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Industry Views: FCA review

Robert Davies, Partner at Quantum Advisory, gives his thoughts on the recently released report from the Financial Conduct Authority (FCA)…

Robert said: Fiduciary management can benefit pension schemes thanks to the economies of scale and efficient implementation it brings. However, issues can arise when there is no oversight of fiduciary managers, particularly when the fiduciary manager is responsible for setting the strategy.

An independent party overseeing the fiduciary mandate should be responsible for two things. One is the setting of strategy and the other is monitoring the performance of the fiduciary manager, which works as the implementation expert. Once you set strategy that reflects the trustees’ objectives, it is reasonable to expect the fiduciary manager to have responsibility for tactical asset allocation, manager selection and implementation of dynamic de-risking triggers.

However, I am worried that regulation could bring paralysis. Advisers are already regulated by their own bodies, so clients should be confident in the advice they give. But the industry could benefit from having best practice guidelines. An example of best practice could be hiring an independent firm to oversee the fiduciary manager. Possibly, the fiduciary manager should not be the firm that carries out actuarial valuations as well. I think a comply-and-explain regime would be better than regulation.

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