Not every day – but maybe every other day.
I ought to set up a virtual graveyard on this blog for the European, British and American fund managers who have set up DC teams to sell lookalike DC product on the basis of some strategic review carried out in a faraway place by management consultants.
RIP Schroder Pensions
RIP Threadneedle (Amex)/DC Solutions/Capita
RIP Mercury Life. Mercury Equitable, MLAM/NPI/AMP. Blackrock/DC Link
RIP several iterations of Fidelity
There are probably many more that briefly flickered across our radar via two page spreads in trade rags and the sponsorship of an NAPF Conference.
There are two delusions that these fund managers have and will continue to suffer from
- That their brand is able to leverage distribution, it doesn’t and won’t, the life companies (bless ’em) are the retail pension brands and the gatekeepers for the fund managers are their platform managers and the fund rating agencies that dictate what IFAs and EBCs recommend.
- That there is any way to measure alpha in a DC sense, there isn’t at member level, there isn’t at trustee level and frankly even if a DC investor were to benefit from beta outperformance (net of fees) he or she’d piss it up the wall to the power of ten when annuitising.
The number of independent purchasers (by which I mean trustees and corporates who research and purchase independently of an adviser) must be countable on one hand.
Sponsors and trustees may know the fund manager’s brand but supposing that they will want to entrust their default savings option inadvisedly is as likely as Steve Webb taking an cash-enhance TV from the Parliamentary Contributory Pension scheme. Ok it’s Christmas – cut me some slack on a little jargon guys!
So as I travel up to the smoke to see the future of DC (part 84) as explained by J Randolph Bigsuit of MegaManager inc. , I am wondering what advice I could give him other than to stick with 401K and IRAs where the fees are fatter, the punters believe in alpha and there aren’t gits like me about asking how they can justify their proposition in a competitively priced market?
My answer is this. Read this blog and the 414 like it. You’ve got an R & D budget and a marketing budget. Use it to make a difference to the 450,000 people who are going to get squashed by current annuity products. Think about a decumulation product that provides a genuine alternative to annuities and doesn’t need to be primed with £250k of DC savings (per punter).
If you’re going to sell snake oil, sell it in the bond fund space and sell it to the purveyors of DGFs. If you are looking for distribution for your snake oil, talk to the platform managers- by which I mean the big insurers left standing. You probably are already talking to ATP and NEST but don’t count on any big wins in terms of upfront assets from either.
You’re arriving over here now because we are finally accumulating some DC assets and like the thieving magpie or cuckoo, you want to raid someone else’s nest. It’s certainly a better tactic than you trying to buy distributions like those in my graveyard but please don’t think this is going to be easy.
Today’s snake oil may be tomorrow’s penicillin. The wise men you meet today will give you a hearing but you shouldn’t be expecting any quick breakthrough. This is a mature and well-governed market, we’re looking for fund managers who know what the problems are and you need to understand how our market differs from your homeland’s. The UK is not like Europe, or South Africa or the Far East , nor is it like the USA.
The future for DC may well be a fund manager’s future but it’s a fund manager with big ears and a small mouth who is most likely to win.
- Beyond belief – investment philospohies in the DC world (henrytapper.com)
- Investors raise cash to highest level in a year (business.financialpost.com)
- Should you believe the low-cost fund hype? (telegraph.co.uk)
- High ‘hidden charges’ in City fees are leaving pensioners and savers worse off (dailymail.co.uk)
- The problem of communicating DC to DC? (sluggerotoole.com)