Roundtable Fiduciary Management & the Wtp

March 5, 2025

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

Under the Wtp, the provision of information will become important, both on the SPR side and on the FPR side. Fiduciary activities will change and become more complicated, mainly due to the age cohorts at the SPR and the lifecycles at the FPR.

By Hans Amesz

Under the Wtp, the provision of information will become important, both on the SPR side and on the FPR side. Fiduciary activities will change and become more complicated, mainly due to the age cohorts at the SPR and the lifecycles at the FPR.

What will change in fiduciary activities under the Wtp?

Annemijn Fokkelman: 'I expect much closer contact between pension funds and asset managers. The exchange of data will increase. Funds will have to give their participants more information about their 'pension pot'. We have set up an entire module to oversee the flow of information between the fund company and the asset manager. There is the possibility of also doing the rebalancing in part in advance, because otherwise you are always a few weeks behind.'

Lodewijk van Pol: 'We are moving to DC in two variants. This means that the emphasis will be much more on two things: communication to the participants and operational implementation. It will be complex, with all kinds of distribution rules and the protection and excess return. It simply has to work. We are working hard on it, but it does not seem to be getting enough attention at all the board tables. That is also my concern.; 

Fokkelman: 'We carried out a lot of simulations and calculations prior to the switch. You always come across new things that need to be properly adjusted and finalized. The monitoring has to be in order.'

Karin Roeloffs: 'What is really different is the structure of lifecycles. That is new for most pension funds and a number of fiduciaries.'

Hans Fortuyn: 'Soon you will have to deal with multiple funds that all receive their data around the same time. So operationally things have to be in order. Scale is very important here, because you have to be able to organize and automate such a project properly. The importance of good advice to the funds is also increasing. This requires being well informed about the ins and outs of the different cohorts. That means a clear change and something in which you can distinguish yourself as a fiduciary.'

Tim Barlage: 'The provision of information is becoming very important, both on the SPR side and on the FPR side. It is changing and becoming more complicated because of the age cohorts at the SPR and the lifecycles at the FPR.'

Peter Dom: 'The operational structure is essential. There is no longer any margin for error. That is a huge change in the world of pensions. In the past, things could still be adjusted on a monthly basis in the total pension capital, but that will no longer be possible because the participants will have their own pots. During implementation, there must be coordination with all providers in the chain. A certain standard must be chosen and applied.'

Rik Albrecht: 'To improve the quality of the implementation, it is important that the countervailing power is raised to a higher level. As far as I am concerned, the concentration of tasks in one fiduciary party is undesirable. I distinguish four roles: the direction, the manager selection, the asset management and finally the reporting and the investment administration. It is important that these four roles keep each other on their toes. You can only achieve this by separating these functions. That way, they cannot protect each other and the board will quickly know which mistakes need to be corrected. This is already essential and will become even more important in the future.'

We are going to DC in two variants. This means that the emphasis will be much more on two things: communication to the participants and operational implementation.

Jeroen Roskam: 'The more tasks you divide up, the more transfer moments there are for which a pension fund must take responsibility itself. As mentioned before, there is less room for error. That makes dividing up tasks throughout the process a major challenge.'

Roeloffs: 'The countervailing power of pension funds has grown much stronger over the past decade. For example, by setting up administrative offices and increasing the expertise of board members. We do not yet know exactly what requirements pension funds will face under the Wtp in terms of governance and management, but I think that in principle it is already well organized. After all, these are professional organizations in a solid supervisory framework. Within the fiduciary there are of course also clear checks and balances.'

Fortuyn: 'You have the pension fund, the custodian, the pension administrator and the fiduciary. If the communication between them is not correct due to a lack of direction, errors can occur. That is really new compared to the past.'

What changes in the fiduciary's activities with regard to strategy, operational excellence and communication?

Fortuyn: 'It starts with the custodian, who sends the information to the pension administrator. And then we receive files from the pension administrator that must be implemented as quickly as possible. After all, you have to rotate the portfolio according to the newly obtained information as quickly as possible. Scale is needed to be able to do this in a robust manner.'

Roskam: 'What will change in our work is that it is important for us as fiduciaries to also conduct lifecycle analyses ourselves. We can no longer optimize an investment portfolio within a single risk profile. We must translate this to different groups of participants. This increasingly requires us to have some of the knowledge that is traditionally available to an actuary or ALM consultant. This will enable us to provide pension funds with specific insights between ALM cycles.'

Roeloffs: 'It is sometimes said that the new system is mainly about pure investment. I think that knowledge of how a pension fund works, what the impact is on the participants, how certain choices between different generations are made, is just as important as it is now.'

I notice that the operational aspect is often somewhat underexposed. And that while many things can go wrong in the operation.

Fortuyn: 'We now generally have a three-year cycle. Soon, under the Wtp, we will probably go to a five-year cycle. So the question is: what will happen in the meantime? Will the ALM consultant play a greater role or will the fiduciary step in and provide more advice?'

Barlage: 'The fiduciary must deal with these kinds of matters in a very practical way. Now is the time to take steps and clearly indicate which role the fiduciary will take in the chain.'

