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Honesty needed for consultant-trustee relationships

17 March 2017

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A lack of frank conversation between consultants and trustees could be adversely affecting pension schemes and members.

Paul Richards, director of strategy at pensions consultancy Redington, said research conducted on trustees and consultants found that 95% agreed that honest dialogue was essential for rectifying areas of weakness in scheme governance.

However, the research also found critical feedback remains uncommon, due largely to concerns from both trustees and consultants about damaging the existing relationship.

Richards told delegates at the Pension and Lifetime Savings Association conference in Edinburgh, one in five had seen no instances of consultants delivering developmental feedback.

He said 68% of respondents worried that doing so would negatively impact the ability to work effectively, and 67% were unwilling to take actions that might risk the client relationship.

However, the research also showed that 86% of those surveyed said that putting assurances in place that offering critical feedback would not affect the trustee and consultant's future ability to work together would increase chances of doing this effectively.

Richards said: "Feedback is an integral part of any healthy relationship, and with the potential to impact so many scheme members, it is crucial that trustees and consultants feel able to have frank and honest discussions with each other."

"In fact, studies have shown that effective governance can equate to an additional return of between 1-2% annually, so the ability to communicate effectively and honestly has a direct impact on members' bottom lines."

Richards suggests encouraging consultants to adopt a "radical candour" approach, keeping trustees informed of what they can expect throughout the process, enabling all parties to air concerns openly.

"With the financial security of so many at stake, we need to find practical and workable frameworks in place to ensure both parties can raise areas of concern without fear of negative repercussions further down the line," he said.

"Very often, raising concerns early on can prevent more serious issues later and it is essential that we find a way to express worries about governance as soon as possible in the process."

First published 17.03.2017