided.
- Fiduciary management is only for small schemes
Sion Cole said: ”Not so – there is now a comprehensive range of fiduciary management solutions available to schemes of all sizes, including full, partial and dynamic de-risking mandates. It’s all about the issues that are specific to each individual scheme – large or small – and finding a solution that is tailored to meet their unique needs.”
- Trustees lose control
Sion Cole said: “If anything fiduciary management gives trustees greater control. The fiduciary manager should be working within the guidelines set by the trustees at the outset to deliver the results they want. Trustees retain control for the areas they need to, such as high level strategic decisions, setting investment objectives and any parameters. The fiduciary manager can then implement the strategy based on these strict guidelines.”
- Mandates are not going to competitive tender
Sion Cole said: “Any decisions on tendering and choice of provider remains with the trustees. At Aon Hewitt, 100% of our new business in the past 18 months has been through a competitive tender process or through an external verification exercise. We are seeing trustees do a good job of following through selection processes including due diligence and site visits. We actively encourage all our clients to come in to our offices.”
- Fiduciary management is just a fad
Sion Cole said: “We don’t believe that is the case. There is ever-increasing complexity in pension scheme investment, particularly as trustees contemplate putting their schemes on flightpaths to buyout or other solutions. Trustees need all the help they can get with both finding the right approach and being able to action it in time. Clearly, fiduciary management can help with that situation and it’s therefore hard to see how it can be an approach which is just subject to fashion.”
- All fiduciary solutions are alike
Sion Cole said: “Fiduciary management is very much a bespoke solution, designed to help each pension scheme with its unique characteristics. The approach and services vary greatly between providers and can also differ within the solutions a provider offers - depending on a scheme’s specific needs.
“Again, it comes down to the selection process; trustees need to ask the right questions to get the best understanding of what an individual provider can do for them.”
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