Governance, not recession, behind investment management fee awareness
Investments | Global
In an article in Benefits Canada, Buck’s Robin Pond talks about the growing attention retirement plan sponsors are paying to investment management fees. That focus provides a jumping-off point for managers, consultants and plan sponsors to address issues such as plan governance and risk management.
From the article:
“Fees are a factor, but I wouldn’t say for most clients they’re a driving factor.” Robin Pond, senior investment and DC consultant with Buck Global Investment Advisors in Toronto, agrees, adding that performance is looked at as a relative rather than as an absolute.
People want to understand what they’re being charged. If performance is expected to be lower than in the past, you are eating up a greater portion of the performance the higher the fees are.
What’s interesting to note is that plan sponsors were looking at performance issues long before the crisis—and putting managers on watch where performance had become an issue. Pond agrees that greater scrutiny of fees is emerging, noting that transparency and monitoring of fees have become more important. While he admits that the economic crisis has made plan sponsors more “fee-sensitive,” he says the evolving concept of good governance has been the driving factor. “The more people become aware of proper techniques of plan management, the more they will look at things like, How much are we paying?”
Trends emerging out of the U.S. are also driving this evolution. Pond explains that over the past five or 10 years, plan sponsors have really pushed managers on fees and fee structures. “In the performance evaluation reports that we do quarterly for DB plans, we now will often put in a fee universe, and where the manager is in that fee universe.” These days, many of those requests come from larger U.S. companies and their Canadian subsidiaries, he adds. As larger plan sponsors start requesting more fee information, this trend will likely trickle down to mid-size and smaller plan sponsors as well.
