Consultants under pressure to prove their worth

Pensions consultants face increasing pressure to justify their worth in the new-look pensions world in which providers are offering integrated schemes with in-built governance and employee communication services alongside asset management.

Speaking at the Employee Benefits Pensions and Workplace Savings Summit on 31 January, Debbie Harrison, senior visiting fellow at The Pensions Institute at Cass Business School, said:  “We don’t know yet what consultancy charges actually cover and how you can measure that.

“It’s quite difficult when you’ve got some schemes like [the national employment savings trust] Nest, B&CE and Now: Pensions where they’ve got everything embedded in the scheme. If you use Nest as a benchmark, what does paying a consultancy bring? Where does it add value?”

Harrison said she was also unclear about how consultancy charges are structured. “It’s not clear to me whether some of the communications or the platform, for example, are actually part of the scheme charge or part of a consultancy charge, nor do I know the point range and how many basis points consultants might be adding to the member charge,” she said.

There are a number of reasons why an employer may use a consultant, such as the desire for an independent third-party provider to document and sign off its strategy.

Harrison is in the midst of research into consultancy charges, which will cover the extent to which they offer employers and employees value for money.

Employers should review their currency consultancy arrangements. “If you think you’ve very much got a Nest-type profile, then you’ve got to wonder if they’re going to benefit,” she said.

She added that the pressure under which consultants will increasingly find themselves will eventually extend to pension providers, which will be forced to consider the direct-to-employer-style of business that new-style schemes, such as Nest, have adopted.