6 ways employers can save on and control adviser fees

Driving adviser performance and value for money is one of the key reasons an employer chooses to appoint a professional trustee to its pension scheme. I take this responsibility seriously and time and time again find we can achieve improvements in costs and service for schemes and their members.

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It is about getting the right fit for the right price - and how we do it for a pension scheme can easily be translated into other areas where a business seeks advice.

I find the key ways to improve control of adviser costs are:

Work together as one team - establish good two-way communications, respect each other’s expertise and contribution, support a ‘no surprises’ culture so working relationships are open and collaborative, raise issues early when service is not meeting expectations and use all the experience available to you to explore options and solutions when there are challenges.
Agree the likely scope of work needed and budget for the year – this will involve the employer, your adviser and, where relevant, your pension scheme trustees. Make sure someone is responsible for monitoring that budget and reporting back to you regularly.
Prevent excessive or unnecessary adviser fees – take time to understand when advice is required and when it isn’t. When it is required, tightly scope it to focus on exactly what is needed. I always try to frame the right questions to narrow the issues, enabling clear and direct advice to be provided. Scope creep is all too common, but quite easy to stop if you pay attention.
Know what value for money looks like – if you don’t, get some targeted professional help. For example, working closely with the universe of pension scheme advisers means I know that market inside out and can easily tell you what fees and service levels represent good value for money. I wouldn’t have a clue about cycle to work providers though.
Agree a watertight client agreement - set and articulate service level standards clearly and remember to monitor them!
Agree fixed or capped fees wherever possible - I make it clear additional work outside a fixed fee needs to be agreed in advance by the employer and trustees. This has worked wonders for many of the schemes I work with.

Here’s an example…

At this client the employer was paying considerable fees to a large pension adviser. Service quality was fine, but costs were becoming a real issue for a scheme that had become a legacy arrangement.

Getting the scope of an adviser’s service right can make a huge difference so my first step was to refine this. I then took what seems a fairly standard process - invitation to tender, interview, shortlist and site visits - but avoided a scatter gun approach.

Going to the whole market really doesn’t help anyone - you get bogged down in responses and it is hard to see the wood for the trees. From the experience, I knew there were only three other advisers who would offer a quality proposition for a scheme of this size - so that’s who we invited to tender along with the incumbent.

A standard interview can be quite artificial in giving the complete picture of an adviser and their proposed team. This scheme had some historical issues the trustees needed to be confident it would be managed well, so I had to make sure the site visits were worked hard. We really pressed and probed the teams - smiling faces are always nice to see (especially as ongoing relationships are key), but trustees don’t buy services on the basis of smiles, tidy offices and decent coffee.

The trustees decided to move away from the incumbent, choosing instead an adviser better suited to a small legacy arrangement who had built up a good rapport with our co-trustees and the employer in a short period of time.

The bonus was the average fee saving of £50,000 a year.

The author is Kevin Kenneally, client director at Punter Southall Governance Services.

The article is provided by Punter Southall Governance Services.