EUROPE - Fiduciary management is “very confusing”, and the term now refers to so many different practices it has become “somewhat ridiculous”, according to Paul Boerboom, one of the managing partners of consultancy Avida International.

Reacting to a series of articles on the topic of fiduciary management appearing in IPE.com in recent weeks, Boerboom and Petra Zamagna, head of German consultancy Ambitus, said the next generation of consultants saw fiduciary management as “an interesting solution”, but that they would rarely refer to it by that name.

Boerboom said: “Fiduciary management is very confusing, and almost everything is now called fiduciary management, which is becoming somewhat ridiculous.”

He said fiduciary management should be about working with the pension board to consider carefully how it should organise itself, which internal staffing and competencies it needs and which tasks can be outsourced.

“Trustees always have to stay in control,” he said. “Delegating operational activities is just a way to free board members up to focus more on strategic risk management and decision making.  

“We have been one of the leading pioneers in the Netherlands in this field, but we deliberately never use the term ‘fiduciary management’.

“We are discussing various solutions with the board members that may result in something that could be labelled ‘fiduciary management’ by some or ‘delegated CIO’ or ‘implemented consulting’ by others.”

Zamagna added that this decision to outsource and delegate some tasks was particularly important in Germany, where the emergence of new pension vehicles like CTAs or Pensionsfonds over the last years - together with a more complex investment structure - has made pension matters much more difficult to understand.

“At the same time, many more corporates have decided to finance their pension liabilities and therefore need an efficient pension management organisation within their treasury departments,” she said.

“We do not see ourselves as classic consultants aiming to get one client for a lifetime, but we are rather like a fire brigade helping corporates or pension funds when they feel the need to change something.”

Asked whether hiring yet another consultant on top of existing external advisers is a feasible option for institutional investors, Boerboom said optimisation was necessary and practically self-financing.

He added: “We are looking into the fee structures of the pension fund and are helping to re-negotiate or find other providers, and we are helping the board to use some of the money saved to reinvest in strategic issues like governance that are often neglected.”

Both Zamagna and Boerboom said they saw interest in those services, contrary to many other consultants who claim fiduciary management is not taking off in Germany.

Boerboom said: “We have seen similar reactions to the system by established consultancies in the UK, the Netherlands and Switzerland. They will not welcome it unless they reinvent themselves.”

He pointed out that the first generation of fiduciary management started in the Netherlands at the beginning of this century was “a failure”, as it was too static, and too much was outsourced.

“But the new generation, which has already been in place for five or six years now, is more flexible, and even early movers in fiduciary management have returned to the market with a more flexible approach,” he said.

Both Boerboom and Zamagna were critical of large consultancy conglomerates and said hiring a specialist for certain tasks might be cheaper and yield better results.

They said tailor-made services by senior experts often tended to be “more efficient”.