NETHERLANDS - Pension funds are often too dependent on one dominant adviser or asset manager, whose interests are rarely aligned, according to Avida International.
A new study published by the Dutch pension fund management and organisational consultancy revealed that only a quarter of financial service providers sufficiently act in agreement with the interest of pension funds.
"Board members of pension funds have indicated the need for more self-reflection at financial service providers, and we have noticed that it is difficult to find good players who act purely in the interest of the client," said Paul Boerboom, managing director at Avida.
Avida's study shows that only 20% of asset managers are sufficiently transparent about their costs, and just over 50% have stable customer teams.
"Service providers should adapt to pension funds, rather than the other way round, but many players appear to be going back to their old habits," Boerboom said.
There is much room for improvement on strategic risk management, he said, particularly in the Netherlands where there are a limited number of providers.
The Avida research also suggested that only seven of the 28 interviewed financial service providers offered an insight into how they measured success for their clients.
"Our study indicates that pension funds, as clients of financial service providers, shouldn't contract out crucial tasks or lean too much on an external party," Boerboom said.
He continued: "Pension funds should force providers to serve the interests of their clients by setting conditions on, for example, their remuneration structure."
Avida International questioned the providers about crucial services, such as strategic advice, integrity risk, portfolio management, as well as fund selection, trading and sustainable investing.
The providers were also asked about their remuneration policy, transparency of costs and the separation of advice, implementation and monitoring.