Life’s a beach for the BlackRock IGC

black rock stock.PNG

It’s a sure fine of things to come when an IGC report is promoted by a stock photo. This couple appear on most of the IGC reports I have read, I suspect they were scammed out of their pension and now have to make a living looking happy outside of beach huts.  Sadly they presage a lazy report and here’s another (and hopefully the last) from BlackRock.

“Lazy” is not a word that I’d ascribe to most IGC reports, most are testaments to the struggles the Committee has with Value for Money, that – like the holy grail – hovers tantalisingly out of reach.

Not so BlackRock who just get out the cheque book, hand the problem over to BlackRock and presumably slope off to the beach hut.

It is important that you, as members, receive good value for the contributions that you and your employers are investing. This is generally referred to as value for money.

The IGC takes this extremely seriously.

Whilst we could technically have performed this exercise ourselves, we believe that it is important for members that this exercise is carried out at the highest level by appropriately qualified professionals and so during 2017 commissioned KPMG, as specialists in this area, to provide an independently assessed review of the overall offering as a follow up to the 2016 assessment.

What the IGC have agreed with KPMG is so anodyne that it is hardly worth my comment. BlackRock achieve a score of 92 out of a potential 100. KPMG have constructed some bizarre universe of rivals to Black Rock, each with its spurious title.

black rock charges

This is an analysis of BlackRock’s charges , the “money” in value for money”. We aren’t told what these charges are (that might be disclosing some client confidentialities). Black Rock clients can feel proud that they are not offering members anything “basic” or “average” but an “above average scheme”.

This is so uncontroversial that it probably ticks every box on KPMG’s risk register. It is busy saying absolutely nothing – very elegantly – kerching!

KPMG’s assessment gives BlackRock 135/150 for investments, despite all stages of the target dated funds underperforming their benchmark during the year (gross of charges). Just why their is underperformance isn’t clear (though it may have something to do with hidden charges which KPMG mention but do not display). The report does display the charges later (still not accounting for the underperformance). As one would expect, slippage trends to zero because BlackRock are a top tracking manager.

The reason for the 15 point loss, is not that the benchmark wasn’t achieved – pretty material in a value calculation but because

BlackRock didn’t quite reach 150 as it doesn’t provide an additional range of LifePath options based on member’s risk appetite (e.g. high risk or low risk).

Sweet mother of Jesus, I so wanted those extra LifePath options!” – (taken from the blog of the unknown member).

The report meanders on in similar vacuous vein.  BlackRock are nearly perfect at retirement, just tripping up because they don’t integrate their drawdown process into the accumulation fund but tip the target date fund into a special drawdown fund. It isn’t clear why this is a bad thing – it clearly trips some internal trigger in the KPMG DC rulebook.

Similarly , BlackRock’s governance is almost perfect except BlackRock don’t tick all KPMG’s boxes

to obtain a score of 100% an IGC must have an agreed training log. The IGC does, however, undertake ad hoc training as and when required and it should be noted that the IGC includes professional trustees. In addition, the IGC reviews member communications on an annual basis, whereas, to get 100%, KPMG felt that continuous review should be undertaken.

For heaven’s sake! Admin is perfect, communication almost perfect, the sun is shining and the waves are twinkling – happy days.

BlackRock’s IGC get out of their deckchairs just long enough to deliver their verdict on BlackRock’s overall value for money

We consider the methodology adopted by KPMG, based on its research of workplace pension providers as useful, covering the most important factors affecting you. Their assessment gives us independent confirmation of our own beliefs that members are provided with good value for money.

I have a good mind to send this to the FCA as an example of an IGC holding the IGC process in contempt. It is simply not good enough, outsourcing governance when you are an independent governance committee is not on. This report gets red – with vermillion streaks for its value for money assessment.


 Engagement

I will not labour the point. During the year BlackRock’s workplace pension business was purchased by Aegon. Though the report suggests that the IGC is likely to do another report in 2019, I really can’t see what is the point (unless KPMG are doing a “buy two- get one free” service.

The report is engaging enough not to be downright annoying. It didn’t send me to sleep and it was well written. It was however lacking in anything that I could call “interesting”. I’ll give it an orange which can be peeled in the beach hut.


Effective

You’d have thought, that having outsourced its main function to KPMG, that the IGC could get on with doing some effective work ensuring that policyholders got the best innovation their money could buy.

There is however no evidence that the IGC Committee did very much with BlackRock last year. They express disappointment that they didn’t get the transaction cost numbers from external managers, and there are perfunctory statements on ESG and GDPR. The report fizzles out with some biographies of those around the beach hut and a couple of links to post boxes which members are invited to click if they have anything to say.

I wonder if BlackRock have turned on the “out of office” message. This IGC report is really ineffective, I give it a red for not turning up, it rivals the first Hargreaves Lansdowne report for laziness.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in IGC, pensions and tagged , , , , , , , . Bookmark the permalink.

One Response to Life’s a beach for the BlackRock IGC

  1. John Hutton-Attenborough says:

    Credit to you Henry. Reading these reports must be the equivalent of banging your head against the wall while repeating the mantra “I love my job, I love my job”!

    Liked by 1 person

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