The Advert
On Tuesday I am sitting on a panel with good friends; Otto Thoresen, author of the Thoresen report; Mathew Arends, Partner at Aon Hewitt, Duncan Buchanan president of the Society of Pension Consultants. The session will be chaired by Malcolm Mclean OBE.
The panel is the highlight of a day discussing the future of pension consulting and I believe you can still get tickets here
There’s a good supporting card including my buddies Simon Leyland and Peter Shellswell and some other people. They’ve even brought in that joker in the pack , Michael Johnson who I hope will do his party turn and tell us that pensions have no future. There’s nothing like Michael to boil the kettle.
The only thing missing is women – consultants don’t have to be male! I’ve put some pictures of some women in this blog to remind me that they are the people who generally get things done!
The Conference is in central London and gives you all the tra-la-lah of CPD points so I hope I’ll be seeing you there.
The danger of uncontested scrums
The only problem with the panel is that it is in danger of agreeing with itself. Matthew is a fan of CDC (though he hasn’t quite got the point that it’s for people not employers- see yesterday’s blog). Malcolm is generally right though he works for Barnett Waddingham which is becoming an old folks home for retiring grandees, Duncan is a good man but spends far too much of his life devising tax-avoidance plans for the pension super-rich while Otto is representing a clapped out trade-body saddled with debt and a mutinous membership.
So I will find plenty to disagree on! I hope my colleagues will cast an equally jaundiced eye over First Actuarial and the Pension Play Pen. We need some genuine debate. Watching rugby with uncontested scrums (I’ve just watched England lose to Australia this morning) is a sad affair!
Where consultants can be so rubbish
I’ve sat on too many management boards of the consultancies I’ve worked for to have any respect for the way they are run. When the primary objective of a consultancy is to generate value for a small group of Founding Partners, then consideration for the other stakeholders –employers, trustees, members and yes- staff – is second order. The principle of the customer comes first cannot be subjugated to a spread sheet where the first line read is “margin”.
Where consultants can help
The future of pension consultancy lies in seizing the opportunities and managing them. That is not the same as exploiting them. The new pension freedoms offer us the Wild West. We can act as bandit or as sheriff, or we can be the guys who built the ranches and bring ordered prosperity out of seeming chaos.
There are a whole load of things we can do to make these freedoms work but if we start with a vertically integrated model which asks how many bps we can suck out of “funds under advice” , we will drag pensions back to where they came from – and that is not a good place.
I hope we can talk about the positive role that consultants can play to;-
- Construct products that engage, educate and empower people to organise their financial affairs in retirement
- Warn people off the scammers that beset our industry like the bandits and brigands that beset the ranchers.
- Ensure that we preserve the heritage of defined benefit provision- both funded and unfunded
- Promote pensions as things that serve the needs of people retiring and not the needs of the pension industry.
Where should our focus be?
All the panellists were asked to put down a few bullets about what they thought was important. One panellist struck me as hitting the sciatic nerve that should enliven the whole event, his bullet
(to meet) “the needs of those in the middle segment (too much money to just take the cash, too little to perceive value in seeking regulated advice” .
Consultants are not offering retail advice, they are working through those organisations that individuals rely on for the delivery of their retirement income, employers, trustees, unions, insurers and fund managers. They cannot both advise on and be the managers of the benefits for consultants have a critical governance role. They must remain unconflicted and properly independent to fulfil this function.
There are those who will serve the needs of those with limited funds and debt, those who will manage those with wealth but consultants need to focus on the vast majority of UK citizens who will reach retirement solvent but not comfortable. People for whom an acceleration of retirement income by 20% would constitute an economic miracle. I believe we can achieve such a goal.
I will be 53 in a few days, today the average person is providing themselves with around £1800 per year of private pension (based on median pot of £36k), if we could increase that to £2,000pa within five years – solely by making pensions more efficient – we would have done something worthwhile.
Increasing pensions efficiency by 20% over five years may be what we can do, but individuals, by saving more into the new and better vehicles we can hope that pension outcomes increase by very much more than 20%.
If I had a single phrase I could use to capture what 2015 will mean to me it would come from that quote.
“To meet the needs of those in the middle”.
