The Transparency Times Edition #3 July 2016

July 2016

Dedicated to driving up the levels of transparency in financial services, right around the world.

This month’s contributors include: Henry Tapper

Jonathan Parker

Sophia Morrell

Richard Field

Founder, Pension PlayPen

Founder & MD, Jonathan Parker Consulting

Independant Media Consultant

Director, Institute for Financial Transparency

Gregg McClymont

Olivia Seddon-Daines

Head of Retirement Savings, Aberdeen Asset Management

Senior Research Analyst, ET Index Ltd.

Adam French

Co-Founder & MD, Scalable Capital Limited

Andy Woolmer

CEO, New Change FX

Tom Tugendhat

Member of Parliament for Tonbridge, Edenbridge and Malling

Richard Metcalfe

Independant Consultant

Janice Lambert

Former Europe and International Mgr. The Pensions Regulator

and more!

The official publication of The Transparency Task Force. FREE to members of the Transparency Task Force, membership of which is also FREE

CONTENTS: LAUNCH EDCITION | MAY 2016

THE OFFICIAL PUBLICATION OF

Andy Agathangelou

Founding Chair, The Transparency Task Force “Transparency and Teamwork for Pension Cost Optimisation?”

Page 3

Sophia Morrell

Independant Media Consultant “Assets through the looking glass: why transparency is critical to reputation” Page 35

John Belgrove & Zoe Taylor

Henry Tapper

AON Hewitt “Ain’t Misbehavin’” Page 38

Founder, Pension PlayPen “The IA and the abuse of personality” Page 6

Tom Tugendhat MBE MP

Member of Parliament for Tonbridge, Edenbridge and Malling “Foreign Exchange: Why consumers & businesses need and deserve greater transparency” Page 10

Andy Woolmer

CEO, New Change FX “Bringing transparency to currency markets” Page 42

Richard Field

Olivia Seddon-Daines

Adam French

Vidya Nathan

Director, Institue for Financial Transparency “A brief history of transparency” Page 14

Co-Founder & MD, Scalable Capital Ltd. “Don’t let millenials carry the burden of hidden fees” Page 20

Gregg McClymont

Head of Retirement Savings, Aberdeen Asset Management “UK Pensions: Avoiding the lemons” Page 23

Janice Lambert

Former Europe and International Manager at the Pensions Regulator “Insights from the OECD’s Paris Forum” Page 26

Senior Research Analyst, ET Index Ltd. “Moving the transparency debate beyond Active v Passive” Page 46 Economics and Mathematical Sciences Graduate “Why I believe there is a need for higher levels of transparency in the financial services sector” Page 50

All you need to know about: The Transparency Task Force Teams Page 52

All you need to know about: Transparency Statements Page 58

Jonathan Parker

Founder & MD, Jonathan Parker Consulting “The nature of charging structures for consumer savings products” Page 28

Richard Metcalfe

Independant Consultant “Let’s risk it!”

Page 32

Recommended reading Page 63

All you need to know about: The Directory of Pro-Transparency Organisations Page 66

2

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

COMMENT FROM THE EDITOR

Transparency and Teamwork for Pensions Cost Optimisation?

by Andy Agathangelou, Founding Chair | The Transparency Task Force It has been said that transparency alone may not lead to much change, and that we should remain pragmatic about what we’re trying to do and how we should go about doing it. I think that the sentiment behind the point is that transparency is something that enables other good things to happen; but transparency alone may not have much of an impact.

I’m open-minded about that but on the basis that it might be right, maybe we ought to be willing and able to do more than just encourage transparency for the full positive impact of transparency to be felt?

Therein lies an idea that

relates (at least for the moment) to just workplace pensions in the UK and I’m extremely keen to get your views on the idea please.

Here’s an outline: • A lack of transparency is preventing Trustee Boards and IGCs from being able to efficiently optimise scheme costs; ‘You can’t manage what you can’t measure’ is a simple way to think of the problem • Furthermore, the lack of transparency

Edition #3

|

is inhibiting the market from working efficiently - how can the market work efficiently when the market seeks value for money but cannot find it due to the lack of transparency on costs and charges?

