In investment, there is often no single right answer

As someone who sometimes finds it difficult to toe the corporate line, I was pleasantly surprised that Aon was prepared to let me write an uncensored blog on investment. But then this is one of the main reasons why I joined them - a key element of the Aon proposition is that, while there may be 'guidance', consultants are not expected to 'push' the same house line with all their clients. In investment, where often there is no single right answer but there are wrong answers, the only way an organisation can be truly focused on client solutions is to allow their experienced consultants freedom. However I am in danger of getting to the punchline 300 words too early.

In the pieces I shall be writing, I will I suspect enhance my reputation as the 'Victor Meldrew' of the investment world ('grumpy' for those too young to remember 'One Foot in the Grave'). This grumpiness stems, in part, from the belief that my and succeeding generations, having overseen the development and growth of defined benefit schemes (a good thing) has then managed (inadvertently) to destroy them (a bad thing). As a result we have transferred investment risk to a group less well-equipped to manage it - the individual DC contributor.

As an industry we have made our share of mistakes. This is what being human is all about but at least let us not repeat the same ones. In consultancy one of the mistakes made is a 'one size fits all' approach to advice. This is commercially good for the consultant and accords with a 'we know best' approach to advice but the firms who operate in this way are doing their clients a disservice. Every DB scheme is different. Benefits offered may be similar but funding level, sponsor covenants, investment beliefs, investment objectives, governance budgets, Trustee attitude to risk will all vary. Volatility will be a huge risk to some and an investment opportunity to others; hedge funds will be an essential part of the toolkit for some but a high cost way to mediocre performance for others; return matters more to some than others; and so the list goes on.

Sometimes trustees don't make it easy to give scheme specific advice. Some just want to be told. It is human nature to favour certainty over uncertainty. In my spell out of consulting I well remember one chair of Trustees telling me that he liked a particular firm because that firm had come up with a plan to achieve full funding by 2025. No it hadn't. It had put forward a plan that, based on its assumptions being borne out in practice, would achieve full funding by 2025. Consultants should certainly be positive in their recommendations but those who promise or infer certainty are selling a dream.

There is no single right answer in investment so don't expect one. Instead Trustees should expect to get advice which is empathetic to their beliefs, their objectives and their circumstances. They should ask their consultant what he/she would recommend if he/she were a dictator and understand why that is not appropriate for them. Trustees should expect positive advice but should be very wary of those who peddle certainty. Finally a plea, in investment, mistakes are inevitable and should in most cases be forgiven. Repeating the same mistake is altogether different.

About Tim Gardener

I am a Partner in Aon's investment consulting team. I provide expert investment advice to a number of Aon's clients and contribute to the development of their intellectual capital.

Twitter: @investmenttim

Linkedin: https://www.linkedin.com/in/tim-gardener-00b59b15/

You can contact me via my blog editor Anna Rudgard

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