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Musings

The CMA's Final Order

July 2019

The CMA has published its ‘Final Order’ following its investigation in to the Investment Consulting market. The key measures focus on tendering for fiduciary management services, improved reporting on fees and performance and an increased focus on setting consultants strategic objectives. The Final Notice, which details the actions consultants, fiduciary managers and trustees will need to take is largely consistent with the CMA’s Final report, as published in December 2018, but a number of items have been clarified. A few key points to note:    

Setting strategic objectives – any objectives set are expected to be reviewed every three years and after changes in strategy. Expected outcomes and timescales over which they should be achieved will need to be detailed.   

Tendering – where existing appointments have not been tendered and more than 3 years have elapsed since the appointment, a 2-year grace period applies. This means that tenders will need to be undertaken by June 2021. Where more than one fiduciary manager is used, special rules apply if trustees wish to increase assets to more than 20% with those fiduciary managers.

Performance reporting – investment consultants and fiduciary managers will need to report on the performance of recommended products on managers at least annually.

Reporting to the TPR - Trustees and service providers will be required to submit annual compliance statements confirming the extent to which they have complied with the requirements of the Order. The compliance statement will need to be accompanied by a certificate signed on behalf of trustees or the service provider. The first compliance statements will be required within 4 weeks of 10 December 2020.

Most of the remedies will come in to force on 10 December 2019.  Prior to December, TPR is engaging with industry stakeholders to develop its guidance, consultation will take place over the Summer. The Government plans to draft regulations this year with the aim of bringing changes into force in 2020 which will replace the CMA order. Once regulations are in place monitoring and enforcement will pass to TPR.

We remain broadly supportive of the remedies suggested by the CMA.  However, many schemes are already working on the basis set out by the CMA ie: regular competitive tendering is in place for all service providers, management information and objectives are clear, scheme specific and well-defined. For those schemes, the new remedies seem likely to add little more than an extra reporting burden.  Where schemes are not working on the basis set out by the CMA, doing so is likely to leave trustees better informed and better able to manage their investment consultant or fiduciary manager. However, the new rules will add to the significant investment governance burden already faced by trustees.

Transition is just the start (Barry's blog originally posted Mallowstreet)

July 2019

When changing to a new administration provider, there is often a lot of time spent making sure the transition is effectively and successfully delivered, and rightly so. A good transition is fundamental to the strong foundation from which to build a quality administration service. A bad transition is difficult to recover from and sets the service on the wrong path from the start. However, transition is only one part of the story; it is only the beginning…

Sustaining a quality service requires regular maintenance. A strong foundation is not enough to keep the administration in order over the long-term. But, like in transition, the responsibility for the maintenance of administration services lies with all those involved. It should be a partnership. Administration should be an area in which both sides communicate openly about issues, requirements, changes and any other matters that arise. For this to happen, there need to be regular meetings that build up good relationships and create an open forum for discussion. The meetings should involve the right people, who can make a difference to the service levels and create a realistic but proactive discussion dynamic.

There ought to be an annual plan of activities set out, for example to check up on the level of automation. As schemes change, automation can easily degrade. But this is just one area. All other activities that could be continually improved should also be considered when creating an annual plan, and the teams should be working together to prioritise and realistically plan ahead to manage expectations but still maintain the high-quality service. The annual plan is not just a checklist, but an opportunity to think constructively about the 12 months ahead. What changes are needed, what is possible and what is appropriate?

Reporting is required at a variety of levels recognising the difference between the day to day management that, say a Trustee Executive might undertake, and the higher-level information needed by the Trustee to fulfil their stewardship of the scheme.

How will the administrator be held accountable by the Trustee? Are the right people around the table and do they have the necessary knowledge to challenge? How are issues being addressed and what changes have been put in place to prevent a repeat?

If we were talking about investments, all of this would be a given. It all just sounds a lot like good governance. However, it is often the case that this good governance is not routinely applied to administration in a meaningful way. Consequently, the once solid foundations start to crumble as services change, schemes mature, automation lessens, and attentions fall elsewhere. For the administrator, their attention may be taken on new clients, for the Trustee, on seemingly bigger ticket items.

Administration warrants oversight to ensure that the energy spent in setting it up is not ultimately wasted. Effective oversight of administration will provide an early warning system for issues, allow for identification and mitigation of risks, deal appropriately with significant events and help to achieve Trustee objectives.

Viewpoints

Muse Advisory's response to TPR's trusteeship consultation response

18 September 2019

We have written to TPR to give Muse Advisory’s response to the Consultation on Trusteeship and Governance of July 2019.

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Muse Advisory's response to TPR's draft guidance on the CMA's Orders

23 August 2019

We have written to TPR setting out our thoughts on their draft guidance following the CMA's orders being published. 

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Oil and water don't mix...

24 May 2019

The Select Committee on the Big 4 and anti-competitive behaviours said “The culture of advisory services is about helping management; and the culture of audit is about challenging management. When combined in one large-multidisciplinary firm these two cultures mix like oil and water.” The same applies in the trustee world. The culture of advisers is to help trustees and pension managers; the culture of trustees is about taking advice and challenging advisers. When combined in one firm, conflicts may arise.

