Do trustee qualifications make a difference?

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Trustee qualifications have become more prominent with the accreditation of professional trustees since 2019 and this year that of lay trustees. How are trustee qualifications viewed, and can they help trustees with their careers? 
 
Trusteeship was, for a long time, an oddity in the financial sector; people with no prior experience of investment or capital markets could be in charge of large sums of money that were not theirs, tempered by external advisers and managers supposed to provide technical know-how but without any fiduciary duty to act in members’ interests. 
 
More recently, the global financial crisis and corporate scandals like BHS and Carillion may have created a view among regulators that trustees were a weak link, meaning that as well as pushing for tougher legislation, the Pensions Regulator has been supportive of the professionalisation of trusteeship, at one point even floating the idea that having a professional trustee on every board could become a requirement. 
 

Lay trustees feel under pressure 

 
Lay trustees have felt under pressure ever since. And although they are enshrined in law, there is nothing to stop an employer appointing a sole trustee, which is usually a professional trustee firm, a solution that enjoys popularity with sponsors. 
 
The Pensions Management Institute has, as a result, come forward with a qualification for lay trustees provided by the PMI. The PMI’s director of policy and external affairs, Tim Middleton, said the Association of Member Nominated Trustees and the PMI had many conversations about a possible MNT qualification in the wake of the new accreditation regime for professional trustees being brought in; the PMI then adapted the exam for lay trustees, which is very similar to that for professionals except for the fit and proper test. 
   
    
“The qualification is a recognition of the skills they are required to have,” said Middleton. By law, all trustees must demonstrate knowledge and understanding of pensions, he pointed out. “What we now call the first part of the certificate in pension trusteeship is very much focused on what trustees a supposed to have according to [the Pensions Act 2004],” he said. 
 
The exam is a way to “separate the wheat from the chaff” he believes. “TPR has long been concerned that there are too many trustees who don’t pull their weight and don’t have the skills they need,” he said.  
 
Middleton played down industry concerns that the qualification could act as a barrier for lay trustees, who in some cases are already difficult to recruit. He pointed out that the lay trustee exam is voluntary, adding: “If a scheme sponsor appoints somebody to be a trustee and says, ‘We’d like you to do a qualification’, if that individual sees the qualification as a barrier you have to ask why. If they are good enough to do the job, getting the qualification should be little more than a formality.” 
 
As the lay trustee exam is almost identical to the one that professional trustees sit, he said it could also serve as a potential avenue into professional trusteeship for lay trustees, something the AMNT has been keen to explore. 
 

Trustee qualifications will become ‘more, and more demanding’ 

 
Qualifications on the whole will become “more, and more demanding”, Middleton predicted, because the accreditation system for professional trustees is partly based on the Australian system, where those who run large superannuation funds are required to be qualified. 
 
“If you look at the direction in pensions, it’s moving away from the traditional British thing of having a large number of tiny schemes, and to consolidation,” he said. A pension system with a small number of large funds, such as defined contribution master trusts, means those in charge of them should be able to demonstrate relevant knowledge and experience, he argued. 
 
The number of qualified trustees is still small, he said, but added that there “is a clear tendency” towards chairs of trustees having a qualification.  


 
Pensions is still lagging far behind other financial services in terms of diversity – data from 2016 shows that 83% of scheme trustees were male, with a quarter of boards being 100% male, while a third of trustees were over 60 years old.  
 
Some might hope that exams could provide an avenue to recognition for those outside the group of mainly older white men. Middleton argued that this “isn’t really something exams can help with” yet believes that creating more diverse boards will be easier if appointments are more about “demonstrating competencies rather than who you know and went to school with”. 
 
    

Can an exam reflect what trustees bring to the table? 

 
Not all trustees agree that exams are key, however. Neil McPherson, managing director at trustee firm Capital Cranfield, said the components of the professional trustee exam, except for the soft skills exam, were already part of appointment processes before accreditation was brought in, and it is now a given that well known trustee firms will make their new hires take the exam. 
 
