Competition authorities are investigating the fiduciary management market and are due to report back by March 2019. However there is plenty that pension funds can do in the meantime to get the best out of their provider, say Simeon Willis, Director at KPMG in the UK, and Anthony Webb, Senior Manager at KPMG in the UK.
Fiduciary management is clearly on the up. According to KPMG’s 2017 Fiduciary Market Survey, fiduciary managers’ assets under management in the UK has increased by over 15% to £135 billion in the 12 months to 30 June.
But despite its growing popularity, the industry faces a serious regulatory challenge. In September, the Financial Conduct Authority (FCA) referred the investment consulting and fiduciary management industry to the Competition and Markets Authority (CMA) amid concerns that investment consultants have been pushing existing advisory clients into using their own fiduciary services. The FCA suggests that fiduciary management is one of the most opaque areas in UK asset management, in relation to fees and performance.
The investigation is likely to shake things up, but not for a while: the CMA is not expected to report until March 2019 – still 17 months away.
The FCA have themselves indicated that customers can also play a role in creating a better-functioning market by being more demanding. And we agree. Pension fund trustees should think about three steps to get the best out of their Fiduciary Manager right now:
“Our package special: a beach … somewhere”
The process of selecting a fiduciary manager should be a bit like buying a package holiday. Each customer has their particular requirements and the operator should be able to find the right package for them.
So imagine browsing the brochure and finding that every holiday package contained the same generic beach shot and vague promises of a “dream holiday”. It had no details about where you’re going or customer reviews, just a number saying “call for best price”.
You wouldn’t settle for this choosing your summer break, but it might feel familiar to those who have chosen a fiduciary manager previously.
Because not all of their clients are the same, Fiduciary Managers have struggled to provide reliable past performance and risk data. Nor does the market provide an easy way to compare prices.
KPMG offers the kind of visibility you need to make the right choice – simplifying the process and help you gain the confidence to entrust a third party with the management of your scheme.