Kevin Humpherson: FM fees started to plateau in 2025, suggesting the minimum cost may now have been reached.
Fiduciary management (FM) fees for smaller schemes are beginning to plateau as a result of cost inflation and falling asset values, EY research finds.
The consultant's seventh industry-wide Fiduciary Management Fee Survey – which covered the UK FM and outsourced chief investment officer market, collecting data from 14 providers – suggested that, while competition remained strong in the FM smaller schemes segment, the market may now have reached "minimum cost".
Despite this, it said overall investment costs – including fiduciary management costs as well as those for investment management – continued to fall across the market, driven in part by a shift towards internal fund management, a trend it said was most notable for smaller-sized schemes.
EY said this shift could offer schemes greater efficiency – with providers able to be more commercially flexible by obtaining a greater share of the total revenue split.
But it noted value would only be achieved where "lower costs were met with the optimal investment solution".
EY UK and Ireland partner and head of pensions investing Kevin Humpherson said: "For the first time since the EY's FM fees survey began in 2013, FM fees started to plateau in 2025, suggesting the minimum cost may now have been reached.
"After more than a decade of intense competition, combined with inflation, and falling asset values since the liability-driven investment crisis, a stabilisation of FM fees for small/medium sized schemes is no great surprise. That said, overall investment costs continue to fall across the market, as more providers are implementing portfolios through internal funds.
"While this can bring efficiency and lower headline costs, trustees should combine this with the right investment solutions to deliver value; with fees sourced across multiple disciplines, transparent, fair, and independent oversight is more important than ever."
Despite FM fees stabilising for small and medium schemes, Humpherson said fees continued to fall for larger schemes – a trend that reflected competition for the biggest mandates and that there was less scope to reduce overall costs through asset management charges given the scale and complexity of larger schemes.
He said: "At the top end of the market, fees continue to fall on a scale driven basis, as very large schemes adapt to an evolving market, with opportunities being fewer and more significant in revenue terms."
How FM fees for UK DB schemes have changed since 2013
Source: EY. Note: Chart shows the inter-quartile range (the middle 50% of values) of FM fees since 2013, with a return target of gilts+2.5% per annum.
Internal management
EY said that, on an overall costs basis, FMs who manage a portion of their clients' portfolios internally will take a bigger proportion of the overall costs as their revenue, compared to those offering open architecture mandates.
It said that, for providers who only use external investment managers, the median level of FM revenue they receive from pension schemes targeting an investment return of gilts plus 1.5% per annum is approximately 43% of the overall costs paid by the scheme – compared to around 66% for providers offering some or only using internal asset management.
Humpherson noted recent market activity appeared to be shifting towards strengthening internal asset management capabilities – but noted that not all providers were headed in this direction and that there remained optionality in the market for both internal and external management offerings.
The differences between internal and external asset management
Source: EY. Note: Chart shows the inter-quartile range of total FM revenue as overall costs for schemes targeting investment return of gilts + 1.5% per annum.
Backgrounder: Fee components
EY said the fees in a fiduciary management mandate can be separated into three key components:
- FM fees: EY said these represent the fee paid directly to the fiduciary manager for strategic advice (including modelling and setting the investment strategy), and implementation of the investment strategy (including portfolio construction, manager selection, tactical asset allocation and implementing liability hedges). It said there may also be a performance-related component to the fiduciary management fees.
- Investment management fees: EY said that, typically, fiduciary managers implement the chosen investment strategy via underlying investment managers. It said the IM fees incurred by the underlying investment managers make up a large part of overall costs, and are passed through to the client.
- Expenses: EY said there can be other costs and expenses associated with a FM mandate, such as administration fees and custodian fees. It said such expenses may or may not be included in the FM fees or IM fees, and may not be disclosed properly to trustees.
Despite this, EY said FMs do not apply these components in the same way.
It said that, for instance, some FMs will manage part of schemes' assets through internal investment funds – with managers having various charging structures for those utilising their internal investment funds.
EY added some FMs will offer lower FM fees while recovering revenue through investment management (IM) fees applied to their internal funds; while other FMs will offer higher FM fees and do not apply IM fees on their internal products.
In addition, EY said some FMs will impose separate fees, in addition to their base FM fees, for managing certain assets/strategies (such as private market investments, liability hedging assets, or specific downside protection strategies).
EY added there is also variance in how FMs treat expenses – with some including expenses in FM fees, others listing some or all of them separately.
