LONDON (7 September) 2015 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has announced the findings of its annual Fiduciary Management Survey of UK pension schemes, which reveals that almost half the respondents now have a fiduciary manager to help them with increasingly complex investment decisions.
The survey, Aon Hewitt’s sixth and the largest and longest-running survey on the UK fiduciary management market, gathered the opinions of 230 pension schemes, with an estimated £181 billion of assets and representing around 10% of the defined benefit pension market in the UK. The survey covers 66 schemes which currently use fiduciary management services, with an estimated £60 billion of assets.
When asked whether they have a fiduciary management solution in place, 46% of the respondents answered positively. The adoption of fiduciary management has increased substantially over the last four years - only 18% of the respondents said they used fiduciary management when Aon Hewitt first asked this question in 2011.
Responses from the survey reveal that larger schemes are increasing their use of fiduciary management services with the strongest growth in this year’s survey coming from schemes with £1 billion or more in assets. 51% of the respondents within these schemes have now either full or partial fiduciary management, while in 2014 the figure was 22%.
Sion Cole, partner and head of European Distribution at Aon Hewitt, said:
“It has been a common misconception that fiduciary management is used mainly by small schemes. This year’s survey shows that while this remains the case for full fiduciary management, we are now seeing strong growth in take-up from mid-sized and larger schemes on bespoke mandates.”
“Last year 22% of larger schemes used fiduciary management services and this year’s results show a significant uptake, proving that schemes are recognising the benefits of delegating the day-to-day decisions on the portfolio and the fact that they see value in the wider range of bespoke solutions available.”
Measuring success based on scheme’s own objectives
As in 2014, the majority of respondents to the survey (69%) agreed that they would prefer to measure the success of their fiduciary provider based on the scheme’s specific investment objectives, rather than by using an industry-wide benchmark.
Sion Cole continued:
“There are calls in the industry for a fiduciary performance league table of some sort. We are not against this concept but believe if poorly constructed it could be misleading. Fiduciary management is a bespoke solution that varies between providers and within providers. Each pension scheme is also unique in terms of its size, make-up, investment objectives and beliefs, for example. For a meaningful comparison to be made both the parameters of the solution and the pension scheme characteristics need to be the same, or very similar, to draw sensible conclusions.”
Key survey highlights:
• Customer satisfaction with fiduciary management services remains high with 98% of respondents saying their overall experience is excellent, good or satisfactory.
• The main benefits of fiduciary management are cited as being the access to expertise as well as attention to risk and investments and ‘nimbleness’.
• The main concerns continue being costs and the difficulty in differentiating between providers.
• Schemes with assets of £500m or less are the most likely to opt for full fiduciary, while schemes with more than £1bn in assets are more likely to opt for a partial fiduciary management mandate.
• 58% of respondents would prefer to use a fiduciary provider linked to their existing actuary or investment consultant
• 74% of respondents would use face to face interactions to select their fiduciary provider. Selection processes continue to be used in combination, with 65% of these including beauty parades.
Aon Hewitt’s Fiduciary Management Survey 2015 is available upon request from firstname.lastname@example.org.
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