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Strategic Partnerships - a game of scale
Collaborative efforts can sometimes yield the best results. A significant number of fiduciary managers have forged strategic partnerships with the custodians of their clients’ scheme assets or the providers of services around them.
Managed well, these relationships can bring tangible benefits to pension trustees – cutting costs, reducing operational risks, and providing opportunities to foster innovation. In a rapidly changing world, strategic partnerships can also help fiduciary managers scale up their businesses, further enhancing the services they can offer to schemes.
As pension schemes and the issues they face become more complex, we at IC Select believe that trustees should consider how well placed their fiduciary manager is in this area. Does it have what it takes to adapt and innovate in response to changing client needs and developments in markets and regulation?
Is its model scalable in a way that means it can not only maintain, but also improve, customer service and the fund’s performance as it grows?
Not all fiduciary managers have strategic partnerships with custodians or asset-service providers. And, of those that do, not all of them manage to collaborate in a way that benefits the client. For some, the relationship is a purely functional one.
For us, that’s a missed opportunity. In our view, trustees should understand the appetite that their existing or prospective fiduciary manager has for collaborating with others, irrespective of whether they have formal partnerships or not.
That collaboration can take many forms: it could be co-operating with third parties on technology, the benchmarking of service provision, or centred on environmental, social and governance (ESG) issues. When it works, it will almost certainly improve the service that is provided to scheme trustees and, therefore, their members.
Those fiduciary managers that fail to develop effective strategic partnerships may find themselves struggling to scale up their businesses and keep pace with market innovations. And that makes it more likely that the service they provide to their clients ends up falling short.