De profundis

It was a beautiful day and it was a great hotel. But I left the Professional Pensions Defined Contribution Conference profoundly depressed. Perhaps I needed  lux in tenebris (see the progress that is being made elsewhere). The problems created by “Freedom and Choice” appeared – at least yesterday – ineluctable.

The problem for the conference going consultancy fraternity (and sorority) is that no-one is making money out of DC consultancy. But this is a function of the current inefficiencies with which we are managing DC – these inefficiencies must be addressed.

We heard from a number of asset managers telling us what Joe Public thought and we gathered that Joe (and Joanne) were totally confused about what to do with their pension pots and had deep reservations about the advice they were getting.

We heard about various solutions put forward by the sponsors of this conference, all of which involved using their services and we heard from the Pensions Regulator, Andrew Warwick-Thompson about what the Government was doing to put things right.

The quality of the debate was poor

Considering the Conference was about thought leadership, we saw and heard very little all day that could be considered emotionally or intellectually challenging.

This was not the fault of the conference organisers – this was down to us – the audience and the speakers.

There was no new thinking about how we might bring the costs of delivering pensions down. No one talked about payments, no one discussed the blockchain and there was no discussion around non-conventional investment structures (ETFs for retail or mutual pooling for collective DC).

In terms of innovatory thinking, this was one of the weakest events I have attended in the past five years.

Why the quality of the debate was poor

This was a conference about making money out of DC. It talked about improving DC outcomes but the consumer was not in the room- save through vox pop videos which we viewed as if the people featured were fairground attractions.

The solutions on offer all hinged on finding ways to help people spend their retirement funds. There was virtually no interest in the savings process which now appears to have been handed over to the “auto-enrolment lot”. The fund managers see money in the accumulated assets.

So we heard from Hymans Robertson about how investment consultants can design decumulation defaults and Aon about what people want in retirement and we heard from Schroders about how diversification can reduce financial ruin and Alliance Bernstein about TDFs and we heard from Intelligent Pensions about how we should all be paying financial advisers to sort this out for us. Oh and we heard from a firm of lawyers about how complicated things are (as if we needed that after 8 hours of complication).

We must do better than this – at the very least we owe this to the conference organisers.

We need profound change to get us back into the light

1. We need to radically overhaul governance so we start focussing DC not just on delivering good outcomes, but on investment strategies that people can understand
2. We need to forget this silly talk about freedom and choice and focus on producing collective default mechanisms for the mass of people who don’t want freedom but want a good pension
3. We need to have a proper discussion on risk which gets past guarantees and looks pragmatically at what level of certainty people are prepared to accept
4. We need to explore and adopt new technology such as Blockchain, such as messaging and such as digital payments and get beyond the current delivery mechanisms which rival the Houses of Parliament for decrepitude.
5. We need to look at the regulatory structures of DB and DC and see how a third way can be established (as legislated for in PA15).

We get what we ask for – we asked for more of the same and that’s what we got!

I don’t blame Professional Pensions for the poor quality of yesterday. People turn up to these events knowing full well what the agenda will be and they demand more of the same.

We will continue to have conferences like this for the foreseeable future until we think bigger than the immediate ROI from participating

They are constrained by the lack of innovation within their organisations; the answers to making money all revert to taking a slice of the AUM and therefore the answer is always around asset management.

Infact yesterday was a blindingly well organised event. Thanks to Milly and her crew!

I presented late and the interaction with the audience was a little thin.  I guess having had a free breakfast, lunch and tea, not many of the delegates felt much point in staying!

Thanks to those who did!