GLOBAL - Fiduciary management is entering a "post-product" era with the creation of bespoke, unbundled services for pension funds, and assets managers will win "the fiduciary turf war" in the battle for business, according to a report on the fiduciary management market.
A study has been conducted by Spence Johnson, entitled Five Futures: Fiduciary Management, which predicted fiduciary management will evolve into version 3.0 over the coming years - version 1.0 being its launch in the Netherlands - delivering solutions-focused partnerships between pension funds and asset managers and consultants. It claimed pensions officials are looking for "outcome strategies" rather than return possibilities, which allow them to retain the in-house tasks they are comfortable with performing.
More specifically, the report carried 19 predictions for change but the biggest of these is a claim that "asset managers will in future win a bruising confrontation" with consultants in both the Netherlands and the UK pensions markets.
The qualitative study garnered the views of individuals from 46 asset management companies, fiduciary advisers, consultants, pensions schemes, pension delivery organisations (PDOs) - Dutch industry-wide pension schemes - as well as from the National Association of Pension Funds.
Six out of 10 questioned predicted there will be significant change to fiduciary management over the coming years as pension funds "will no longer tolerate a detached product-pushing mentality from their advisers and suppliers", albeit the exact changes will depend on the market reviewed. The Netherlands is now considered to be "reaching saturation" while Germany, Switzerland, Scandinavia and Ireland are touted as potential new markets.
"The post-product requires a new mind set, we were told, a new client/provider dynamic. It requires pension service providers to listen to their pension fund clients' needs as partners rather than push their product as suppliers," the report concluded.
The plethora of labels for fiduciary management had led to misunderstandings and confusion about as to what fiduciary managements actually is, according to the report's author Nigel Birch. However, this is also representative of the services now sought by pension funds, the report argued, as pensions professionals no longer expect there to be a single solution to managing a pension fund.
The traditional consultancy model - described in some cases as "unaccountable advice" - has a limited future, some of the contributors predicted, and the boundaries between consultants and asset managers will break down. That said, asset managers in the UK are still nervous of stepping into the fiduciary management space because they fear it will damage their relationships with consultants who act as gatekeepers to the pension funds.
Asset managers were seen as most supportive of change while consultants were least supportive. PDOs were also predicted to "fall short in areas such as client servicing as asset managers offer a more client-focused approach" and "as markets stabilise, the urge to outsource the entire running of the fund to low-cost providers such as PDOs may subside", according to the study.
Some of the officials questioned came from pension funds such as Henkel - the first company with a global fiduciary pensions structure - alongside Shell, MNOPF, Asda, as well as Van Nunen Partners.
A copy of the report can be obtained from Spence Johnson.