Press Release: Investment consultants agree to discuss IC Select solution in drive for transparency

London,2 October 2018 – the Big Three investment consultants - Aon, Mercer and Willis Towers Watson - have agreed to take part in top-level talks, hosted by governance specialist IC Select, to develop a strategy to show whether they provide value for money to their advisory pension scheme clients.

 

The other consultants who have so far agreed to participate in the first round of talks are Cardano, KPMG, Redington, River and Mercantile, and Momentum. Discussions with further firms are ongoing.

 

Last year, IC Select won support from fiduciary managers across the UK for a performance measurement standard to help clients appraise the value they offered. Administration of the service is expected to move to the CFA Institute in the near future.

 

This exercise, Project Spotlight, aligns with the Financial Conduct Authority’s mission to develop transparency standards for the performance and costs incurred by pension schemes. It also answers the challenge laid down by the Competition and Markets Authority to The Pension Regulator to develop guidance for trustees to be able to assess the performance of their advisors and challenge them more readily and effectively.

 

Spotlight will allow scheme specific analytics and costs to be presented in an independently produced annual report allowing pension trustees to compare their risk-adjusted performance, investment costs and asset allocation strategy against a peer group of similar funds selected from the universe of UK wide defined benefit pension schemes.

 

The FCA has said: “Providing comparable data on the performance of investment consultant advice would benefit trustees and the sector as a whole.”

 

The Competition and Markets Authority, currently reviewing the activities of investment consultants, said at the start of their review that the development of an industry standard template for the reporting of fees and performance would make: “value for money more transparent and comparable across different consultants.” In the recently published CMA Provisional Decision report it was found that there was a “lack of clear and comparable information for customers to assess the quality (performance) of their existing investment consultant and “a lack of clear and comparable information for customers to assess the value for money of alternative providers”

 

Spotlight is an industry-wide database which captures key pension fund data. Initially this would include standardised performance relative to liabilities and cost data, together with fund information such as asset values, funding levels, covenant strength, risk data and asset allocation. Over time, other information, such as client satisfaction can be added.

 

Based on the information in the database, each trustee board, would decide the parameters of their own customised peer group against which to benchmark their performance and cost. These peer group parameters could be based on schemes with similar characteristics in terms of asset size, funding level, return objective and liability hedging level or based on industry sectors.

 

Trustees would receive a written report from the Spotlight database which would benchmark their performance and costs against their peer group and also include information on how their asset allocation compares to the peer group.As a result, trustees will be able to assess whether the advice they receive from and the fees they pay to consultants represent value for money.

 

Roger Brown said “we believe this solution has the potential to address the CMA’s concerns around the lack of demand side challenge by giving trustees relevant and comparable information, to understand the effectiveness and costs of their governance solution. The beauty of the approach is that the report can be delivered in a highly cost effective manner, costing no more than a few hundred pounds for smaller schemes.

 

Our initial discussions with trustees, has shown strong support for the project. However, there are still significant challenges to overcome before the service can be launched, although the involvement and support of the major consultants and their willingness to embrace greater transparency is a significant step towards achieving this.”

 

For further information please contact:

Peter Dorward,

Managing Director

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RThis email address is being protected from spambots. You need JavaScript enabled to view it. Brown,

Founder and Director

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Director

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Monday, 17 December 2018