The introduction to the CFA Institute’s Trustee Primer nails it: “Let’s face it. Few business assignments are more intimidating than being placed in a position of responsibility outside your area of expertise.”
Thus it is for pension fund trustees, often members of staff and management at the company with the pension scheme, who have to decide on questions related to millions or billions of pounds that could affect the lives of many others. And yet it’s hard to believe that members of this group, with an extraordinary burden of responsibility, often have no formal training in finance.
Luckily, the Pensions Regulator lays out the knowledge it expects trustees to have in its “Trustee Knowledge and Understanding” guidance. For example, those working on defined benefit schemes should have knowledge of “the basic principles relating to the investment of assets” and “capital markets including, in broad terms, the effect of economic cycles.”
In order to achieve the desired level of knowledge, the regulator provides the Trustee Toolkit, a series of learning materials covering a wide range of issues facing those taking on the role. CFA UK’s Client group believes we can help, particularly in the development of new materials around behavioural finance to give them an awareness of the unconscious biases that may undermine their rational decision making and provide them with some tools to mitigate them. Another area where we can provide more clarity for trustees is training around ESG (environmental, social and governance) issues, which as CFA members will know, are particularly relevant given the long term investment horizon for most pension funds, endowments and charities.
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