Investment managers/consultants and pension scheme trustees can foster a successful and profitable working relationship by communicating more clearly about investment issues and getting the right teams together to do this, according to BESTrustees.
Sheila Gleig of BESTrustees pointed out a number of ways that this could be achieved. She said that one of the most crucial aspects of a profitable relationship between these two parties is the manager getting to know the trustees and the level of knowledge they have.
She said: “Many elected trustees when they are first appointed may not be used to working in a committee structure. It is important to approach communication with a great deal of thought about the people who are to receive the message, and to appreciate that different levels of understanding apply.”
Gleig also said that it is essential that the manager recommends the right product for the pension fund instead of just pushing their latest product: “There is a difference between ensuring your clients are informed, and making recommendations to introduce new initiatives.”
Gleig also recommended that both trustees and advisers select the right people, with the right skills for their teams: “Are the people right for the project? Do they have the right skills? If it is not done, it often contributes to the failure of a project.”
She is worried about the “black hole” between the trustees making a decision to change their strategy, following advice from an investment consultant, and the implementation of that instruction with a manager: “Do you need a transition manager to help with the change, does that appointment require an investment agreement; can you use derivatives to assist in the process, does your trust deed allow for that? If you are changing managers does this mean a change of custodian? The process can be quite time consuming, and it sometimes makes trustees wish they had not made the decision to change because they are inundated with new issues relating to the decision they thought they had already made.”
She said that consultants and managers also need to monitor results, to see if their investment expectations are being met. She thinks there should be a system for monitoring advice, manager selection processes and strategic direction.
Finally, Gleig recommends that trustees get adequately trained so that they can meet their responsibilities and work together effectively: “There can be a huge diversity of approaches to how trustee boards operate; from the really hands on, to the almost rubber stamping everything, and I believe this is often due to the level of knowledge of trustees.” By Siddika Khalique
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