Roeloffs: 'Fiduciary searches often involve manager selection and investment strategy. I have noticed that the operational aspect is often somewhat underexposed, even though many things can go wrong in operations.'

Dom: 'The operational aspect is really important, especially now. Not only with the fiduciary, but also with the pension organization and the custodian. These three blocks have become one chain.'

Van Pol: 'The creation of the chain also means something for governance. Who does exactly what? If something goes wrong, who do you hold accountable? Who has final responsibility? It is very important to discuss and record this properly.'

What is the role of the fiduciary with regard to communication?

Fokkelman: 'All reporting on what happens in the portfolio already goes through the fiduciary to the fund. The technical and professional language in which this takes place will have to become understandable for the participants, in a more consumer-like environment. The fiduciary will play a greater role in preparing that fund communication.'

Dom: 'The fiduciary must be able to put him or herself in the shoes of what pension funds want. Pension funds are still very much preoccupied with high priority issues that they must resolve in the short term. This means that too little thought is given to how pension reporting, for example, will change. Now, when designing your operating model, you must already start thinking about the data elements you will need. The fund reporting side is still very underexposed.'

Roskam: 'The role of the fiduciary with regard to communication naturally depends primarily on the pension fund's need for communication. But I sincerely hope that fiduciaries will communicate better and more extensively, particularly from the participant's perspective.'

Fokkelman: 'If their pension pots fluctuate sharply or shrink, the fund will naturally receive many questions from its participants. The question is whether a deeper insight from the participants could lead to funds making different investment decisions or more tactical decisions. I am curious about that.'

Fortuyn: 'If you as a fiduciary do not receive all the necessary data at cohort level, you can end up reporting much less. It is important that funds are aware of this. Even if there are extra costs, it will ultimately be more profitable if the fund can manage adequately.'

What is really different is the structure of lifecycles. This is new for most pension funds and a number of fiduciaries.

Do we see a difference in the role of the fiduciary manager under the SPR versus the FPR?

Barlage: 'It's going to be different. The fiduciary will now also advise the pension funds per age cohort and per lifecycle, support them in shaping the ‘building blocks’, and of course report on this. Don't underestimate the fact that the fiduciary manager's reports under the Wtp are going to look very different.'

Mr. Albrecht: 'I think that third parties, such as journalists, websites, consultants, etc., are going to take a very critical look at what pension funds promise in the SPR's allocation policy. What is actually being allocated? As a pension fund, you claim to have a certain exposure to business values and protection against interest rate risk. If you cannot live up to this because the investment policy is insufficiently in line with the asset allocation policy, you will be called to account. Soon, all of this will be possible based on public information. In addition to the pension fund and the fiduciary, others will want to make money from, for example, publicity or by offering supplementary pension products to make up the shortfall. The pension fund must deal with this proactively and ensure that you do not make any commitments in the allocation policy that you cannot materially fulfill.'

Van Pol: 'Once again, communication is becoming increasingly important. With regard to the SPR, this is focused on the expected pension, where you do not get to see the investments - or only see them deeply hidden. With the FPR it is different: what you see is what you get, namely your money pot.'

Roskam: 'We must distinguish between board reports and communication to participants. The board reports will look different, both under the SPR and under the FPR. In the communication to the participants, I foresee a difference between SPR and FPR. We know from experience that the FPR is reasonably easy to explain. The SPR is complex, especially under the hood. That must be recognized.'

Fortuyn: 'There will be cohorts that may show extreme differences in returns. That will have to be explained.'

Transparency will ensure that outsiders will compare SPR and FPR returns with simple benchmarks.

Will there be more focus on costs and passively cheap solutions in the future?

Mr. Albrecht: 'Yes, transparency will make portfolios simpler. Currently, the sector is pushing innovative investment categories such as hedge funds, illiquid real estate, private equity and private debt, etc., because they earn more than a passive global equity fund. From an investment perspective, there is something to be said for this, despite the costs. However, under the Wtp, it is less about whether we as experts think it is wise, but more about whether the participant understands it. Transparency will ensure that returns from the SPR and the FPR will be compared by outsiders with simple benchmarks. If you deviate strongly from this and also incur high costs, you as a pension fund will be in a defensive position. That is not something you should want. What you do need to take into account is that it is mainly the smaller pension funds of less than a billion euros that are under pressure from the employer. The employer is really only looking at the costs, and if he thinks they are too high, he will simply pull the plug and go to a general pension fund, for example. This way, asset managers are indirectly forced to participate in cost reduction and therefore simplification. I wonder if, because of economies of scale, fiduciaries will start to specialize in certain parts of the market, like pension administrators, and only choose certain schemes and not all of them.'

Fortuyn: 'We can only be a good fiduciary if we are independent. Our targets do not include internal products. The asset management business is a separate business with its own distribution channel. Simplicity is of course important for a portfolio. But ultimately we have to look at the return after costs. What provides the highest return at the end of the day? It may of course be the case that certain products have added value in a portfolio despite higher costs. Furthermore, the question is whether the participant can handle being confronted with (large) monthly fluctuations in their pension pot. Then you might be more inclined to absolute return products and you might end up in a corner you don't want to be in right now.'

