Taking stock: what next for the early adopters of fiduciary management?

24 Jun 2014

The fiduciary management market in the UK has been growing steadily in recent years. The growth, has generally been steady – they’re certainly not pulling up trees – and according to KPMG’s annual survey into fiduciary management, the UK market stood at around £58bn in 2013 across 345 UK pension scheme mandates.

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The full delegation market grew by £5.6bn in 2013 over 211 mandates to the end of June. Most of these full delegation mandates (91%) were made by schemes of less than £250m in assets, three-quarters of which were managed by implemented consultants.

The next KPMG study will not be available until September, but it is likely to reflect a definite shift in the market in favour of the specialist provider away from the consultant providers.

The original trend of consultancy firms growing their business with a relatively captive advisory audience is being undone, says Brian McCauley, investment consultant at Buck Global Investment Advisors.

“The early adopters are reviewing their position to see if they’ve made the right decision.

“Due diligence is now being done to understand the things they are getting from their fiduciary manager.”

As relationships develop, trustees are becoming more savvy about what to expect their managers to do, says Crispin Lace, director at Russell Investments. As they understand more, they become more involved and will consider making a change. “The marketplace offers investors few places to turn when given a persuasive argument from their consultant or other provider. The emergence of the intermediaries is therefore quite valuable not only to schemes, but to us in shaping our own business, getting us in front of prospects,” says Lace.

This has been fuelled by the growth in the number of firms offering independent assessment and monitoring. There is no definitive number at the moment, but it is thought about 18 are operating in this space. Some feel trustees were a little slow to mark their own scorecards and while the intitial drivers of governance such as holistic risk and speed of execution were the low hanging fruit, monitoring is finally being addressed, says McCauley.

As schemes become more comfortable with fiduciary management, so they are likely to be more circumspect about taking any fiduciary manager’s services on face value and run the usual governance rule over it by appointing an adviser.