'Wake-up call' to fiduciary managers as one-third of schemes switch providers following retender

The consultant's UK fiduciary management survey - which gathered data from 16 major fiduciary managers in June and was published today (4 November) - found that, of the 22 full service retenders conducted up to that point, 14 were won by the incumbent and 8 were won by different providers.

Isio director and head of fiduciary management Paula Champion said that, prior to the Competition and Markets Authority (CMA) intervention, trustees had tended to "stick to who they know", leading to a "lack of healthy tension between the fiduciary managers".

The consultancy firm said it was surprised so many schemes had decided to switch provider - saying this demonstrated both that fiduciaries weren't doing a good enough job and that trustees were taking these reviews seriously and were committed to getting the best possible outcome for their scheme.

Champion said: "I wasn't surprised that retendering forced a review of these relationships, but I was surprised a third decided to switch provider. This is a wake-up call to many fiduciary managers."

She added the retendering process had, for some schemes, bubbled up discussions around fees and service niggles - issues which have clearly led some to switch provider.

This concern around fees was also cited as the key concern among UK defined benefit schemes in a separate report by Cerulli Associates.

It said that around two-thirds of the US scheme it surveyed said high fees were their main reason for retendering. They identified poor performance and conflicts of interest as the second- and third-most-important reasons for deciding to retender or to switch fiduciary manager.

A third of pension trustees switch provider following CMA intervention

Source: Isio UK Fiduciary Management Survey 2020

Such concerns, however, haven't slowed the growth of fiduciary management - and Isio's survey revealed the industry has continued to grow at an incredible rate with £200bn of pension fund assets now managed by fiduciary managers, generating around £300m of fees. 

It said total fiduciary assets under management have doubled over the last four years and grew by 15% in the last year alone. The total number of mandates, either for part of the scheme or for the whole scheme, grew by 67% over four years and by 7% in the last year.

The biggest growth has been seen in mandates for full fiduciary management services, where asset managers manage 100% of the pension scheme's assets. Full delegation mandates grew 89% over four years and assets under management grew 157% over the same period.

Growth in fiduciary assets under management

Source: Isio UK Fiduciary Management Survey 2020

Growth in the number of fiduciary mandates

Source: Isio UK Fiduciary Management Survey 2020