Pro trustee trend continues with sole trustees in high demand

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Trustee firms are “recruiting heavily” as professional trustee appointments grew by 11% in the past 12 months amid a surge in demand, one consultancy has found – with nearly half of all professional trustee appointments being for sole trusteeship.    

This year’s Professional Trustee Survey by WTW shows appointments grew by 11% in the past year, while corporate sole trustee contracts went up 14%. The survey covered 15 of the largest trustee firms and nearly 2,500 professional trustee appointments. 

The group was led by Vidett with 412 appointments, followed by Independent Governance Group with 378. Both were formed last year through merging two existing trustee firms. Dalriada and Capital Cranfield came third and fourth respectively in terms of appointments, according to WTW.
Source: WTW
"The growth in professional trustee appointments across all areas has continued at an impressive rate, underscoring a pivotal shift in pension scheme governance," said Richard Campbell, senior director in WTW's professional trustee group, who expects the trend to continue.  

The increase in appointments means half of the UK’s defined benefit schemes now have a professional trustee.  

The report authors also note that almost half (48%) of all the appointments were for corporate sole trustees. Among schemes with less than £25m in assets, sole trustees accounted for nearly three-quarters (73%) of all appointments. Two-thirds (67%) of sole trustee appointments include a lead assisted by one other professional trustee, while 20% have a lead assisted by two or three other professional trustees, and 13% have two joint professional trustees leading.

Apart from sole trustees, other appointments were divided with 27% of new appointments being for trustee chairs and 25% for co-trustees. 

High demand for trustee services means firms have been busy recruiting. According to WTW, there are more than 380 professional trustees in the UK market, a 15% increase in the past year, albeit with considerable variation between firms.   

Trustee firms are casting their nets wider in looking for new trustees as demand has increased. Although 29% have actuarial and consulting backgrounds, there are now 21% with HR experience, 13% come from finance, 13% are lawyers, a further 13% have investment backgrounds and 3% have covenant experience. 

Professional trustees show greater diversity of protected characteristics than trustees overall, with 42% being women, compared with just 28% among trustees generally. About 91% are white, compared with 96% in the trustee population, and the median age of professional trustees is 51 – 10 years less than for trustees overall. 

The growth of the professional trustee industry, where companies are increasingly backed by private equity firms, has not gone unnoticed by the Pensions Regulator. Last month, TPR said it would work closely with some of the largest professional trustee companies to promote good governance. The regulator is also planning to collect data and create a trustee register.  

TPR has found that more than half of schemes with more than £5m in assets use a professional trustee from one of just 13 different firms, raising concerns about concentration risks.  

Its chief executive Nausicaa Delfas said in March that "whilst these firms bring expertise, the number of independently minded people making decisions for savers has decreased massively”, calling today’s pensions landscape a “concentrated, commercialised marketplace of complex financial institutions”.
What does the changing trustee landscape mean for governance? 

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