Professional trustee market revenue rises by 14% in 2022

Professional trustee market revenue increased by 14 per cent in 2022, the third consecutive year of double-digit growth, according to Isio’s 2023 Professional Independent Trustee Survey.

The 14 per cent rise in 2022 follows average revenue growth of 21 per cent in 2021 and 17 per cent in 2020.

Total appointments across the firms surveyed was 2,100, up from 2,000 in 2021, while the number of trustee directors increased from 284 to 290 over the same period.

The merger of Independent Trustee Services with Ross Trustees to form Independent Governance Group and 20-20 Trustees with Punter Southall Governance Services to form Vidett reduced the number of firms covered from 12 to 10.

These mergers mean that 10 firms are now responsible for pension schemes with a combined asset value of over £1.1trn.

Their trustee directors have an average of 11 years of experience and oversee seven appointments each.

Isio partly attributed the growth in the sector’s larger firms to the rise of sole trusteeship, which accounted for over 40 per cent of all appointments in 2022.

There were 26 existing trustee appointments moving across to the sole trustee model last year, which is now responsible for £58bn of assets under management.

Isio noted that the sole trustee model is no longer restricted to smaller pension schemes, with six out of the 10 firms having sole trustee appointments for schemes of £1bn or larger.

The survey identified three types of professional trustee firms that have emerged: Focused firms that stress the benefit of the independence of the trustee, integrated firms that emphasise a packaged solutions to pension scheme governance, and hybrid companies that have an offering that can fit either description.

Pension schemes are increasingly turning to professional trustee to help meet their diversity requirements, according to Isio.

While one aspect of diversity that professional trustees can provide from their career background, in practice sponsors and schemes are “often more interested” in physical diversity characteristics.

The survey found that 38 per cent of trustee directors were female, while just 7 per cent of professional trustees were from ethic minority backgrounds.

“Professional independent trustees have established themselves as instrumental to the pensions industry, and an ever-increasing number of schemes now rely on these firms,” Isio partner, Mike Smedley, commented.

He continued: “In addition to the headline third consecutive year of double-digit revenue growth and significant consolidation of major players in the sector, we are seeing other interesting trends at play.

"Among the most notable is the rise of sole trusteeship, both in terms of new appointments and switches from existing mandates, and the increasing use of this model by larger schemes.

“We are also seeing the hardening of firms’ messages to differentiate themselves in the market, ranging from the ‘focused’ firms, who prioritise trustee decision-making above all else, to the ‘integrated’ models, which emphasise a packaged solution to governance.

"And we expect professional independent trustee firms to be key to pensions schemes’ diversity efforts in the years ahead, in particular given the focus the regulator has placed on increasing the diversity of trustee boards.”

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