Pension funds outside the Netherlands struggled to understand fiduciary management only two years ago, but now the concept is thriving and evolving independently in different European countries, a report finds.

The study, ‘Five Futures: Fiduciary Management’* published by Spence Johnson, concludes that trustee boards find the concept confusing, largely because of a plethora of labels and explanations created in the last 18 months. However, a ‘post-product’ era of fiduciary management is likely to finally give trustees what they have wanted for many years, suggests the report’s author, Nigel Birch: bespoke, unbundled services that assist trustees or boards in the execution and management of all pension fund management activities.

Whereas the UK is dominated by major consultancy firms advising pension funds, respondents to the report, which included pension fund and corporate executives, asset managers, consultants, fiduciary advisers and lawyers, said fiduciary management is now going through a transition which will see assets managers win a fiduciary “turf war”.

What pension funds are now looking for, suggests the study, is “outcome strategies” rather than “return possibilities”, which allow executives to retain the tasks they are comfortable with performing in-house. And that is the key element of the fiduciary relationship that needs to be most carefully examined, according to Birch. Pension funds “will no longer tolerate a detached product-pushing mentality from their advisers and suppliers”.

“The main concern trustees and finance directors had was control: are we still going to be in control of our scheme?” Birch told IPE. “Will we monitor it and where will the consultant be now? If they go down the implemented consulting route, who is acting for [the trustees]?” However, whereas finance directors want pensions liabilities to be taken care of, pension board executives may not be so willing to hand over full control to another party, the report finds.

How the fiduciary concept evolves also depends on location. Respondents suggested the Netherlands is now considered to be “reaching saturation”, while Germany, Switzerland, Scandinavia and Ireland were touted as potential new markets.

Some respondents predicted that the boundaries between consultancy and asset management will break down and that the ‘traditional’ consultancy model has a limited shelf life. That said, asset managers in the UK are still nervous of stepping into fiduciary management because they fear it will damage their relationships with consultants who act as gatekeepers to pension funds.

Asset managers were seen as most supportive of change, while consultants were least supportive. Dutch industry-wide schemes - which are hoping to scoop up more business through industry consolidation, were also predicted to “fall short in areas such as client servicing as asset managers offer a more client-focused approach”.

It continues: “As markets stabilise, the urge to outsource the entire running of the fund to low-cost providers such as [pension delivery organisations] may subside.”

So what emerged in the Netherlands as “version 1.0” of fiduciary management is likely to evolve again, the report suggests. The needs of pension funds in new markets could in future dictate who provides the services. And with risk management taking the driving seat, as the report suggests, fiduciary providers will be expected to deliver a hands-on service.

* ‘Five Futures: Fiduciary Management’ is available from