Hell’s Bells: Jumpers and Annual Reports
A Winter’s Tale
It will soon be time to celebrate, but there is much work to be done, especially for the hardworking fund board iNED thinking about a range of issues, but especially about Assessment of Value. In this diary entry, JB provides some very helpful and practical tips on how to manage your time, your diary, and ensure you leave home with the right set of notes.
Winter is coming the forecasters say. The HBO smash epic ‘Game of Thrones’ might have concluded but that won’t stop your faithful author from using the odd reference. The air is turning colder, the street decorations more festive and the increasing activity is not only that of buying presents for little John and Daenerys on Regent Street.
Season greetings fellow FBC members!
Within most Authorised Fund Managers the start of the annual report process has already begun. With that annual report planning you should see meaningful progress to delivering the first Assessment of Value (AoV) and activity intensifying. My latest diary entry comes from ‘North of the Wall’ and focuses on the AoV build up amid the regulatory noise around liquidity and the run up to the annual report and how to help keep your Board focused.
Are you looking forward to the year end? My wife Jenny kindly kicked off the festive period by ordering me an ACDC Xmas jumper compete with knitted flames and ‘Hell’s Bells’. Very me. It reminds me of one my sage ex-colleagues, who was an avid jumper wearer, and something of an office philosopher. My favourite of his being, “If you have your jumper on, then your jumper’s on”. I still to this day ponder its meaning.
However, the end of the year end is not all philosophy, frivolity, mince pies and appropriately named gluhwein (‘glow wine’), but one of the busiest periods for UK fund boards. It helps when digesting the latest Financial Conduct Authority’s letter to my Board’s chair. This last month the Woodford issue has expanded into a broader conversation of illiquid assets in open-ended funds and the segregation of retail and institutional investors. Having instigated a robust liquidity risk and governance discussion upon joining my boards I feel we are in a good place compared to many in the market when it comes to controls and committees.
Meanwhile the annual report looms (gulp). The end of the year period also tends to gravitate the activity on your different Boards into the same narrow nexus. Follow up activities, pre- calls, post- calls, action logs, outstanding items that ‘Execs’ try to push through at the 12th hour (even 11th would have been helpful!), and of course the meetings themselves all tend to squeeze together.
As an iNED you need to be on your toes both to manage your time, your papers and make sure you don’t confuse them. Through the year many iNEDs like me may feel below capacity but this can quickly change at year-end. Plan your roles accordingly. My tip is to have different folio cases for your respective boards. This ensures no contamination of sensitive information but also ensures you don’t get confused between agendas. Just make sure to pick up the right case, as you head out in to the cold.
With all the recent focus on liquidity controls, that increasingly preoccupy boards, how is your Assessment of Value (AoV) prep doing? Do you feel safe within your Winterfell keep, or cold and alone surrounded by white walkers? Hopefully you have made good progress towards delivery and more importantly still have confidence in the direction taken and outcome. Delivery may come through a working group, reporting to the Board, or direct contact with your Finance Director or Head of Compliance. If you haven’t seen anything at this point, and your annual report is publishing within the next 6 months, then start to worry.
By now you should have had sight of the timeline for delivery of the AoV and have had opportunity to comment on the data inputs belying the minimum 7 FCA considerations. It’s unlikely you will have seen the final assessment, or agreed the disclosure yet. The danger going forward is that the AoV is treated as merely a line entry of the annual report and thus swept up in the volume of activity. Also, the AoV will be only one matter of business at your Boards; (assuming it is on the agenda). Others will include client assets and custody (CASS), Compliance and Risk reports, money laundering, liquidity reports, Finance reports, Sales and Marketing reports, Board actions, committee papers, conflicts of interest, remuneration, action log and of course the agenda and previous Minutes.
Even if the Board can peel itself away from Woodford or Brexit; the finite meeting has many items vying for airtime. Chairs may see the AoV as yet another regulatory project and subordinated beneath the likes of CASS. In fund governance, safe custody has to reign above others but the AoV should be promoted up the ranks along with the new senior manager’s regime. Steps I have taken personally to help escalate and progress the AoV agenda in my Boards include:
- Instigating a working group meeting back in Q2 meeting key staff
- Lobbying the Chair, ongoing, as to the importance of the AoV.
- Agreeing milestones for timely project delivery of the AoV
- Directing input into the AoV matrix of considerations and discuss challenges
- Aligning AoV with Marketing reviews in areas like peer group comparisons
- Understanding key issues that impact the cost and delivery of the funds
- Encouraging aligning the AoV with annual product governance reviews
- Direct regular engagement with colleagues, other than Chair, responsible for the AoV
- Sharing articles with colleagues and Chair that point towards best practice
- Adding the AoV as a standing item to the Board agenda to ensure progress (or lack of) has to be discussed and noted in the Minutes.
This hopefully moves fund boards a little closer to the ongoing “Value for Money” governance applied by Independent Governance Committees (IGCs) in pension companies, raising the focus of AoV in Board papers.
The last quarter of the year can be the most hectic for fund boards, it is probably the last Board to agree the AoV, without needing a special meeting, and so better watch out for drifting timelines. Be ready for papers to be more packed and hectic than usual. Jumper on. Time to heat up the mulled wine for winter is coming. Hell’s Bells!
“The night is dark and full of terrors”, Melisandre, Game of Thrones, George R.R. Martin.
JB Beckett, FBC Corporate iNED Member
iNED, Author ‘New Fund Order’
In his monthly column, Diary of an iNED, JB will record his experiences on the boards of two very different organisations as he navigates the highs and lows of a plural career at a time when the fund industry is beset with challenges and opportunities in equal measure.
JB can be contacted at firstname.lastname@example.org.