• At least one UK scheme, The Railways Pension Scheme, has appointed a specialist to identify and hunt down wasteful costs to manage out the problem, and they are very successfully making huge savings.

• Maybe a similar approach ought to be taken by Trustee Boards and IGCs in all pension schemes that suspect there could be savings to be had?

• For very large schemes, appointing permanent full time staff to do the job of cost optimisation would seem to make sense

July 2016 | www.transparencytaskforce.org | The Transparency Times

3

• But for smaller schemes permanent full time staff might be an over-engineered and unworkable solution • Instead, they might want to be able to draw on cost-optimising expertise as and when they want to. That might be on a one-off, ad-hoc or parttime basis; I guess it would vary a great deal from situation to situation and scheme to scheme • The full ‘black art’ of cost optimisation isn’t known by many people because of all the complexity in general and all the opacity around costs and charges in particular. I imagine that very few people indeed have the level of detailed knowledge that would be needed to cover all the basis on their own in the detailed and forensic manner necessary • So one way of solving the problem would be to have a cluster of individuals with all the expertise necessary that can work as a team, who would be able to work flexibly in response to the varying needs of the schemes they were serving. Each individual would specialise in a particular aspect of cost optimisation • Within some of the very large advisory firms and consultancies it might be possible for all the skills, insight and experience needed by each of these individuals to be provided by experts working for that one firm • But if an advisory firm doesn’t have all the skills, insight and experience needed then perhaps it could team up with one or more other firms to be able to provide a com-

4

plete solution to their clients and potential new clients • And if you take that particular point to the Nth degree you could conclude that if there were say seven people needed for a complete cost optimisation team you could have those seven people from seven entirely different organisations. Some might be working for very large consultancies; but some of them (indeed perhaps even all of them) could be individuals working for very small independent consultancies • I’m thinking that what matters most is the competence of the individuals (I’m thinking they would have to be red hot at their part of the cost optimisation process) and their ability to work as part of a team; not the size of the organisation they are connected to • Somehow all members of the team would need to work to a common methodology, have a similar philosophy and approach etc.

Once I get to that stage of my own thoughts on the idea I get far more questions than answers: Process? Risk management? How to charge for the work? Payment formula for the individuals providing the service? Roll-out strategy for existing clients? Client acquisition strategy for new clients?

Despite these and many other unanswered questions I think the idea might have tremendous potential, and perhaps most importantly it could lead to a real, practical value to the greater transparency we are campaigning for.

So to summarise, the idea is to explore whether clusters of individuals that have all the necessary skills, insight and experience between them can work together provide what I think would be an extremely cost-effective service to UK Trustee Boards and IGCs that want to optimise costs.

Perhaps the cost spent on hiring in the service might be the best ‘investment’ a pension scheme can make, with amazing Return on Investment?

I am hoping there might be two types of people that are keen to explore the idea with me further: Firstly, those that are responsible for DB and/or DC pension schemes keen to save money through a systematic and well-structured, forensic cost optimisation programme. Please get in touch if that’s you.

Secondly, those that would like to explore being part of a team that gets paid to optimise pension scheme costs for DB and/or DC schemes in the UK. It’s very early stages for the idea and I am looking to keep our campaigning community up to date on developments, if the idea gets any real traction.

Please do make contact if you’d like to express interest or share your thoughts on the idea, and we’ll go from there.

Thank you.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

PLEASE NOTE As you may be aware there has been criticism of my decision to be a member of the Investment Association’s Cost Disclosure Advisory Board.

Whilst there has been publicty about this matter you may not have seen it. The purpose of this note is to ensure you are aware and to invite you to let me know if you wish to disassociate with the Transparency Task Force as a result of my decision.

Please pop me an email if that is how you feel so I can amend my circulation list accordingly.

My email address is andy.agathangelou@transparencytaskforce.org I’ll not take such a decision personally.

