There’s been a lot this week on social media about blame. Perhaps the most pertinent criticism of accountability in pensions came from an IFA.
Which you then won’t satisfy because they’ll have no idea how they’ve done they’ll just have a meaningless figure. You’re playing on people’s need to constantly compare themselves to the next person and desire to feel smug (>50) or blame someone else (<50).
— Ed Gibson (@Gibson_XL) August 22, 2019
Ignore the bit about me not knowing how people have done (AgeWage has over 200,000 individual sets and counting. Ed’s point is right, people who do better than average feel smug while losers feel cheated and all too often join class actions (PPI etc),
On the face of it , giving someone the results of their saving is a mugs game, no one will thank you for doing a good job and you’re going to get you arse busted if you don’t.
It’s not just IFAs that feel this way.
I’ve spoken to a few of the ludicrously
overpaid clever CIOs of our big pension funds and when I explain value for money scoring to them , they start fidgeting and going a little green- then – when they’ve worked out their plan of attack- they hit me with a lot of risk-rated – de-risking – hedging stuff to show that they know far too much to be doing with a simple rating that’s told people how they did.
Now not being a CIO myself , I am sure they are right to be frightened by the terrible beauty of a number that tells you how you’ve done. It asks a question which is definitely not in the member’s Q&A – “has the plan worked”.
Actually I rather prefer Ed’s honest admission that I’m just stirring up a hornet’s nest of discontent and I should let sleeping dog-funds lie.
Let sleeping dog-funds lie
No sooner did I write that than I thought of Woodford, and how his lack of accountability has now stored up a dam-full of resentment that will burst when funds are finally released later this year.
It is far, far better for people to know bad news early than to let the rot set into the timbers (I am sitting on Lady Lucy as I write this – looking at the repairs that cost me £10k three years ago – when rot set in!)
If people are getting consistent underperformance over time it is either because they are paying too much to have their money managed or because their managers are consistently getting it wrong in bets on markets, stocks and hedging – or it’s down to bad luck (investing the lump sum the wrong day). Very occasionally it is because of theft.
If I come to sell my car and I can’t because it hasn’t been properly maintained, then I can blame the mechanic, the manufacturer or myself. In the end i would like to know what went wrong before I send my car to scrap. But I will not let the problem happen again, I will learn.
That’s why we can’t let sleeping dog-funds lie. We need to know that things are going ok , and if they aren’t, we need to know how to stop the rot. That is what ordinary people do with all the other assets they manage – cars, houses , stamp collections – why in heaven’s name can we not see what is going on with out pensions and hold our plan mangers to account?
We can’t hold people accountable because they say we can’t.
Whether it’s a wealth manager of the CIO of a multi-billion pound pension plan, you are not getting the simple information about how your DC pension is doing – against everyone else.
Because you don’t know , you can’t ask the next question – what went wrong and what went right. And because of that – you have to sit in the backseat of the car while Mum and Dad drive you where they choose to go. You are not in control of your destination.
But when you get out of the car at the end of the journey, you will be horrified to find that Mum and Dad have scooted off and you are left with a pension pot and the need to find your way home (eg get a spending plan that lasts as long as you do).
Mum and Dad have left you with a pretty tough problem and it’s too late when you get to retirement – to complain that you haven’t got what you expected. You were never able to hold Mum and Dad to account when you sat in the back seat – and you can’t now.
Who wants to be accountable for people’s later life happiness?
Put like that, would anyone want to manage someone’s retirement fund – whether wealth manager or CIO? I think a few brave souls would , but most fund managers are able to hide between rows of intermediaries so they are never directly accountable to the people they serve.
Increasing the accountability of the people who manage our money is long overdue. But it isn’t going to happen till we demand the transparency of information that I am doing at AgeWage. Making these demands on behalf of others is proving very disruptive to the people who manage our money.
I can understand that they don’t like it at all. They point their fingers at me and tell me that I am boiling the water too hard, that the frog might wake up and jump out the pot, that people will leave off saving for the future because of what’s happened in the past.
I can see why they feel this way, but there is no evidence that people stop saving because they find things aren’t going well. I have been working in financial services through the crash of 1987 and 2000 and 2008 and no doubt I will see another crash before I pack up. What I see is that people hate losing money but don’t stop saving because they have seen their savings drop. They just keep saving.
I want to be accountable for my AgeWage scores and I hope that you will let me be. Until we make ordinary people masters of the information that tells them how their funds have done, I fear we are just letting sleeping dog-funds lie! When those dogs are woken- they are likely to cause a lot of trouble.