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Five tips for trustees when re-tendering for fiduciary services

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Since the CMA published its final order into the Fiduciary Management market in June, trustees with Fiduciary Management arrangements have been digesting the impact for their schemes and reviewing their next steps.

These are my five top tips for trustees considering re-tendering for Fiduciary Management services.

1. Legal duties

The first stage is to understand what you need to do.

If you appointed your Fiduciary Manager before June 2019, without carrying out a competitive tender process and more than 20% of your scheme’s assets are invested in a Fiduciary mandate, you will need to carry out a competitive re-tender exercise.

The timescales to carry out the re-tender depend upon when you first appointed your Fiduciary Manager:
(i)              More than five years ago, or if the five-year term is reached within the next two years, you must carry out the exercise by 10 June 2021;
(ii)             In all other cases you must complete the re-tender within five years of initial appointment.  
If you are unsure if your original selection process meets the requirements of a competitive tender exercise, you should ask your Fiduciary Manager to confirm their understanding to you. In fact, they may have already written to you regarding this.
To date the focus has been on those schemes who did not make an appointment as part of a competitive tender exercise. However, even if you did carry out a tendering exercise when first appointing your Fiduciary Manager, trustees should periodically consider if re-tendering is in the best interests of the scheme. This will help ensure you continue to receive value for money.

2. Where to get help?

Once you know where you stand in terms of the timescales to carry out a review, the next step is to consider what support you need.

The Pensions Regulator (tPR) has published guidance for trustees to support them in tendering for Fiduciary Management services. This is a useful first step for trustees.

If you have an independent trustee appointed to your board, they may be able to assist further, or you may consider appointing an independent investment consultant who specialises in Fiduciary Manager search and selection. The advantage these approaches bring to schemes include (i) an overview of the whole Fiduciary Manager market; and (ii) a wider understanding of any changes in the market since your initial appointment was made.

Independent advisers, whether trustees or investment consultants, can help you find the right partner and ensure the claims made by the Fiduciary Managers can be validated and compared fairly, as well as assessing fee proposals side by side for consistency.

3. What do you want?

The need to re-tender gives you an opportunity to sit back and consider what you want from your Fiduciary Manager for the next five years. You may be pleased with the services and performance that your Fiduciary Manager has provided to date, but how has the pension scheme developed during this time, and what are your needs for the future?

Taking time to consider your journey plan and objectives will help you select the right partner to support your scheme’s goals.

4. Record keeping

I can’t emphasise this point enough. You must keep a record of the process you follow, not just the shortlist of managers you interview and the ultimate decision you make.

The first part of your planning is to document trustee discussions and requirements when setting your objectives and goals. Next, record not only the invitation to tender request that you issue, but also how you produced the document around your specific objectives and goals. It goes without saying that you will record to whom you send the invitation and the responses you receive. Then you’ll need to apply your scorecard to shortlist the responses before interviewing three or more managers.

Recording and evidencing your competitive re-tendering process will also give you a template to follow for future exercises. But make no mistake, this is a detailed undertaking and one you will want to get right, so you will need to make sure you assign adequate time and resource to the process!

5. Things you can’t measure

There are things that are harder to measure. All advisory appointments are built on a foundation of trust and you will need to feel confident that you can build a relationship with the Fiduciary Manager. One of my key metrics for trustees is to assess whether the Fiduciary Manager listened to you during the ITT process and interview, or did they just tell you what they thought you wanted to hear?

Amanda Burdge
Partner and Head of Investment at Quantum Advisory