If you wish to know more before making a decision you can read the article by Henry Tapper that follows and search the ‘net for other coverage if you want.

Kind regards, Andy Agathangelou, Founding Chair, the Transparency Task Force.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

5

ARTICLE: HENRY TAPPER

THE IA AND THE ABUSE OF PERSONA

by Henry Tapper, Founder | Pension PlayPen; Director

Of all the financial myths that remain unchallenged, the myth of personality is least challenged and most lethal. For it allows the congregation of expert panels/committees/boards – stuffed with perceived “personality” to validate all manner of iniquities.

For those personalities are – by dint of CV – considered unimpeachable in their wisdom, their integrity and their good intentions. Taken collectively, their judgements can be used to rubber stamp any old rubbish – and this is precisely what we are about to see happen as the Investment Association seek to kick the debate on costs and charges into the long grass.

Here is how the Investment Association are playing the personality card.

Chaired by NEST Chief Investment Officer Mark Fawcett, the Board includes other senior figures from the pen-

sions world as well as representatives from the Financial Services Consumer Panel, Transparency Task Force and Local Government Association.

Lest we are in any doubt that this board will comprise the great and the good, the IA’s press release goes on to list them.

The Disclosure Code Advisory Board: Mark Fawcett (Chair) - NEST Andy Agathangelou - The Transparency Task Force Yvonne Braun - The ABI

Richard Butcher - PTL Tereza Fritz - The Financial Services Consumer Panel (in an advisory capacity) David Hare - Chair, Phoenix Life IGC Chris Hitchen - RPMI Jeff Houston - The Local Government Association Thomas Mercier - PLSA DB Council Alex Pocock - The Society of Pension Professionals (SPP) Graham Vidler - The PLSA David Wills - The Society of Pension Professionals (SPP) The list represents all the vested interests, the fund managers, platform managers, insurers, mastertrusts, occupational pension schemes, IGCs and even the Transparency Task Force.

The point of inclusion of names is to leave us in no doubt that our interests are being represented.

6

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ALITY | First Actuarial The FSCS clearly had some reservations but everyone else seems to be happy to be displayed and representation on this panel is already on at least one of the panellists linked in CV. There is safety in numbers.

IA as impressario: The Advisory Board sits in a wall garden under an oath of secrecy, its terms of reference are not available to less mortals.

Those on the panel have been invited, there are notable exclusions – the awkward squad who would ask difficult questions; Chris Sier, Con Keating – organisations such as Share Action, PIRC, Manifest and consultancies such as Novarca.

In a week when our new Prime Minister called for boards to have independent representatives, this Board is theatrically stage managed.

Why we should not dare to make it personal: The IA are in a doubly strong position, because of the myth of personality. In a recent blog I made an attack on NEST for allowing the position of NEST CIO to be (ab)used to give Edition #3

|

this Advisory Board credibility and I questioned the credentials of Mark Fawcett to chair the board. I said he did not have sufficient experience managing assets and that NEST had no great track record on investment governance. (NEST have outsourced investment administration to State Street, this State Street.)

These are my opinions, I am also of the opinion that Mark is a good man and is doing a reasonably good job as CIO of NEST. He should leave it at that.

This was sufficient to earn me the threat of legal action from NEST who spend a considerable amount of time monitoring my blog and presumably a considerable amount of (our) money, protecting their corporate reputations and those of key staff.

The myth of personality persists because of the ever present threat of legal action from the usual suspects who are happy to be blogged about when the weather is good, but run to the lawyers when they don’t like what they hear.

Let’s be clear, the IA in its press release, played the

personality card. Those of us who see the Advisory Board as an attempt to sanitise the IA’s ongoing attempts to stop the proper disclosure of costs and charges, face legal threats for daring to oppose their tactics.

Standing up for yourself: The value of independence is often talked about, but when independently minded people speak their mind, especially when they publish their thoughts, they are not listened to, they are threatened with legal action.

