Criticism of fid man selection and transparency is unfounded

In my experience, the vast majority of trustees do go through a form of fiduciary manager selection exercise – mandates are not being awarded ‘on the quiet’.

Fiduciary fees are very much dependent on the solution and therefore can differ significantly between providers

One fee would not fit all schemes. One of the key benefits of fiduciary management is the total tailoring of the solution to suit the unique needs and objectives of a scheme.

The fee charged is very much reflective of that solution; the elements and services included such as flight planning and asset allocation, the growth versus matching split, and the underlying investments and instruments used.

Fees are actually very transparent, particularly with an unbundled approach. This is where they are all shown separately: provider fees, underlying manager fees, investment consultancy fees and others such as custody or administration.

This approach gives much greater clarity on where costs are incurred. It also allows providers to show clients where they have made fee savings, for example through asset management fee negotiations.

Cost is not uniform

Asking the price of fiduciary management is like asking how much a house costs. The features, location, size, age and so on all impact how much you would expect to pay.

Like trustees, housebuyers also have a list of key criteria – an additional bedroom, for example, may be a 'nice to have' but you wouldn't want to pay more for it.

Fiduciary fees are very much dependent on the solution and therefore can differ significantly between providers, and between solutions offered by the same provider.

This makes comparing fiduciary provider fees difficult. However this is not because they are opaque. First and foremost, trustees should determine what they need, what their objectives are, and their ultimate end-goal, and therefore what their ideal solution looks like.

After that they should look at the solutions available and the fees involved; the most important thing is to ensure you are comparing like-for-like. Where the offerings do differ, it is important to understand how, the impact this has on fees and if you are willing to pay for any extras included.

As fiduciary solutions are bespoke to each client it is totally inappropriate to compare directly just the headline performance of providers. The mandate in place must be considered in terms of, for example, the investment objective, hedging levels, permissible asset classes, operational parameters etc, as all of this impacts performance.

Performance is not opaque

Trustees need to agree at the outset what success looks like so they can assess the manager along the journey.

They need to really delve beneath the headline numbers. However, this does not mean performance is opaque.

The quarterly reporting provided is actually more transparent than many schemes would ever have seen. It reflects the overall scheme position, including funding level updates, return on assets and liabilities, and the key drivers within this.

If trustees feel there is a lack of clarity around performance, they should question their provider on this. Then, if they are unhappy, perhaps they should consider an alternative provider.

Over the past six months, much has been much written about fiduciary manager selection processes and the supposed lack of competitive tenders. In my experience this is unsubstantiated.

Here, 100 per cent of our wins in 2013 were through a competitive process. Also, around 70 per cent of our fiduciary business since launching has come from pension schemes with which we had no previous investment relationship.

Our experience is that UK trustees are running selection exercises themselves and doing an excellent job of it. The competitive tenders in which we have been involved have almost exclusively been run as a joint exercise between trustees and scheme sponsors, and have been extremely well managed.

Sion Cole, is head of client solutions for Aon Hewitt's fiduciary business