How Much Are You Paying Your Asset Manager?

A new UK-based study sheds light on some important knowledge gaps among pension trustees – not about complex investment approaches or products, but fees.

The research, from Willis Towers Watson’s Asset Management Exchange shows that more than 80% of pension trustees in the UK have low confidence about the clarity of costs incurred by asset managers in the areas of investment, trading and operations.

Operational and trading costs are one of the biggest blind spots for trustees in this survey – 86% have little or no confidence in these costs.

A few other key findings – Less than half of trustees think their asset manager delivers value for the money paid in administrative costs.

Two thirds are worried about money being directed to unnecessary costs – and 88% point to fees as a top factor when selecting an asset manager.

Despite advancements in technology, 43% of respondents say they must spend more time monitoring their asset managers.

At the same time, what the study seems to reveal is a lack of understanding about what some fees involve – trading and operation fees for example.

The report itself calls for standardization as a solution – that would allow trustees to monitor their investments and costs across the board with a greater level of confidence. At the same time, as the research points out, only one in five trustees think it’s safe to have numerous asset managers with their own governance models – and only 33% think that giving control to numerous managers is sustainable.

I’d be interested in knowing whether these concerns extend to Canadian pension trustees – my gut says yes. And if that’s the case, then it’s probably time to have an enhanced and more transparent conversation about asset manager costs at the boardroom table.

After all, if we want to encourage a sustainable and long-term approach to manage pension assets, a clear talk about costs is a big part of the discussion.

You can access the report here.