I’ve been waiting to review BlackRock’s IGC chair statements for a couple of weeks but all I could see was a link to a report marked “April 2016”. I carelessly pressed the link this morning to find a report marked April 2017. It this degree of careless disregard for its readers , extends to its IGC, I have every sympathy for Allan Whalley and his board.
BlackRock’s workplace pensions are no longer owned by BlackRock the global fund manager, but by Aegon (the Dutch insurer who’s IGC report you can read here). Although the announcement was made in May 2016, we learn the transaction won’t complete till April 2018. The IGC sees the merger positively, as offering its members the benefits of Aegon’s member communications. The future of the IGC post 2018 is unclear but the likelihood that BlackRock funds will be offered to both Aegon and Black Rock pension customers is not in doubt.
In the meantime, the IGC has spent the last year outsourcing its responsibility to monitor the value members are getting for their money to KPMG. KPMG have done a review of the BlackRock proposition using six metrics (sensible ones) and scoring each out of 100.
There are three problems here
- This is work that the IGC was charged with doing – outsourcing to a consultancy is pretty feeble
- The scoring system assumes that there is some kind of benchmark (the average provider which gets 50 out of 100). There is nothing we can compare the BlackRock scores with,
- These scores are based on a standard proposition, BlackRock’s workplace pension has prided itself on providing bespoke services to each employer.
I don’t have a problem with KPMG issuing an assessment to BlackRock or Aegon of the value of its proposition, but I do think that the resulting score of 85.6/100 is spurious in its accuracy and meaningless to the readers of this report. If BlackRock’s IGC wishes to publish other KPMG ratings (calculated on the same basis), I’ll be happy to change my view!
Vfm is about financial outcomes not the “member experience”.
But the KPMG work is nothing to do with value for money; it is an advert for Black Rock’s workplace pension to prospective purchasers.
The IGC report gets hot under the collar that it still has no way of properly measuring how much members are paying for fund management. BlackRock have provided some numbers relating to “tax and commission” but these aren’t the slippage numbers that the FCA is promising us.
The IGC Chair berates the industry for not getting its act together and concludes it will be very disappointed if transaction costs cannot be measured by April 2018. I heartily agree and this is well said. I look forward to discussing with Allan how we can put this right as I too am determined to have this sorted by the next Chair reports.
But BlackRock are part of the industry and a very substantial part of the industry, despite BlackRock offloading its workplace pension to Aegon, I would expect it to have done more to promote transparent costs than they have done and I wish that its IGC had stated this explicitly. I can only give the IGC an orange rating for Vfm , the “member experience” as Julius Pursaill rightly writes, should not be confused with member outcomes, Vfm is ultimately about member outcomes.
It is a shame that an investment driven proposition from the world’s largest fund manager can make no comment on Environmental, Social and Governance issues and how its provider is addressing them.
An effective report?
Having shipped the majority of the heavy lifting onto KPMG, the report concludes
But the communications that the IGC have reviewed scored a relatively disappointing 32.5/50 which the Chair regards is “not as high as we would like it to be”. Bearing in mind the Aegon deal is still a year away, I would have expected the IGC to be doing more for members now. It is hard to find anything in the report that the IGC can be effective about. It is hard to see quite what the IGC has done for members last year, other than spend money with KPMG – I give the IGC report a red for its effectiveness.
The tone of the report
The report reads well and has plenty of personality about it. But it worries me that so much is taken as read. BlackRock systems are “modern, up to date and fit for purpose” – three meaningless descriptors which need some challenge. Aegon’s capabilities to enhance the “member experience” are assumed not analysed and those of us who have worked with Aegon know that these capabilities are not always quite what Aegon crack them up to be.
I give the report an orange for its tone, it is not quite the eulogy of some of its peers , but it is some way short of what it could and should be.