This article looks at the types of conflicts that may arise and practical measures to identify and manage conflicts.

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Guides & Tools

Professional Trustee Standards: Muse's View

We responded to the consultation on Professional Trustee standards. It's not an easy challenge to grapple with and we applaud the efforts of the Working Group so far. Read our full response here.

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21st Century Trustee - Roles and Responsibilities: Muse Views

The Pensions Regulator has published the first in their series of guidance on 21st Century Trusteeship. We have some thoughts on this, which you can read here.

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Case Studies

Conflicts of interest policy


TPR says you should have one. In fact, having one can be an education in itself and helps trustees to decide what actions to take when conflicts of interest are identified.  A well-governed trustee board will treat their conflicts of interest policy as a living document to be reviewed from time to time to consider new situations as they arise.

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TPR says you should have one. In fact, having one can be an education in itself and helps trustees to decide what actions to take when conflicts of interest are identified.  A well-governed trustee board will treat their conflicts of interest policy as a living document to be reviewed from time to time to consider new situations as they arise.

Many trustee boards are alive to conflicts of interest.  They are reminded of them when relevant at each trustee meeting either at the beginning of their agenda or just before the relevant item is being discussed.  This appreciation of conflicts has usually come about through articulating and sharing identified conflicts of interest, through regular training sessions on the subject and through self-aware advisers that are at pains to set out potential conflicts of interest in any advice they may be giving.  A good chair will also have the courage to call potential conflicts of interest out so that all the issues can be aired in a fair and transparent manner.

Risk workshop


Muse facilitated a workshop for the Audit and Risk Committee of this multi‑billion‑pound scheme as part of the introduction of a new risk framework. We walked the committee through a specific administration example to help them understand what their risks were, what their risk appetite might be, the controls they should have in place, how they would be implemented and by whom and how those controls could be monitored (administrator, trustee executive or internal audit) and reported on to the committee.

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Muse facilitated a workshop for the Audit and Risk Committee of this multi‑billion‑pound scheme as part of the introduction of a new risk framework. We walked the committee through a specific administration example to help them understand what their risks were, what their risk appetite might be, the controls they should have in place, how they would be implemented and by whom and how those controls could be monitored (administrator, trustee executive or internal audit) and reported on to the committee.

This scheme had an objective to deliver a quality, member-focussed service, that was accurate, consistent, efficient and responsive. However, its current administration service was only just improving after a period of under-resourcing, data and calculation errors, breaches and member complaints. A liability management exercise was muted which the trustees knew would impose greater volumes of work on an already fragile team.

Understanding their risk appetite was essential when the trustees subsequently came to making decisions on which projects to undertake. Was the risk of not committing to the liability management exercise on the scheme’s long-term funding position greater than the risk of a poor administration service in the short term? With this knowledge, the trustees were actively able to manage the right risks in the short-term and tweak their strategy to prioritise activities over the medium to long term.

News

The Future of Trusteeship and Governance

08 October 2019

In their current consultation, The Pensions Regulator (TPR) is moving further away from a one size fits all approach, towards one based on core trusteeship and governance standards for trustee boards to apply to their schemes and engage on with the employer. Julia Land and Ben Picknett write about how we welcome this as a direction of travel.

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Muse News - Management Changes

05 September 2019

It's been a busy summer at Muse and we have some exciting changes to update you on as we take the next step in our planned evolution.

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It’s been a busy summer at Muse and as autumn draws near, we have some exciting changes to update you on as we take the next step in our planned evolution. We have recently updated our management structure, which will ensure we retain our focus on clients, promotes the career development of our people and supports future growth. 

The change ensures that we retain our core values and culture and it also supports our intention to remain a leading independent specialist firm offering pensions management and governance advice and services. We are very proud of our reputation in the pensions market gained through the quality and professionalism of our people, the independence that differentiates us and the excellent relationships that we have built with many Trustees and advisers.

We are approaching our 13th birthday and will continue to operate in the same way that made Muse successful to date. The key changes are as follows:

  • Avgi Gregory steps up to become Chairman, whilst continuing to focus on client relationships, coaching, peer-reviewing and external relations.
  • Ian McQuade becomes Chief Executive Officer, with responsibility for the day to day business and continuing to work with clients across all our business lines. 
  • Barry Mack becomes Director, Consulting and Risk, with responsibility for our advisory services; ensuring that our consulting work remains fresh, professional and of excellent quality.
  • Lindsay Hawkins becomes Director, Trustee Executive Services, with responsibility for our growing Trustee Executive Services; which range from providing existing in-house teams with extra help when they need it, through to fully outsourced trustee support.

Avgi Gregory said: “I am delighted to be announcing the appointment of Ian as CEO, and Directors Barry and Lindsay with responsibility for the advisory and retained parts of the business respectively. This team has been managing the day to day business for quite some time and will ensure that Muse Advisory continues to be a great place to work but primarily a firm that will exceed client expectations.”

Ian McQuade said: “As always, we look forward to continuing our great service to our clients, by looking after our people, by working collaboratively with advisers and providers and by remaining true to our core values of quality, integrity and independence.”  

We would like to thank all clients, other adviser firms and friends in the industry for the support and trust over the years and we look forward to continuing our work with you.
 

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