A survey of more than 100 pension scheme managers and trustees found a high proportion of schemes do not seek independent monitoring of their fiduciary manager.

The survey, by independent consultant LCP, found one fifth of respondents appointing a fiduciary manager use an independent adviser to review and monitor their performance.

LCP found that although 63% of respondents received advice from an independent third party of which fiduciary manager to appoint, only 20% received third party advice on monitoring the continued performance of their scheme's fiduciary manager.

This leaves many schemes without independent oversight of the appointed manager which, LCP says, means they are in unchartered territory.

The survey also showed that 41% only considered one fiduciary manager, and that 79% of respondents said the main challenge they face is being able to identify a suitable replacement or managing the complex transitional process to another manager.

Clay Lambiotte, investment partner at LCP, said the shortfall of independent oversight was worrying.

He said: 'The lack of independent oversight of fiduciary management is clearly a growing concern."

"Whilst this can be an attractive form of investment delegation, managers and trustees must not overlook the pitfalls.

"There can be inherent conflicts involved in the process – whether due to fees and assets under management, or simply a lack of oversight."

The survey also found schemes wanted a change in regulation – 57% of respondents said they wanted to see a change following the FCA review of the asset management industry.

More than half of these people would like to see new regulations or disclosure rules around the selection process of fiduciary managers, while a third want to see a requirement for independent firms to oversee advice provided by the fiduciary manager.

"The FCA review has a wide remit, but it is clear that scheme managers and trustees want more regulation and transparency over fiduciary management," said Lambiotte.

First published 02.09.2016

Lindsay.sharman@wilmingtonplc.com