Today is a big day for funds disclosure in the UK. It is the day hands to the FCA, the template created by the Institutional Disclosure Working Group. This template will facilitate the collection of data on the costs and charges we incur when handing our money to fund managers.
This may sound dry stuff but it isn’t. If you can’t measure it – you can’t govern it and we haven’t been able to assess the rate at which fund managers burn our money, in search of value.
Whether that value goes to the owner of the fund or to the manager or is just dissipated is a separate but related matter. We need not just to know the cost but the value we get and we need to know the risk taken to extract that value.
Dr Chris Sier spoke yesterday at the DC Strategic Summit as did Julius Pursaill, who is Chair of the DC Trustees of RBS and an investment guru at Royal London.
What I had not appreciated till then was the extent to which these gents have progressed their thinking from lofty abstractions to consumer applications.
The holy trinity of cost, risk and performance appears set to be launched to ordinary people (like you and me) , in the guise of a number.
the question that Pursaill put to the audience was whether a single number score on your fund or pension contract is a “reductio ad absurdum ” or a financial “must have”.
Sier made it pretty clear that it became the financial services industry to strive for such simplicity. Many in the audience violently disagreed.
The process that such a number could be calculated, was outlined
This to the consternation of senior investment people who understandably considered this approach over simplistic. “I can understand presenting a number of numbers” said one CIO , but to aggregate everything into a single score, makes things misleadingly easy.
Misleadingly easy?
We had a vote on whether a single VFM measure would be a viable and attractive development – 72% agreed it would, 28% thought it wouldn’t and not one person abstained.
The most interesting thing for me was that nobody didn’t have an opinion and there were no “don’t knows”.
For the 28% who are against this kind of measurement, we need to better understand why.
It seems to me that such a scoring system is aligned with the aims of the pension dashboard, with the need (identified in the FCA’s FAMR project) to make advice available to the mass market and is critical to pension aggregation (pot follows member).
But is this the way to get a pension aisle in the money supermarket?
What do you think?
Good luck to Chris Sier and the IDWG
The creation of the means to collect information on pensions is critical to the integrity of a single number. It’s a step along the way to empowering people to understand what they own, valuing what they own and managing their money with confidence.
Chris Sier is helping to restore confidence in pensions. The Pension PlayPen wishes him luck.
Pensions belong to ordinary people. Unfortunately, few ordinary people understand financial services, least of all investment management. So, a single figure is essential, in my opinion.
As Chair of the DC Strategic Summit, I’d like to comment a little further on the audience demographic at the event yesterday. This is important in understanding this electronic poll, on which Henry reports. The delegates were comprised of pension fund executives (Heads of Pensions, CEOs, CIOs and Trustees), fund managers, consultants and other advisers, service providers, industry and government bodies (eg. DWP and TPR). The pension execs were the largest single group. An outstanding turnout by the way. We didn’t break down the vote by category. I don’t like to speculate but I’d say it’s a fair guess that a greater proportion of the fund managers would have disagreed with the concept of a single measure for VFM.
You may be right! The pressure for some kind of simple comparator is very much bottom up- rather top down (to use fund management language!).
Thanks Ant, very well put!
HT
reductio ad absurdum applies more accurately to taking the abstraction of homo economicus and applying him to individuals in aggregate purchasing in the pensions market. That’s not to say one can’t filter out egregious underperformance and over charging and that in itself would be great progress for institutional and individual investors alike; but the long term nature of the product makes more useful purchasing distinctions impossible except over the long term by sophisticated institutions ie pension funds with fiduciary duties. Your energy from a public policy point of view should surely be burned in pushing for enlargement of such pension funds to make long term decision deploying all the available (post IDWG) information. Apart from anything else without these institutions CDC fails! Gregg
Sent with BlackBerry Work (www.blackberry.com)
From: The Vision of the Pension Playpen <comment-reply@wordpress.com> Date: Thursday, 14 Jun 2018, 7:22 am To: Gregg McClymont <Gregg.McClymont@aberdeen-asset.com> Subject: [EXT] [New post] “Reductio ad absurdum” or a financial “must have”?
henry tapper posted: ” Today is a big day for funds disclosure in the UK. It is the day of the launch of the template created by the Institutional Disclosure Working Group that will facilitate the collection of data on the costs and charges we incur when handing our money to “
I will be turning my thoughts to these very subjects Gregg!