Bacon & Woodrow is giving clients the option to hand over responsibility on major investment decisions. But despite the move - which follows a similar initiative by Watson Wyatt last month - doubts still remain over how investment consultants can follow the Myners call for greater accountability.
Bacon & Woodrow said it was willing to take on board manager selection and other decisions such as strategic allocation – in return for an increased fee.
Head of UK investment consulting practice Anthony Ashton reportedly said that B&W would be happy to take manager selection decisions for clients. He added that the decision was taken in light of the consultant’s role to support trustees and help them to make informed decisions. The development in B&W’s strategy highlights the appetite among consultants to improve the profitability of their business models – raising fees in return for taking on more responsibility.
It follows Watson Wyatt’s decision, announced last month, to offer a similar service. Watson Wyatt – which is offering to pick fund managers and determine the briefs for clients – said trustees faced a complex series of decisions and responsibilities, and needed as much advice as possible as a result.
B&W’s announcement follows the Myners review which highlighted the need to improve trustees’ understanding of investment and to make consultants more accountable.
Some consultants have said that it would be feasible to measure the performance of managers against a benchmark and have a performance fee based on managers’ success or failure. But much of a consultant’s work – such as trustee education – is hard to quantify and question marks remain as to how performance-related fees concerning more strategic decisions could operate fairly.
William M Mercer head of investment strategy Andrew Green said: ”Accountability and success-measurement is complicated when one tries to establish a formalised process whereby strategic decisions are delegated.
“If trustees delegate decisions it remains their decision to delegate and the responsibility is still with the trustees to ensure that the delegation process is understood.”
Aon Consulting senior investment consultant Alvar Chambers said: “As the Myners report states, the actual setting of an investment strategy is one of the most important long-term decisions and it is hard to see how you could measure performance there.”
And Buck Consultants consulting actuary David Kershaw warned: “It’s a very fine line between what consultants are able to do and what they should be doing. The Pensions Act is quite clear - it is the trustees’ responsibility to oversee investment.”
By Alistair Graham
Kerrin Rosenberg says while the rise of CDI is positive, understanding the risk and return aspect is a great challenge
Schneider Electric has appointed Aon to provide full fiduciary management services for over £400m of assets held in the Schneider Pension Plan.
Pension Insurance Corporation (PIC) has invested £40m in debt issued by Scottish Borders-based Eildon Housing Association.