Independent trustee lays down the law

Trustees of pension funds have major responsibilities. While much of their day-to-day work is outsourced to external suppliers and professional advisers, getting that work delivered to the desired standard is not always straightforward. Hence the growth in professional, independent trustee services where you appoint somebody from the pensions/investment world to sit on your trustee board to help you focus and stretch your suppliers (the old ‘poacher turned gamekeeper’ device).

Here’s a recent tale of a pension scheme trustee board in just that situation. They had become greatly concerned about the quality of external input they were receiving. Their admin provider creaked. Their actuary was impossible to understand. Their legal advisers had the meter running at a rate they could not afford. And the worst culprit, their investment consultant, simply could not deliver any work on time.

 A top independent trustee — we’ll call him Terry — was appointed to help the trustees get tough. He had a reputation for getting what he wanted. At his first meeting, the investment consultant — Sara — also attended. She was very experienced and could talk eloquently about the subject matter in hand. Alas, the trustees were unable to get much out of her input as Sara’s jargon-heavy presentation was based on a thick report the trustees needed to have fully digested in advance. Alas, that hadn’t been possible — because Sara only tabled the report at the start of the meeting.

 Terry was not impressed. “Papers should really be issued 10 days before a meeting,” he said. “The trustees can’t be expected to make decisions on investing millions of pounds without having had a chance to read the papers first!”

 With little defence, Sara shrugged and looked at her sheepish assistant (who squirmed — he had probably produced the late report). “Sorry,” she said. “We’ve been very busy.” With that she left the meeting. A week later (bang on time) her invoice for £3,500 (plus VAT and disbursements) arrived.

Cut to the next meeting, three months hence. Sara and her sidekick turned up to advise on the performance of the trustees’ selected investment managers. But no papers had been submitted in advance — once more, the report appeared at the meeting. Terry hit the roof. “This is a disgrace! You get hefty fees and we expect you to provide the necessary reports in good time.”
Sarah smiled nicely, but this time her apologies and claims of being “too busy” had little traction.

Terry had had enough. He insisted the investment consultant’s contract with the trustees be changed to state that all investment reports must be issued at least five days prior to a meeting. If not, Sara would have to forfeit her fee. Terry was pleased with himself as the consultant was now finally on the hook to provide a decent service.

 Three months passed … the next meeting came … no reports. Terry’s blood pressure hit a lifetime high as Sara strolled into the room, sat down and smiled. She calmly dished out the reports and started to make her presentation when a furious Terry thumped the table. “Stop!” he thundered.
 “Excuse me?” said Sara.
 “Our papers are late! Late. Again! You are required to get them out five days before the meeting!”
 “Not true,” said Sara.
“The contract says we can table them late if we don’t charge. We’ve been busy. I’m doing this meeting for free.”

Steve Delo is the President of the Pensions Management Institute and Chief Executive of PAN Governance LLP. He can be contacted at stevedelo@pantrustrees.co.uk or 01737 222402.