Origo – a monopoly in the making

I have for five years been writing about the pernicious impact of a potential monopoly created by Origo in the transaction of pension transfers. I still worry. Origo was set up  in 1989 as a non-profit organisation owned by 12 pensions providers and investment management firms. Their mandate was to develop technology solutions to solve inefficiencies and process pain points across the industry.

It was set up by the industry for the industry and is effectively a transfer club based on a set of private protocols which other pension providers can join on the founder’s terms. So long as the firms who own Origo behave beneficially, Origo is only a potential monopoly. As a “not for profit” it paid its executives handsomely, but it was still regarded by advisers as part of the solution.

But the worry remained that were Origo to be sold to a less benevolent organisation , there was a potential for substantial fee increases an. Fees are not generally absorbed by shareholders, in financial services they are passed on to consumers. Consumers might end up paying for the private club – and paying through the nose.

My worries intensified when I read this headline.

I was not the only person who gulped when I read that Origo’s founders sold to Vespa Capital

Via Nova challenges Origo.

I am pleased to see that an alternative to Origo is emerging. It is called ViaNova and it has been doing good work in the funds industry for some time. Even 15 years ago, the majority of fund transactions were manually processed on the back of faxed instructions. This was slow, inefficient and resulted in errors.

ViaNova changed that by introducing a system of protocols based on Swift Messaging and open standards that speeded up transactions and made them cheaper and more accurate. Initially there was resistance, but once LGIM adopted the “new way”, there was no turning back. The open standards and messaging protocols pioneered by ViaNova are now generally adopted.

Now ViaNova are back solving the problem created by the potential monopoly created by Origo. Remember, in the private club that Origo had created, it was Origo’s way or no way.

Now there is a new way based on the same system of Swift Messaging and Open Standards that brought fund transfers into the 21st century.

Once again, there is reluctance to adopt new technology and open standards. Once again it is taking things forward by recruiting early adopters who are effectively breaking ranks

The early adopters of the approach include the WTW (Willis Towers Watson) Lifesight Master Trust and two large occupational DC schemes managed by Hargreaves Lansdown and Fidelity.

While Origo was very much an insurance and insured SIPP initiative, ViaNova brings retail and institutional pensions together to create “open pension transfers”.

The ViaNova initiative brings together schemes regulated by both the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR), using open standard solutions with a common legal framework to streamline DC transfer processing.

TEX is responsible for the legal framework, managing and running the complete set of non-commercial contracts between parties that cover standards, service level agreements and matters of liability concerning all aspects of transfers.

The ViaNova group, meanwhile, will continue to look at ways in supporting the industry, including the use of DB transfers.

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How ViaNova’s approach works

Timely delivery – anticipating the impact of the pensions dashboard.

This is of course happening at a time when precisely these conversations need to happen. Whether it is the intended consequence or not, the creation of pension dashboards will result in ordinary people wanting to combine their pension pots so they can see and organise their retirement income on one platform with one payment provider.

This may not happen on dashboards , but dashboards are going to accelerate the number of DC transfers even faster than the rate of consolidation today. Already we are seeing a surge in transfer demand , but not a reduction in pension transfer times

Since this report, transfer times have continued to slow (as reported on this blog). To be fair to Origo, this is not due to Origo’s technology, more to do with certain pension provider and trustee’s predilection at throwing red-flags at SIPPs who use marketing budgets to incentivise “refer a friend” schemes.

However, the concentration of increasing numbers of transfers through a private-equity owned monopoly is certainly not a desirable outcome of  the pension dashboard’s delivery.

Why I am backing ViaNova

As the name suggests, ViaNova is the new way of doing things, Origo represents the past. We know that the new open standards created for open banking have improved the consumer’s VFM from banking. I expect these new open pension standards will bring down the costs of transfers for providers, advisers and most importantly for consumers.

I think it necessary that the hegemony of Origo is challenged, especially now it is privately owned. I hope that its founders have not signed up to excessively binding agreements requiring them and their customers to stay using Origo for unreasonable periods.

I hope that the early adopters give courage to other, less well-funded DC providers to sign up with ViaNova so that by the time the dashboard in fully up to speed, we will not just have open data, but open transfers.