The Changing Face of Professional Trusteeship

They have stressed that this might cover things like the ownership structure of those professional trustee firms, the skills and experience they have, how they’re able to cover that important diversity angle within equality, diversity and inclusion (EDI), as well as fees. TPR have also made it clear that they will be looking to start engaging with the Professional Trustee before Christmas.

Having provided independent trustees services to schemes for over 20 years, and having been a strong supporter of the professionalisation of trusteeship and Chair of the APPT working group on Sole Trusteeship, it is interesting to note that it appears from the commentary that increased professionalism may lead to reduced independence.

So from Pi’s perspective what lessons do we think can be learned from LCP’s recent research.

‘Professional trustees are becoming the new normal’

We can certainly confirm that this is the case, and also that more schemes are choosing a Corporate Sole Trustee (CST) arrangement. Here at Pi, over 50% of our appointments are CST appointments, often for different reasons, many of which were well documented within the research.

What is interesting is that whilst once this model was very much for smaller schemes, over the last 3 years far larger schemes with strong employers and theoretically significant support are also choosing this model. Whilst a CST can add value, it is also worth remembering that we can never know as much about the employer or the membership as employer and member nominated trustees so access to this level of historical input remains invaluable.

As Professional Trustees, working with our co-trustees also makes sure that we don’t get too caught up in the pension industry bubble.

‘Strong recruitment and investment in regional offices is vital’

There has certainly been a strong drive to recruit more trustees, and good to see regional representation and more diversity in backgrounds moving into trusteeship. Here at Pi, we broadened our geographical footprint with the acquisition of Align in Manchester, after previous acquisitions in Bristol and Birmingham. Getting new trustees up to speed and supporting them into the role is an ongoing part of development, even for very senior people in the industry.

‘Wider services are being offered outside the traditional trusteeship’

Possibly an area where we are seeing the greatest discussion, where do trustee firms draw the line on offering other services. With the continuing acquisition of other advisers, the demands of Private Equity ownership and the possible consolidation of risk (particularly in the CST model), it is perhaps surprising that TPR has taken this long to focus on the changed trustee market.

Whilst there are advantages to a fully combined service, here at Pi we think it is important that there is a clear dividing line between the role of advisers and trustees. This includes being free to work with the full range of advisers, including incumbents where we are newly appointed as Trustee. Understanding how the developments in this area impact upon governance in the short and long term will be critical. Just because you can do something – doesn’t always mean that you should.

‘More dedicated, streamlined, full-service Corporate Sole Trustee offerings are available to the smaller side of the market’

There is no doubt that streamlining scheme management services does offer good value for smaller schemes. Here at Pi, we have a streamlined governance model for all our CST clients, delivering the operational elements of scheme management frees up trustees and employers to focus on the strategic objectives. However, a full-service offering can lead to additional conflicts in the longer term and can mean that a bespoke offering, designed alongside advisers, can be an area where a professional trustee can bring together different stakeholders.

‘More M&A activity will continue this year for PT firms’

It will certainly be a challenge for smaller PT firms to keep up with regulation and business management. There is always room for a new entrant, as we have seen recently, where there can be a focus on working closely with your clients. Having grown from 2 to 59 people, the challenges come in running a business with the necessary framework to meet increasing regulation and complexity of compliance. We believe independent ownership will continue to be a strong business model and that mergers of like-minded firms and individuals will continue to be seen within the market.

Simone Lavelle is CEO of Pi Partnership and a Professional Trustee with specialist expertise in the design and review of investment governance frameworks.