LONDON (5 July 2018) – Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions, has welcomed the summary of recommendations released by the Institutional Disclosure Working Group (IDWG), for a framework to give more transparent and consistent disclosure of the costs of asset management incurred by investors.
Neil Smith, head of Performance and Cost Transparency in Aon’s Global Investment practice, said:
“Aon has been a strong advocate of all forms of transparency in the investment industry and we were among the first (of a still small sample) of fiduciary managers to make our client performance publicly available. We believe the imminent launch of these cost templates is another positive step in allowing institutional investors a clearer assessment of the value generated by their asset managers. As the use of the templates is voluntary we believe investment advisers, such as Aon, have a big role to play in ensuring their initial and continued success and particularly how advisers respond to non-compliant asset managers.
“The current procedures (as highlighted by the IDWG) within the Local Government Pension Scheme Code of Transparency of non-compliance, which results in non-renewal/inability to tender for contracts, is an approach we fully expect to gain wider traction. However, based on our own analysis, we anticipate that the vast majority of asset managers we work with, will adopt the templates – and led by those based in the UK.”
Neil Smith continued:
“The ability to access their costs information for the first time in a consistent format, across all asset managers and all asset classes, is just the first step for investors. The proposed level of information has never been so broadly available before. Understanding the importance, magnitude and value derived from the various cost elements will be important to ensure discussions are focused in the right areas.”
Aon has developed systems which, as well as providing a degree of education, will give its clients the ability to understand and analyse their own costs through various lenses - from the overall scheme down to individual manager level. Combining this information with cost assessment expertise, means that Aon’s clients will be fully equipped for discussions with their asset managers.
Neil Smith, continued:
“In our experience, institutional investors have struggled to gather and interpret the costs incurred in the management of their assets. As a member of the IDWG, Aon has seen at first-hand the hard work and co-operation among different stakeholders to standardise which costs are disclosed and the way in which it is done.
“This standardisation, combined with more granular information, means we are confident that the transparency of all costs to investors will be improved significantly. Aon will be adopting the IDWG recommendations and will set the expectation to adhere to them for all current and prospective asset managers who invest our clients' assets. We are sure that clearer and fairer discussions between clients, their advisers and asset managers will follow as a result."
For further information please contact:
Colin Mayes Marina Sanchez
01372 733689 07535 693214
Notes to editors
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About the Institutional Disclosure Working Group (IDWG)
In 2017 the UK Financial Conduct Authority (FCA) published its Asset Management Market Study. One of the key findings was that institutional investors find it difficult to get the necessary cost information to make effective value assessments. The proposed remedy was to convene the Institutional Disclosure Working Group (IDWG), a stakeholder working group with an independent Chair, with the objective to “gain agreement on (cost) disclosure templates for asset management services provided to institutional investors”.
A range of experts was selected and invited to join the IDWG with support from several observers and a secretariat provided by the FCA. Approximately 40% of the IDWG was drawn from the institutional investor community and its advisers, 40% from the provider community (asset managers) and 20% from independent experts with a range of
backgrounds and skillsets. The Group held its first meeting on 7th September 2017, agreed the Terms of Reference drawn up by the Chair, and was tasked with reporting its findings to the FCA by July 2018. Throughout the process the IDWG has engaged with industry stakeholders outside of the group, and the full report includes key issues of
debate and discussion. The IDWG reached consensus over the final templates and their recommendations in June.