Roskam: 'It remains our job to build a robust portfolio that also offers protection in scenarios with higher than expected inflation, for example. That brings investment categories such as real estate and infrastructure into the picture, which also ensure diversification. If you throw the baby out with the bathwater just for the sake of the costs, you are not acting properly as a pension fund. At the same time, I do see more pressure on costs arising, but that mainly concerns implementation. We must not forget that we have just had two decades in which a simple combination of shares and government bonds was almost unbeatable. That may be different in the future.'

Roeloffs: 'The costs per pension fund will vary. Funds with strong ESG ambitions will quickly end up with private assets if they want to make an impact. Yes, there is generally a higher price tag attached to this. Costs are not the first criterion in building the best portfolio.'

As far as I am concerned, concentrating tasks in one fiduciary party is undesirable.

Fokkelman: 'Communication must focus on all areas of attention, namely return, risk, costs and ESG. If you only communicate about costs, you may draw the wrong conclusions.'

What stood out during the transition of the frontrunners to the new system?

Fokkelman: 'Our own fund transitioned in January. Certain choices were made in the composition of the investment policy. For example, the interest coverage has been reduced somewhat in relation to the increased interest coverage in 2024 to protect the funding ratio. Furthermore, there are no longer any investments in inflation-linked bonds and emerging market equities have been reduced somewhat, while emerging market debt and the alternative credit categories have been increased somewhat. The return portion of the portfolio has also been given a higher weighting, in line with the higher risk appetite of the participants. These are shifts in emphasis.'

Mr. Fortuyn: 'In principle, a transition is not entirely new to us as a fiduciary. What makes it difficult now is that you have to make a transition plan for a fund while not all the details of the future situation are known. The board is asked to use a lot of imagination to make progress. Looking back, I can say that the transition went smoothly. The transition of our frontrunners went surprisingly smoothly. Both in the currency market and in the interest rate swap market, liquidity was sufficient on the first trading day of the year.'

What changes will there be in asset management governance under the Wtp?

Roskam: 'The collaboration between pension fund and fiduciary will become closer, the chain will become shorter. As I said before, there is no longer room for error. There will also be more frequent exchanges.'

Dom: 'I agree. The collaboration will indeed become much closer. They will find common ground in operational implementation. It will also affect liabilities. The question is who will fulfill the role of director: the fiduciary or the administrative office, if a pension fund has one. You have to think about this carefully in advance, discuss it with the stakeholders and record it 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 now. I can't say much about it yet, except that the transition went smoothly.'

Fortuyn: 'It is of course essential that the pension fund remains in 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 organization, 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 investment policy is an iterative process in which top-down ALM choices regarding protection yield and allocation to excess return influence the structure of the investment portfolio, and bottom-up choices regarding the structure of the return portfolio simultaneously influence the ALM outcomes.'

We can no longer optimize an investment portfolio within a single risk profile. We must translate this to different groups of participants.

Van Pol: 'A kind of operational agreement has been made about governance. A) a system has been built, I 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 governance is on the fund itself. Should you engage a management agency, or should you switch to a reverse mixed model? The trend of the pension fund as entrepreneur instead of as 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 the main task communication, asset management, control/grip over the entire chain, or a combination of these? The pension fund will also have to consider whether it is possible to collaborate with other pension funds. Or should we perhaps merge? We are all busy with the Wtp at the moment. That is already a huge job. But the next wave is coming: the development of new future organizations.'

Dom: 'I don't know yet which direction it will take. 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 in an interesting time. There are a number of frontrunners, all kinds of agreements have been made between the pension administration and the fiduciary, and of course the fund has a vision on this. But at a certain point, we are going to implement all of that with different combinations. How do you keep that 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 differ per 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.'

The operational structure is essential. There is no margin for error anymore.

Dom: 'As a fiduciary, you should want to say 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 that now, more than in the past, you have to make clear choices. 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 recognize 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 sometimes insufficiently conducted. Fiduciary managers should show their true colors 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 claimed that the fiduciary manager can do everything well, but experience shows 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 upscaling and professionalization. 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 distributed 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 organization. Everything must be carried out with a very tight bureaucratic structure. 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 sits on the pension fund's communications committee. They can then contribute to the fund's communications at the policy level.'

I wonder if, because of economies of scale, fiduciaries will start to specialize in certain parts of the market, like pension administrators, and only choose certain schemes and not all of them.

Roskam: 'We should organize 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 finding more common ground and also being able to think outside our own frameworks. That is what the Wtp is asking for, and it is in the interest of the participants.'

Fokkelman: 'It is indeed important to look more broadly. We often think in terms of cooperation with regard to fellow pension parties, but it is precisely across the financial sector that there will be a lot of demand for this.'

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 organization. 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 organization, want to respond to that? How do you, as an organization in the pension sector, want to be perceived?'

Dom: 'Not all interests are aligned. Parties must 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 set 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 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 supporting 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 direct capital investment, will want to enter the FPR market. Although the barriers to entry are quite high.'