Cost disclosure template could be ready by April; LGPS to adopt immediately
Trustees could benefit from a standardised template for the disclosure of investment transaction costs and charges from as early as April, Chris Sier has said.
The Institutional Disclosure Working Group (IDWG) chairman said the group has made significant progress on its proposed template, and that this could be ready for the start of most schemes' reporting years.
Sier, who was appointed to the IDWG by the Financial Conduct Authority (FCA) last August, said the template will provide "a standard that asset managers can hang their hat on", providing benefits for pension scheme members, trustees, asset managers and the UK economy as a whole.
"This is about creating a standard of data that is suitable for asset managers to give," Sier told delegates at the Pensions and Lifetime Savings Association's (PLSA's) investment conference on 7 March. "It is about building awareness and understanding."
He continued: "The mantra of net performance is all we need to find value for money is no longer credible, sustainable or acceptable; if someone gives you that as an answer, show them the door."
While there are no plans to make the eventual template compulsory, Sier said it will enable trustees to identify best practice for what information they should or could ask from their investment managers. Further, "transparency is a surrogate for trust", boosting public confidence in their workplace pension provision, he added.
His comments came as Local Government Association head of pensions Jeff Houston confirmed to the conference that the Local Government Pension Scheme (LGPS) Scheme Advisory Board (SAB) had agreed to implement the template as soon as it was made available for use. This will bring around £250bn of assets under the template from its launch.
Sier said the template would not only provide trustees and members with more information, thereby boosting trust, but also improve manager selection if schemes adopt a simple "filtering" process.
"Put in place a simply binary ‘yes or no' question that allows you to filter out the good and bad," Sier said, recommending schemes ask if the manager would use the template. "If the answer is no, [then you can say] goodbye.
"If someone is unwilling to give data to what is an agreed standard - or can't - then you probably don't want to work with them, because they either don't have the capability to collect data which is pretty fundamental, or they don't have the honesty."
Sier added support for the framework had been high among asset managers, leaving him with an impression that the managers had simply been awaiting guidance on how to disclose. Sier said this had given him a "sense of relief".
The PLSA, which also sits on the IDWG, welcomed the update, with its external affairs director Graham Vidler said transparency was vital for the market.
"We want to see an institutional investment market that works efficiently, competitively and in the best interests of scheme members," he said. "A cornerstone of any well-functioning market is transparency. That is why we support the excellent work being done by the IDWG which is taking a rigorous approach to defining, surfacing and measuring the full cost of investing."
He added it was important the information was usable and showing in a consistent and standard way.
The IDWG was one of the remedies proposed by the FCA in its Asset Management Market Study, published last June. The watchdog is expected to unveil a policy statement on further remedies later this month.
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