Helping trustees be ‘good owners’: acting with responsibility, with reason; delegating only with well-informed control; minimising conflict; avoiding waste and inefficiency

Supporting trustees
Having worked with large endowment funds and pension trusts in the US and UK for many years, founder Stuart Fowler invited private clients, in his 2002 book No Monkey Business: what Investors need to know and why, to consider trustees as role models for being the ‘good owner’ that money needs. Trust law typically imposes a duty of care that goes beyond common law and sets out for trustees ways of acting as if they were not only the owners of the capital but also ‘good owners’. This is not about knowing as much as experts but it does imply acting as non-experts in a particular way: ‘with responsibility, with reason, delegating only with well-informed control, not blindly, not totally trusting’.

For individual owners, or indeed individuals acting as trustees, to live up to this ownership model takes some effort. It would be odd if we tried to encourage and support that effort by individual owners unless we also sought to do the same for trustees, who are included amongst our clients.

The Fowler Drew approach to goal-based investing requires a very clear definition, including quantification, of the benefits (or what economists call ‘utility’) that capital is intended to deliver. In simpler language, this can be thought of as what would denote success and what failure. Where is the line between satisfaction and regret; what defines the line and why. We never thought this could be about investment itself, or returns, or even relative performance. It needed a more collaborative conversation about purposes, needs, wants, constraints. And it needed any conflicts or tension within the objectives to be confronted and resolved, as far as possible, not brushed under the carpet.

Applied to a trust, where we may be asked to manage only a portion of the trust capital, we still need that conversation. We still need to challenge internal inconsistencies and know how the trustees want to make trade-offs. We need to know how to deal with tension between different beneficiaries. We will still want to specify outcomes. What should then emerge is a better, clearer mandate.

What you can do