On the go: Thirty-eight per cent of defined benefit scheme trustees are planning to review their manager before June, according to a poll from Hymans Robertson, creating the risk of a “capacity crunch” as the Competition and Markets Authority’s retendering deadline approaches.
The CMA’s rules, which came into force in 2019, require trustees to run a tender when appointing a fiduciary manager for more than 20 per cent of their scheme’s assets.
Hymans Robertson warned that the number of tender requests made as the deadline approaches could overwhelm fiduciary managers’ ability to respond to them, which the company’s senior investment consultant, Samora Stephenson, said “is a concern”.
“The purpose of the CMA’s call to retender fiduciary management services was for schemes to not only demonstrate good governance, but to ensure that fiduciary management provides value for money for the scheme. It is a concern, then, that more than a third of schemes are estimated not to have started the ball rolling on this,” he said.
The CMA deadline is an opportunity for trustees “to ensure they are getting the best from their fiduciary arrangements”, he said, and many schemes are already benefiting from activity “driven by” the regulator’s order.
“Trustees are also gaining a better understanding of what is driving their fees and costs. This retender process allows all schemes to question whether their evolving needs are being met, particularly key when the past 12 months will mean that some schemes are in a very different position compared with last year due to the fallout from Covid-19,” Stephenson said.
Tendering needs to be at the top of trustees’ agendas “over the next few weeks” if they want to “avoid a stampede of market activity ahead of June”, he continued.
“It can take up to two months to run an effective tender process from beginning to end and time is of the essence,” he said, adding that trustees who are compelled to tender their fiduciary mandates “should be starting these exercises in the coming days or weeks”.
“We really urge schemes to act now as not only will they avoid regulatory wrath, but there is the risk that waiting longer could lead to disappointment because trustees’ chosen fiduciary managers may be too busy to participate in tender exercises,” Stephenson said.
“Ultimately, rushed tender exercises are less likely to yield good outcomes.”
