Governance, cooperation and new players (Roundtable Fiduciary Management & the Wtp - part 3)

March 20, 2025

_{This report was originally written in Dutch. This is an English translation.}

What changes will there be in asset management governance? And will we see new parties emerge after the introduction of the Wtp? These were the topics of part 3 of the Round Table ‘Fiduciary Management and the Wtp’.

By Hans Amesz

This is part 3 of the report. You can read part 1 here and part 2 here.

What changes will the Wtp bring to asset management governance?

Roskam: ‘The cooperation between pension funds and fiduciaries will become closer, the chain will become shorter. As I said before, there is no room for error. There will also be more frequent exchanges of information.

Dom: ’I agree. The cooperation will indeed become much closer. They will find common ground in operational implementation. It will also have an effect on liabilities. The question is who will fulfil the role of director: the fiduciary or the administrative office, if it has one. You have to think about this carefully in advance, discuss it with the stakeholders and lay it down in an operating model.

Fokkelman: ‘We have a module that is built within the fiduciary and the fund company. It is actually a cross-functional team that is part of the fund company. We have only been “live” for a few weeks. I can't say much about it yet, except that the transition went smoothly.

Fortuyn: ‘It is of course essential that the pension fund retains control, because that is where the responsibility ultimately lies. A target operating model must be established and that translates back into the SLAs, the service level agreements, that the fiduciaries, the pension administration organisation, the PUOs and the custodian have with the pension fund. We also expect the interaction between the ALM consultant and the fiduciary manager to intensify. The development of the investment policy is an iterative process in which the top-down ALM choices regarding the protection return and allocation to the excess return influence the design of the investment portfolio, and bottom-up choices regarding the design of the return portfolio simultaneously influence the ALM outcomes.

Van Pol: ‘A kind of operational agreement has been made about governance. A) a system has been built, I would call it a mid office, and b) you have invested in the fund administrator. Choices can be made there. I am interested in what solutions have come onto the market for this. It is also interesting to see what the impact of the governance is on the fund itself. Should you hire a management agency, or should you switch to a reverse mixed model? The trend of the pension fund as an entrepreneur instead of a social fund is continuing.'

Barlage: ’It is also good for the pension fund to think about what its main task is. After all, that is where the chain begins. Is its main task communication, asset management, control/grip over the entire chain, or a combination of these? Furthermore, the pension fund will also have to consider whether cooperation with other pension funds is possible. Or should we perhaps merge? We are all busy with the Wtp right now. That is already a huge job. But the next wave is coming: the development of new future organisations.

Dom: ‘I don't know yet which way it is going. Everything is still in flux with regard to the various roles that need to be filled. There are many different possibilities and it is important to discuss these quickly and concretely with all stakeholders. From an operational point of view, that has to be crystal clear.

Roeloffs: ‘We are now at an interesting stage. There are a number of frontrunners, various agreements have been made between the pension administration and the fiduciary, and the fund naturally has its own vision on this. But at a certain point, we will be implementing all of this with different combinations. How do you keep it manageable?

Van Pol: ’It must be scalable, not everyone coming up with their own model.

Would the fiduciaries then be flexible in that governance? Or can a fiduciary say: I believe in this role and I will take it, and I will not do other things?

Fortuyn: ‘Ultimately, it's about clarity. That everyone knows who is responsible for what. That will vary from fund to fund, because every fund is different. I think a fiduciary will respond to this in a flexible manner. But it is especially important that the fund is in charge and that the agreements are clear.’

Dom: ‘You should actually want to be the fiduciary who says what is best, also to create efficiency and market standards. I know that many pension funds are large and stubborn and have a strong voice. But I would like to have an honest discussion as a starting point.’

Roskam: ‘I think you have to make clear choices now more than in the past. We have talked about operational excellence before, but that is not feasible if every wish has to be accommodated. Each pension fund has its own policy and its own identity. We must recognise that this also brings with it a great deal of complexity. We must seize the opportunity of the Wtp to have an honest discussion about this with each other.

Barlage: ‘That's true. I do think that this discussion is not being held often enough. Fiduciary managers should show their true colours more often to really indicate what they can do well and, above all, what they can't do. In the past, it has often been said that the fiduciary manager can do everything well, but experience has shown that this is sometimes disappointing.’

Van Pol: ‘We are now in the midst of the Wtp tsunami. When we switch over, funds will start thinking even more and better about strategic objectives. They have become social and financial institutions, participants become customers. There will be further scaling up and professionalisation. I am convinced of that.’

Barlage: ‘The fiduciary must start thinking about how he can best work for his clients in the future. Everyone must reinvent themselves. Of course a lot has happened in recent years, but it is also a great opportunity to effect a good reset for each party in the chain and to make good agreements about this together.’

Mr Albrecht: ‘Regarding the agreements in the chain, I would suggest that the pension administration calculates how the money should be divided among the FPR investment modules. This will result in a file with information that must be translated into actual transactions. Who will do that? I think it should be done by a factory-like organisation. Everything must be carried out with a very tight bureaucracy. An administrative office or a consultant is not suitable for this.

Fokkelman: ‘That is exactly what our Asset Allocation and Overlay department has done. They will receive that file before the end of the month to be able to make an ex ante estimate. It is a tightly oiled machine with checks and balances, a technical department that translates its findings to the various investment categories.

Are there any other issues that need to be addressed?

Roeloffs: ‘Because communication is becoming so important, I advocate that the fiduciary always be part of the pension fund's communication committee. They can then contribute to the fund's communication at the policy level.’

Roskam: ‘We should organise much more cooperation in the sector. Fiduciaries offer that platform and are equipped to do so. I would like to see us in the sector working together more and thinking outside the box. The Wtp demands this and it is in the interests of the participants.

Fokkelman: ‘It is indeed important to look more broadly. We often think in terms of cooperation with other pension parties, but there will be a lot of demand for this from outside the financial sector.

Barlage: ‘We hear a lot of negativity about things that are not going well, but we can also be somewhat proud of what we have achieved together. This applies to the pension fund, the fiduciary, the administration and the pension administration organisation. I also think that the time has come to think about the next waves. What will come after the Wtp and how do you, as an organisation, want to respond to that? How do you, as an organisation, want to be perceived in the pension sector?

Dom: ‘Not all interests are aligned. Parties should be well aware of that. As far as costs are concerned, a certain reset of the price level for the sector would be quite healthy. Profitability is not something to write home about everywhere.

Will we see new parties emerge after the introduction of the Wtp?

Roeloffs: ‘It is not a very profitable business. It is not very tempting for new parties to enter a business with such low margins. It is also a complex business. I think the barriers to entry are quite high.’

Albrecht: ‘I think there is definitely room for what I call new management parties. These are not asset managers. Management parties can function as a kind of outsourced administrative office. They are cheap because their costs are low: a computer and a car, not a whole machine to rig up.’

Roskam: ‘If there are gaps in the chain, there is room for new parties to fill them. That opportunity is there. A fiduciary must have a certain basis in the FPR and/or the SPR in order to be able to perform his duties properly.’

Dom: ’The FPR and SPR are so rudimentary that I think they will continue to be served by all parties. I don't see any party saying: I will not support the FPR or the SPR as a fiduciary. But it becomes different if you start to support leverage or multiple benefit collectives and suchlike. Then parties could say: within the FPR and SPR I choose a certain standard and I will support that.

Barlage: ‘In time, foreign parties, especially those that already have a decent track record with DC investing, will want to enter the FPR market. Although the barriers to entry are quite high.’