I am going to generalise here… But I think the current adviser model is largely broken and failing most Trustees’ needs.

 I will start with the actuary. The role of the pension scheme actuary has diminished over the years. Many of their calculations have been automated, and when the sponsor and Trustee Board are increasingly working together on solving for a Long Term Funding Target (“LTFT”), a “traditional” funding negotiation where actuary and sponsor are at two ends of a spectrum and both refuse to budge, is simply not helpful or in anybody’s interests but their own. Consequently, a lot of what an actuary does now is sell “liability management” exercises or convince you to buy-in (sometimes ill-advised) en route to the chosen LTFT.

The role of an Investment Consultant has morphed somewhat as well. If you work for an organisation that has a fiduciary business, your job is now selling fiduciary. If you work in an organisation that does not have a fiduciary business, you are desperately trying to protect your revenue from fiduciary by selling fiduciary oversight, trying to retain responsibility for parts of the portfolio (e.g. liability-driven investment and credit portfolios – “How can a fiduciary manager add value there?” you will hear them chime), or just outright discrediting fiduciary.

And it is not to say that Trustees do not need all of those things, but it is more about how the advice is delivered and the motives behind it. It is widely acknowledged that most Trustee Boards add value at the strategic level, but consequently, trustees find strategy discussions being dominated by trying to prioritise the sales ideas of their two most trusted advisers. And on top of that, they are not adequately discussing the strategic issues where their most trusted advisers don’t have something to sell or an area where they are not up to speed, like covenant and Environmental, Social and Governance (ESG) issues.

But there is some light. Where my advisers perform the most effective role is where the best ones have evolved into being the scheme’s single strategic adviser – being able to talk across actuarial and investment matters, as well as covenant. They take a step back and help Trustees prioritise the activities that give them the biggest ‘bang for buck’, or most effectively manage their overall risk. Some argue that the Independent Trustee should perform that role and I don’t disagree with that. In fact, 20-20 Trustees have a great track record of achieving fantastic outcomes by taking on the role. But the reality is that the whole decision-making framework would be more robust and effective if the Independent Trustee could instead challenge the advice of the strategic adviser, or provide an alternative view, rather than separating squabbling trusted advisers who are arguing about whose sale/product/idea is the most important. It sounds far-fetched, but I have witnessed this first hand.

The role of a Trustee is largely that of a Risk Manager. So a single trusted adviser that can help your board interpret, understand and navigate the maze of interconnected but disparate risks that sit within Actuarial, Investment and Covenant, is a rare gem. If you have that rare gem, together with an engaged sponsor/sponsor’s advisor, and a fully functioning and engaged Trustee Board which can leverage the cognitive diversity of the room, you are laughing your way to the bank (or LTFT).

So what is the point of this? 1. Most advisers need to up their game. And 2. Next time you undertake an adviser review, don’t review your actuary or investment advisor. Review and appoint a strategic adviser who can help you think about and manage risk holistically, with the aid of a really good and engaged covenant adviser and other specialists as required, fantastic data feeds covering all aspects of your scheme and a robust monitoring and oversight function.