In trying to get the best outcomes for members, schemes may have to dump advisers from time to time. This can be costly, stressful and time-consuming, so what is the best way to ensure a smooth transition?
While it might seem an obvious first step to replace advisers who are failing to meet expectations, some suggest this should be a last resort, advocating instead working on improving the relationship with existing advisers.
More important than market testing is to refresh the relationship
Alan Pickering, Bestrustees
“More important than market testing is to refresh the relationship,” said Alan Pickering, chair at independent trustee company Bestrustees. “Often the current supplier might not be sufficiently well plugged-in. There’s a danger the trustees don’t realise that the adviser could do more or different things.”
Pickering said leaving one adviser for another risked a “frying pan, fire” situation, wasting time and money. “I’d rather improve what I’ve got,” he added. “The adviser can be a valuable part of the corporate memory.”
The premium placed on “scheme memory” was echoed by Lynda Whitney, partner at consultancy Aon Hewitt.
“It’s about making sure you have the knowledge extracted from the existing team,” she said. “No matter how good record-keeping is, there’s always something in someone’s head.”
She added advisers to the scheme may have the best sense of the scheme memory, having worked on it for the longest.
Whitney drew a distinction between switching different advisers, for example on the one hand lawyers, actuaries and investment consultants, and on the other, administrative advisers.
She said while changing lawyers, for example, requires monitoring statutory deadlines, it does not require communicating with a large section of the scheme staff or membership.
Whereas changing administration advisers can require communication with the entire membership and monitoring a number of small processes happening within the scheme.
“In a transition, the worst thing that could happen is you don’t pay your pensioners,” she said. When schemes decide to change advisers, experts suggested a few key considerations.
Claire Altman, client director at independent trustee company Capital Cranfield, said the key to recruiting new advisers was research and knowledge sharing.
“The more information you have, the better,” she said. “You want references, you want to understand the costs and the cost of transitioning. You want to know whether they offer fixed fee. The main thing is to ask as many people as you possibly can to get an opinion about them.”
Whitney recommended a focused approach to screening potential advisers. “Try and make sure you focus on the important things,” she said. “I like a few key pointed questions when I receive a tender document, for example what I think [the scheme] should be doing... over the next few years.”
She added more general questions such as what the adviser’s diversity policies are and other due diligence should be reserved for the preferred candidate.
Pickering advocated selecting the best advisers from different companies and making them work together as a way to overcome a silo mentality.
“Once you have a line-up, wherever possible they should work with the trustee as a team,” he said. “Bringing them in from different stables means you can get best-in-class in different areas.”