For McPherson, qualifications are not linked to diversity. He did not agree “that it’s a closed shop and it depends on who you know”, and said the industry needs more experienced trustees rather than more qualifications. “Trusteeship, particularly as chair, is experience and judgment. You can’t short-circuit experience and judgment,” he said.  
 
He admitted that the average trustee is getting younger and more diverse but believes this is “to do with more people wanting... to take a career change and embrace trusteeship because there is more demand for trusteeship”. 
 
Trusteeship must not become commoditised and live in a ‘tick box’ environment, he argued, as that could have unintended consequences, not least for lay trustees. “It's difficult enough to get lay trustees to stand anyway. If they feel they have to pass an exam that may make it even more difficult to attract them,” he warned. He also noted that the exam comes at a fee, thereby “monetising lay trusteeship, which I'm not sure is a positive step”. 
 
Introducing a qualification fails to recognise what lay trustees bring to the table, he also found, such as knowledge of the sponsor, the scheme and its members rather than pensions technical knowledge, which can be provided by advisers. “I’m confused as to the value [the qualification] is going to add,” he said. 
 
Some in the AMNT agree with McPherson about the fees potentially creating issues. “The cost of doing it – hundreds of pounds – would put off most people if they had to pay for it themselves, which they would probably have to if they sat the exam before being elected or selected as a trustee,” said AMNT co-chair Janice Turner. Each of the two required PMI exams currently costs £450 for non-members, and accreditation is another £300 excluding VAT, as is the renewal fee. 
 
Turner also pointed out that the PMI appears to require people to be trustee members in order to be allowed to sit the exam – implying they may need to be trustees already. “So it's highly unlikely that the new accreditation will make any difference at all to bringing new trustees in,” she said. 
 
Still, she said the AMNT does welcome the new accreditation for lay trustees because “there has been a push against lay trustees over the last few years”. 
 
"The new accreditation enables lay trustees to prove they are of the same standard as professional trustees,” Turner added, an assertion that would appear to back up the view of some lay trustees that they should be able to become professional trustees. 
 

Experience seen as more important

 
However, it is not clear if a qualification without a pensions industry background can pave the way into professional trusteeship - particularly given the weight that professional trustee firms put on having this background. 
 
“Qualifications don’t give a new arrival an automatic entry into the market and it’s probably not possible to exam your way into it if you lack other attributes,” said Richard Butcher, managing director of trustee firm PTL. 
 
“The counter point to this is diversity. Some boards are actively looking for diversity candidates and if they are genuine about this, that can mean they want people with no preknowledge. In that context, qualifications could be a bad thing for some new arrivals,” he opined. 
 
For professional trustees, qualifications are merely “a hygiene factor”, said Butcher, especially at the upper end of the market, where competition might make them an implicit prerequisite where a client is looking for a professional trustee. 
 
The current qualification standards are just a “baseline”, said Paul Battye, chief executive of recruitment firm Hoffman Reed, and don’t guarantee that a trustee is good at their job. 
 
“Trusteeship is probably one area where aptitude and experience count for more than the qualifications,” he said, and involve judgment about the “leadership skills, influencing skills and capacity to commit the requisite time to the role” for a candidate. This means a trustee search should be more like an executive search process than a 'request for proposal' exercise, he argued. 
 
“Lots of people in pensions want to work in independent trusteeship but not that many succeed - that is because of the need for a very wide and deep skill set and a particular ability to blend these skills with genuine C-suite level communicating, influencing and negotiating.  This sort of ability cannot really be distilled into an exams structure,” said Battye. “If people who want to be a trustee that have thus far been frustrated are hoping that the qualifications [and] accreditation will open up the market for them, they may well be disappointed.”  
 
Is the growth of trustee exams and qualifications a good or a bad development in your view?

David Weeks
Janice Turner
Tim Middleton
Neil McPherson
Richard Butcher
Paul Battye