Recent research from KPMG shows 75% of mandates are awarded without a competitive tender. However, this doesn't mean trustees are not asking tough questions says Helen Morrissey.
The lack of competition in the fiduciary management industry has been a hot topic for several years. There have been major concerns that many schemes - largely those working with implemented consultants - are effectively being flipped from a consulting service to a fiduciary management service without looking to the wider market.
The results of the latest KPMG fiduciary management survey would seem to bear this out with a whopping 75% of mandates awarded without a competitive tender having been put in place. This is a result that the report author describes as "sub optimal".
However, a closer look at the results shows that the outlook may not be quite as grim as first thought. All of the implemented consultants that I spoke to said the 75% figure was not representative of their experience over the last 12 months.
They say trustee boards are asking tough questions of their potential fiduciary providers and thinking through their options carefully before deciding to go down the fiduciary route.
This would seem to be borne out by the results of this week's Pensions Buzz, where 60% of readers said trustees entering a fiduciary management arrangement without a competitive tender were failing in their duties.
So while many schemes may not be carrying out formal tender processes as defined in the KPMG survey, they are looking at the wider market and developing processes that best meet their particular scheme's needs.
There can be no one-size-fits-all-approach when it comes to measuring fiduciary manager performance and so it makes sense that schemes look to adapt their own processes.
If this can be done I think we will see movement within the fiduciary management market as schemes look for providers best suited to their needs. The result will be a competitive market that really meets UK pension schemes' needs.
