“I'm not sure that trusteeship could ever be called a cottage industry,” said Mike Smedley, a partner at Isio, speaking at a Pension Playpen webinar. “But if it ever was, it's not now.”

Firms now have revenue targets and sales and marketing structures as they have become more commercial, with increased differentiation of business models and approaches splitting the market into: ‘focused’ firms with a pure trustee role; ‘integrated’ firms, which are those that emphasise a packaged solution/one-stop-shop approach; and “hybrid”, that have a mixed client base or service offering that fits either or both classification.

 

The three largest independent trustee (IT) firms – Dalriada, IGG and Vidett – are now all private equity backed. 

Meanwhile, two of them – Dalriada and IGG – saw the greatest increase in net IT appointments, both taking on considerably more positions than LawDeb, the next in line. 

Despite define benefit (DB) scheme numbers falling, the 10 firms surveyed have increased their market share to 39% last year, from 31% in 2020, the first year of the survey. 

The real growth has been in is sole trusteeship, making up 46% of all appointments (41% in 2020). Meanwhile the influence of these firms also increases, with more than three quarters of appointments being as sole trustee or chair of the trustee board.   

 

Smedley was asked about the potential for poor governance and conflicts of interest at scheme where growing influence have given firms sole trusteeship and/or scheme secretary roles. 

“We all know, there are conflicts, but it's about how they're managed. But it is particularly difficult for finance or HR directors to determine whether things “pass the smell test”, particularly sole trustees,” said Smedley.  

It is hard enough for FDs and HRDs to assess the cost against delivery, but the finance director has typically given the scheme to a sole trustee firm because they haven't got the time or inclination, said Smedley. 

“They don't really care who does it all, provided it all happens and the price looks alright.” 

 

Sole trusteeship better than the alternative 

While the Pension Regulator has spoken of taking the professional trustee in hand, Smedley  believes it will fall far short of seeking to authorise or endorse firms, instead putting in place a “light touch” framework. 

“The regulator will tell you about the horror stories where putting a professional trustee firm in is 50 times better than what was in place before,” said Smedley. 

Instead, he sees the regulator engaging with trustee firms to understand them better, the potential for a trustee register, and voluntary accreditation such as those offered by the Association of Professional Pension Trustees (APPT) or Pensions Management institute (PMI).

David Fairs, a partner at LCP and former executive director of regulatory policy, analysis and advice at the Pensions Regulator believes the regulator may be surprised at the growth in professional trusteeship and that the industry will receive greater regulatory oversight in this area.

“I wonder if it is easier to regulate the trustees and the decisions they make rather than regulate every aspect of the schemes’ operations,” said Fairs. 

He believes the regulator will try to supervise schemes, get a better understanding of how they operate with sole trustees, make decisions and deal with risks and failures. 

Fairs said that it was “inevitable” that the DWP will have to introduce legislation for TPR to have regulatory oversight over the trustees, but believes the firms will embrace it.

“You will see more regulatory oversight in this area,” added Fairs, “but most of the firms will welcome it.”