Schemes’ satisfaction with investment consultants remains steady, in-house expertise grows and consultants’ tenure shortens, finds NAPF survey | PLSA
Schemes’ satisfaction with investment consultants remains steady, in-house expertise grows and consultants’ tenure shortens, finds NAPF survey

Schemes’ satisfaction with investment consultants remains steady, in-house expertise grows and consultants’ tenure shortens, finds NAPF survey

05 March 2014
  • 80% of both DB and DC schemes would recommend their investment consultancy
  • Satisfaction with investment consultants lower in DC schemes than DB
  • Average consultancy tenure shortens by approximately one year since 2009
  • Growing in-house expertise among DB schemes, especially among larger funds
  • Only 30% ‘very satisfied’ with consultants’ stewardship capabilities
  • Consolidation means a few consultancies have a great deal of influence

The National Association of Pension Funds’ today (Wednesday) launched the findings of its third Investment Consultants’ Performance Survey. Encouragingly, results from the survey remained broadly in line with the findings of previous surveys (2008 and 2009) despite the challenging regulatory and investment environment over the last five years.

Over 80% of both defined benefit (DB) and defined contribution (DC) schemes would recommend their investment consultancy to a scheme with similar needs. The percentage of schemes who would recommend their investment consultancy to a scheme with similar needs was lower among DC schemes (80%) than DB schemes (86%)

Pension fund schemes, especially large ones, are taking steps to ensure they hold their investment consultants to account. A quarter (28%) of DB scheme respondents had in-house investment expertise and this grows to 48% of funds over £1bn size, but shrinks to 11% of funds of less than £250m. One fifth of those with in-house expertise had introduced this capability in the last four years; with 50% pointing to lower costs and a significant 25% reporting that in-house expertise helped to challenge consultancy advice.

Stewardship was a new topic to the survey this year. Only 30% of respondents were ‘very satisfied’ with their consultants’ stewardship capabilities, with 48% ‘fairly satisfied’ and 3% were ‘fairly dissatisfied’. This response rate was consistent across all scheme sizes.

Joanne Segars, Chief Executive, NAPF, said:

“It’s clear that overall pension schemes value highly the advice and expertise their investment consultants provide, although the difference in satisfaction levels between DB and DC schemes is something to watch as the number of DC schemes and assets in those schemes will grow quickly. The NAPF will develop a practical guide to help trustees properly evaluate their investment consultants’ service and encourage a structured approach to making sure this crucial link in the investment chain continues to operates in pension schemes’ best interest.

“The growth of in-house expertise over the last four years, especially for larger DB pension schemes, indicates that it is here to stay and we expect to see further growth, driven by schemes looking to lower costs and test consultancy advice. In the future we may see a more collaborative approach between in-house investment sub-committees and external investment consultants, especially among larger pension scheme funds.

“The level of satisfaction from schemes of their consultants’ stewardship capability is disappointing, especially as we know pension schemes have growing expectations in this area. This survey and last year’s NAPF engagement survey both highlight the need for a clearer and more robust procedure on stewardship to be put in place.”

Defined benefit schemes

DB schemes rated their consultants positively for:

  • Providing explanations of technical issues and clear communications for decision making;
  • Providing advice on fund manager selection and de-selection;
  • Providing proactive advice;
  • Understanding their scheme and sponsor’s funding preferences; and,
  • Providing well-researched and objective advice.

DB schemes - areas for development:

  • Only one third (35%) of schemes had a formal process to evaluate their investment consultants’ performance, with 22% of respondents having no process in place;
  • Only two fifths (40%) of schemes rate their consultancy as providing ‘very good’ or ‘excellent’ value for money – although respondents did feel fees were clear and correctly aligned with scheme objectives;
  • Fewer than half (48%) of the schemes interviewed were ‘fairly satisfied’ with the way their consultancy reviews and assesses stewardship capabilities of current and prospective asset managers;
  • Greater need for consultants to support dialogue between trustees and sponsor
  • Greater needs for consultants to recommend and deliver training; and,
  • Growing incidence in conflict of interest reported by schemes where consultants provide fund management and advisory services.

Defined contribution schemes

DC schemes rated their consultants positively for:

  • Understanding their DC schemes (88%);
  • Providing clear and useful written communication (73%);
  • The majority (83%) were satisfied with their consultants’ recommended approach for a default strategy; and,
  • Over three quarters (78%) were satisfied with their consultants’ advice on DC scheme design.

DC schemes – areas for development:

  • Overall rating of consultants by DC schemes lagged behind that by DB schemes;
  • Fewer respondents were satisfied on advice offered to members on the fund range and advice on pre-retirement investment options as compared to the advice provided on default strategy and scheme design;
  • 28% of respondents did not rate their consultancy as providing value for money; and
  • Almost one fifth (19%) of DC schemes took no advice from their investment consultant on investment governance.


On average the tenure of a DB consultancy shortened from 9.3 years (2008) to 8.2 years (2014). The average tenure of a DC consultancy is much shorter at 5.8 yearsas many DC schemes had only recently been set up.

Consultancy landscape

Some consolidation has taken place in the consultancy market over the last five years as witnessed by the findings that three large consultancies accounted for around 50% of all the schemes surveyed and the top six consultancies accounted for around 70% of the schemes interviewed. There has also been growth in niche consultancies that specialise in, for example, risk hedging strategies. Nevertheless, a great deal of influence sits in the hands of very few consultants in the largest consultancies.

The survey report will be available to pre-order at a 50% discount at the NAPF stand at the NAPF Investment Conference.


Notes to editors

The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.

The NAPF commissioned Populus to undertake the survey. 250 interviews were conducted by telephone between 24 January and 6 February 2014. The respondent sample was drawn from 716 NAPF fund members and was chosen to replicate the wider membership in terms of assets under management and the split between private sector and local authority funds. The telephone interviews were aimed at the representative from the pension fund who had the most regular contact with the investment consultancy engaged by the scheme. Where respondents used more than one investment consultancy firm they were asked to respond about their main consultancy arrangement only. The proportion of schemes interviewed with a defined contribution scheme had increased to over half (53%), but nearly all respondents had a DB scheme (96%) and only 4% of schemes had only DC funds.


Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]
Eleanor Bennett, Press Officer, 020 7601 1718 or 07825 171 446, [email protected]

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