We’re not in Kansas anymore
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Well then, how many 1 in 100 year events have we experienced in the last three years?! Neither of us would exactly be considered a veteran of the industry, yet we have both worked through at least three already. Either the next 97 years are going to be very tame, or we need to start preparing for things to go wrong more often than we prepare for them to go right. As the Chair of one of the better-prepared trustee boards we work with likes to say, at times like this it’s best to “panic early and panic often”.
Gone are the days when scheme decisions could wait weeks or even months until the next quarterly trustee meeting.
Faster reporting and real-time analysis are both a blessing and a curse in this sense. As we found in the last few weeks, events can move quickly so trustees have to be prepared to sometimes take significant decisions at short notice. One of the positives arising from changes in working practices following the Covid-19 pandemic is that trustees and advisers are now used to meeting virtually - I dread to think how we would have handled the rapid response needed following the mini-budget if this had happened in the ‘Before Teams / Zoom / video-conferencing-platform-of-choice’ era.
Once the dust has settled, it’s worth considering any lessons learnt. If you have very low quorum requirements, was there robust debate? If you have very high quorum requirements, were you able to schedule the meetings you needed? It’s also worth taking a step back and considering whether it is always the same handful of trustees able to make those extraordinary meetings. You may have a diverse trustee board, but the proportion of trustees always able to make that last-minute call could, understandably, not be.
Investment advisers have been the real heroes of the past weeks, but could we have made life easier for them? Your authorised signatory lists should be updated any time there’s a change to the trustee board. It’s worth scheduling an annual review just in case this is missed. I’ve heard of trustee WhatsApp groups being set up so that pension managers and advisers can flag when important emails requiring immediate review have been sent – when the going gets tough, the most important thing is for your advisers to be able to get hold of you! Don’t forget to update your formal investment documents after all of these rapid asset moves too.
Zooming out from the LDI-upheaval, we can apply a lot of learnings from October to strategic journey planning. Know your role, know your powers, move quickly, and keep the sponsor involved. Getting these decision-making frameworks up and running and tested in the bad times, should mean we can react nimbly and make the most of the good times too (have you seen how insurer pricing has moved in the last year?).
If things remain as volatile as they have been recently, well-prepared schemes should really be able to take advantage of the highs to help them shift gears and speed along their journey plan.
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