A question which all pension funds should consider is whether their Fiduciary Manager has any purchasing power. You may ask, why is this important? Well simply put, the Fiduciary Managers purchasing power directly affects the fees that the pension fund pays.
The Fiduciary Manager has pension fund clients. They might have 10 clients with a total AuM (Assests Under Management) of £20bn, or they might have 20 clients with a total AuM of £50bn. The more clients and therefore more AuM the Fiduciary Manager has, the more purchasing power they have. In other words, the negotiating power of the Fiduciary Manager is related to the total assets at their disposal. For example, you might be paying 1% of fees compared to another pension fund who is paying 0.75% of fees, evidently the fund which pays 0.75% has a fiduciary manager who has more purchasing power than your Fiduciary Manager. The fees which are paid to the investment manager on your behalf are therefore significantly less because the Fiduciary Manager has more assets. These fees which you pay could be servicing the Fiduciary Manager or reporting on markets.
You might be wondering how you can discern whether your Fiduciary Manager has any purchasing power? Well with a comprehensive cost-benchmarking exercise, which we at Avida can offer, we can benchmark your Fiduciary Manager against others and compare how much you are paying in fees versus another. Therefore, through our peer group comparison of your Fiduciary Manager’s purchasing power, we can help you see whether you are paying too much in fees.