The professional trustee market has continued to expand rapidly, with revenue across this sector up by 16 per cent in 2023, according to an industry survey.
Isio’s latest market report shows that this is the fourth consecutive year of double digit growth for the professional trustee market.
Its research, of the 10 largest professional trustee firms in the UK, found that all saw a year-on-year increase in revenue and market share. It said that revenues for these firms had on average almost doubled over this four year period. The larger firms estimated market share of DB schemes increased to 39 per cent.
Isio said these firms also saw an increase in appointments and trustee directors. In total appointments increased from 2,100 in 2022 to 2,300 in 2023, and the number of trustee directors increased to from 290 to 320.
Isio’s report said the significant growth of the sector’s largest firms can, in part, be attributed to the rise of corporate sole trustee roles — which continues to be a key area of growth in the market.
Sole trustee appointments now account for 46 per cent of all appointments, up from 41 per cent in 2020. Although this trend started with smaller pension schemes, most firms now count £1bn+ schemes among their sole trustee clients.
The sole trustee model is now responsible for £73bn in assets under management, while some firms reported that over 50 per cent of their new opportunities are sole corporate trustee appointments.
Isio said that in an increasingly competitive market, firms are differentiating themselves by emphasising their philosophies on trustee governance and the services they provide. The report said there was a clear divergence of firms’ approaches over time, based on their ‘typical’ clients and preferred market approach.
It said ‘focused’ firms prioritise the role of highly experienced individual trustee directors, whereas ‘integrated’ firms emphasise a packaged solution to governance, with larger teams and a broader range of additional services. Finally, ‘hybrid’ firms sit between the two with a mixed client base – and often their broader teams and services are sold separately to trusteeship.
Schemes are also utilising professional trustees to improve representation, particularly following The Pensions Regulator’s guidance last year on equality, diversity and inclusion. Isio says that as professional trusteeship becomes recognised as a long-term primary career option, the landscape has naturally become more diverse and inclusive. This is reflected in the professional background and diversity characteristics of trustee directors and broader teams at the firms.
Isio found that 43 per cent of trustee directors are female, with 7 per cent of trustee directors from an ethnic minority.
Isio partner Mike Smedley says: “The importance of professional trustees continues to rise as schemes rely on their expertise to navigate complex challenges and increasing regulation.
“In addition to an impressive fourth consecutive year of double-digit revenue growth, several intriguing trends are emerging. One of the most notable is the surge in sole trusteeship, evident in both new appointments and transitions from existing appointments. Two in five defined benefit schemes now use one of these 10 large firms as trustee, and almost half of those are as corporate sole trustee.”
He adds: “There’s also ongoing demand for professional trustees to augment trustee boards’ diversity, in terms of professional skills and quite literally from an equality, diversity and inclusion perspective. With the regulator impressing upon the schemes the importance of EDI, this is likely to continue, with more work to be done to raise diverse participation in the industry.”