Lots of people are talking about sole trusteeship. And rightly so – there is a lot to talk about. Although it is often talked about in one of two ways – either as the poor relation to a full trustee board or as a solution to today’s increasingly complicated challenges. But the premise of being a poor relation is just not true when executed well (which to be fair, is not always the case). The second is why we are seeing it more and more, as reinforced in AON, Kempen and WTW reports, with more than one-third of trustees and sponsors noting that sole trusteeship may replace their existing board in the coming years.
As pension scheme membership ages, the ability to find member nominated trustees who are keen to take on the ever-more complex and demanding role is becoming increasingly difficult. And as sponsors are focused on an uncertain economic environment and need to focus on their core business, diverting key individuals from within the business to focus on the pension scheme feels unproductive to many, especially in the context of redundancies which has become distressingly common now. So the existing trustee board model no longer works for some sponsors.
Then there are those sponsors who see the pension scheme as a legacy issue and just want it fast-tracked in an efficient and risk-managed way to the chosen ‘end game’. The sole trustee model is one of the tools available to trustees and sponsors to facilitate that, from a toolbox that includes fiduciary management, master trusts, capital-backed journey plans, consolidators, insurers and undoubtedly other new and innovative solutions due to be unveiled. Sole trusteeship sits in that mix as one of the more versatile tools, but not without its flaws.
But first – let’s change the name. If there are schemes that have a single person acting as the trustee, let’s not legitimise that approach by making the name of it sound like it is a valid approach. All the good independent trustee firms have teams of people responsible, and they have the ability to reach out to a diverse set of co-trustees when an issue arises. The processes around that and the quality of execution of the role varies, but nobody is content saying a single person should be making big important decisions by themselves. So let’s call it something like an ‘outsourced trustee board’. Perhaps someone more creative can come up with a better name, but really, that’s what we should be talking about when we talk about sole trustee. Some in the industry use the term ‘sole corporate trustee’, but I don’t think that goes far enough and can still evoke images of a solitary person. And actually, I think changing the name is important, as it moves the conversation away from picking holes in the concept, and instead gives firms a means to demonstrate how their specific approach can help address or solve specific scheme issues, either in combination with the other tools or instead of.
Secondly, done well, the outsourced trustee board should be everything a normal trustee board should be, but with some key advantages; namely professionalism, efficiency and economies of scale. It should mean that small schemes are run like big schemes, with access to the best advice, data and opportunities. It means benefitting from having a diverse board, with a selection of different views, experiences and perspectives being applied to key decisions, and those decisions being challenged. It means focusing on great member outcomes, whilst recognising all stakeholders.
Don’t get me wrong, if you have a great board in place already that is diverse, engaged and decisive, then without any other catalyst for change you should probably keep doing what you are doing – because the outsourced trustee board does have some challenges – most notably the loss of a direct link to the membership. But like the other challenges, this can be countered or at least offset through things like great member communications or most importantly – just talking to the membership – by holding open Q&A sessions, inviting members to contact you directly, or just picking up the phone when something has gone wrong or a member is going through a key point in their retirement journey.
Which leads me to my third point. In my view, whether we call it sole trustee or outsourced trustee board, firms operating this service need to be held to greater account by both sponsors and members than they do today. Not in terms of meeting regulatory requirements and ticking governance boxes – they do that just fine. But rather stakeholders should measure the success of the strategy, the value the outsourced board is adding, and they should see the member experience improve. To do this, the service needs to continually evolve and develop. As a consolidator, the outsourced trustee board should drive great outcomes by setting clear strategic objectives, extracting any potential marginal gains and economies of scale, using its buying power to demand the most sophisticated services for even the smallest schemes, and embracing technology and data, all whilst maintaining the bespoke approach that sets it apart from some of the other tools available.
Done properly, the outsourced trustee board is not a single product or solution; it’s certainly not a single person or small team making big decisions. The outsourced trustee board is a holistic, professional and bespoke approach to helping a scheme reach its specific end-game more efficiently than might otherwise have been possible, and it credibly stands up alongside the other options out in the market. The outsourced trustee board increases the potential that sponsors and schemes keep their promises to members. 20-20 Trustees has invested the resource to epitomise and constantly evolve how it should be done. I am excited about the next chapter.