Martijn Euverman on the new role of the fiduciary under the Wtp: 'Vigilance needed on operational excellence and costs'

March 5, 2025

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

The role of the fiduciary within pension funds is under scrutiny due to the Pension Futures Act. What changes await fiduciaries? Financial Investigator asked Martijn Euverman, Partner at Sprenkels.

By Jolanda de Groot

What will change under the Fiduciary Supervision Act in the work of fiduciaries?

'A fiduciary can fulfil a number of roles for a pension fund: a policy preparation role, an executive role and a supervisory role.

The policy preparation role includes issues such as ALM, strategic allocation, investment cases and ESG policy. These terms will continue to exist under the Wtp, but the interpretation will change. If a fiduciary wants to advise on the lifecycle or the interpretation of the anti-takeover portfolio, they will need to have the right tools in house. These may be different tools than those under the FTK. To fulfil this role properly, the fiduciary will have to translate insights and standards that are important to the pension fund under the Wtp. For example, there is currently a lot of discussion about the mismatch of the protection yield for funds that have opted for a theoretical yield under the defined contribution system. With the right tools, it is possible to clarify what this means for the excess return for young people and the impact on the solidarity reserve.

The executive (or coordinating) role often begins with the selection of asset managers. This has traditionally been the ‘heart’ of fiduciary services. Here, we foresee fewer changes compared to the FTK. What is significantly different is the monthly process that results in the allocation of returns to participants. An efficient organisation is essential because errors are directly passed on to the participants. The extent to which this requires additional tasks from the fiduciary depends on the target operating model (TOM) and the division of roles between fiduciary manager, custodian and administrator. In most pension funds, we see that the role of the administrator in particular is becoming more important and essential in the monthly process.

The monitoring (or reporting) role includes, for example, the regular (quarterly) reports. These are considerably different from the regular FTK reports. Reporting will have to be based on standards that are relevant to the pension fund and to the participants. We have now set up the reports for the front-runner funds on our own dashboard and these reports are much more extensive than the FTK reports. We recommend discussing the optimal reporting in the SPR or FPR in good time and well before implementation. We still see potential for development in this area among most fiduciaries. In addition, the reports are also related to the TOM. For example, if the fiduciary has no information about the cohorts, he cannot report on them. We also see a more extensive role for the fiduciary in communication. The results will be more explicitly visible to the participants (the ‘receipt’), which is expected to lead to more and more direct communication with participants.'

What changes in governance?

'There is no single optimal governance for every pension fund. There are funds that do not have a fiduciary and there are funds that have a fiduciary who fulfils all roles in the investment cycle. Most funds fall somewhere in between and do have a fiduciary, but with a defined package to prevent conflicts of interest.

We expect the necessary evaluations and selections of fiduciary managers to take place after implementation.

We advise pension funds on fiduciary selections and always determine the desired division of roles (governance) before making a selection. Not all fiduciaries have the same qualities, and this will be no different under the Wtp. Some fiduciaries are extremely strong in operations, others in policy preparation.

Since the activities will change, the fiduciary landscape will change dramatically and we therefore expect the necessary evaluations and selections of fiduciary managers after implementation. Simply because clients will ask themselves the question: is my fiduciary also the best party under the Wtp?'

What will change with regard to the number of fiduciaries?

'The number of fiduciaries has decreased in recent years, so there are fewer of them than there were 5 or 10 years ago. We see limited appetite from international parties to enter the Dutch landscape with fiduciary management. On the other hand, there are relatively new parties that focus specifically on one part of the fiduciary chain, for example manager selection or impact oversight management. We expect this to lead to a further separation of roles within fiduciary services. With multiple parties at the table, it is important to be vigilant about operational excellence and costs.'

What changes in pricing?

'In our database, we see that the costs of fiduciary management have not increased in recent years. We hear from fiduciaries that the profitability of the fiduciary proposition is under pressure. This necessitates broader forms of service (think of impact oversight management or separate ESG services) and possibly additional pressure within the fiduciary to manage part of the portfolio internally. Here it is important for pension funds to be vigilant about conflicts of interest. The basic principle should be that the fiduciary proposition can be self-sufficient to prevent compulsory purchasing. That puts upward pressure on the prices for fiduciary management. On the other hand, we see in our database that, contrary to expectations, the separation of roles does not increase costs. Buying from a specialist is therefore no more expensive than buying in the supermarket.'

What changes in asset management itself?

'The “danger” we foresee is that there will be less long-term management due to a strong focus on costs. The results will be allocated more explicitly to participants and there may be comparison lists between funds. In our opinion, the importance of low costs is great, but it should not be assessed in isolation. In our practice, it is always about the four-cornered approach: return-risk-costs-ESG. A pension fund must make the best choice for its participants within this four-cornered approach. This demands a lot from administrators first and foremost, but also from fiduciaries and advisors, to keep the focus on the long term. If they are unable to do so, the question is whether a pension fund still has a right to exist.'