UK - The National Association of Pension Funds (NAPF) has issued updated guidelines on trustees' relationships with investment consultants and advisers.
In an increasingly complex investment environment, the guide draws attention to the changing requirements upon trustees and offers thoughts as to how trustees can best meet the demands of the new challenges through their relationships with external providers of investment advice.
The NAPF guide, in five parts, details the partnership between trustees and consultants; the consultant’s tasks; measuring and remunerating consultants; managing conflicts of interest; and additional factors to be aware of for DC plans.
Speaking at the NAPF’s annual investment conference in Edinburgh this week, David Morgan, chairman of the NAPF working group which drafted the guidelines, and also CEO at Coal Pension Trustees, presented the guidelines, emphasising that the governance budget is not set in tablets of stone and can and should be expanded to optimise the scheme’s affairs. With an increasingly complex investment environment, Morgan advised trustees to listen to more than one strategic advisor, but to also be clear about whattrustees expect of their consultant.
Roger Brown, director at Blacket Research, which measures the performance of consultants, emphasised the need to act now in implementing the guidelines in order to reduce the threat of legislation in this area. Brown also said that best practice requires that a different model be used for monitoring purposes, where possible.
On managing conflicts of interest, trustees need to be aware of the business context of the ever increasing number of providers offering advice to pension schemes. The guide points to asset managers and investment banks offering modelling services as one example, stressing the need for trustees to ensure “transparency of the costs involved”.
In light of the SEC Pay to Play investigation, the guide also urges trustees to ask their consultants, and potential appointees to posts, for a full disclosure statement that outlines the relationships they have with other clients that might influence the advice that they provide.
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