Almost invariably the legal action is brought by corporates to protect the reputation of the corporate and key staff. I do not blog on behalf of a corporate. These views are my personal views (please send the writs to me).

The Disclosure of Cost and Charges needs to be overseen by Government My justification for writing what I have done, and what I write now, is that the proper process for getting a Disclosure Code in place is via the FCA who are com-

July 2016 | www.transparencytaskforce.org | The Transparency Times

7

pleting a market review of asset managers (the FCA are not on this Board). The person overseeing this work is formerly of the IA and was fired for promoting transparent promotion of cost and charges from IA members (the fund managers) There is a second piece of work being carried out by the Local Government Pension Scheme which will require fund managers who want to manage our money to disclose costs and charges according to a new code (the authors of which are not invited to the Advisory Board).

There is an outstanding call for evidence from the FCA going back to April 2015 which is still due to publish the evidence submitted.

There is work to be done on the disclosure of cost and charges as part of the

DWP’s charge cap disclosures for workplace pensions, due to be rolled out in April of next year.

By April 2017, the IGCs are due to have not just considered, but adopted a way of measuring costs and charges as part of their value for money formulation.

Whether through the FCA’s Market Review of fund managers and investment consultants, through its 2015 call for evidence on cost of charges, through the LGPS disclosure requirements or the DWP’s work on an inclusive charge cap, there is ample work going on within Government.

Knowing what we are paying for our fund management is critical to the success of our pension system (as all this recognises).

Putting the solution in the hands of a trade body that acts for the fund manag-

ers who have most to gain by hiding these costs and charges is wrong.

Those people who are on the IA Advisory Board are, by being on that Board, giving credence to the IA’s behaviour. I call upon the Board to be disbanded, for individual members to resign and I will continue to campaign against the IA’s involvement in the creation of a DC code on cost and charges.

The Investment Association is not the solution – in fact it is the problem.

Legal Action against those who want a solution is not the solution – it is part of the problem.

Those who sit on the Board are not providing a solution, they are simply giving credibility to the problem.

Henry Tapper Is a Director of First Actuarial and a Founder of Pension PlayPen. He is an activist for good governance and dedicated to restoring confidence in pensions. He has worked for some time on improving the transparency of costs and charges in DC plans in the UK and has a wider interest in “value” especially value asset managers can create through good stewardship Henry bloggs at henrytapper.com a fantastic source of often-witty insight and analysis - he sees social media as a key means to get messages out to the public. When he’s not at work he is on a boat in the summer and supporting Yeovil Town if its not.

Editor’s Comment: This is a very important article on a very important topic and if it wasn’t critical of me I would have wanted to publish it. To my mind the fact that it is critical of me isn’t justification to not publish it, so I have. I am publishing it for 3 reasons: Firstly, to make sure that all our readers are aware of the IA’s Advisory Board and the very live debate that surrounds it; the whole situation has raised many issues. Secondly, to be as transparent as possible and to make sure that I am not in any way hiding my decision to be involved with the IA’s Advisory Board. Thirdly, to make sure that if anybody wants to disassociate themselves with me because of my decision then I perfectly understand; pop me an email and I’ll adjust my circulation list accordingly and I’ll not take it personally. I If you’ve missed all the commentry in the media there’s lots you can find including this piece by Professional Pensions

8

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

WHAT’S HAPPENNING ON THE 21ST SEPTEMBER?

WE HAVE ANOTHER GREAT LINE-UP OF SPEAKERS:

To book click

HERE!

Where is it?

Dimensional Fund Advisors, 20 Triton Street, Regent’s Place, London NW1 3BF

When is it?

Wednesday 21st September, 9:30 to 16:30 Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

9

ARTICLE: TOM TUGENDHAT MBE MP

FOREIGN EXCHANGE: WHY CONSUME BUSINESSESS NEED AND DESERVE G

by Tom Tugendhat MBE MP, Member of Parliament for

Holidays are expensive. Last year £26 billion was spent by British families travelling overseas, equating to around £2,000 per trip.

Almost certainly, as part of these expenses, individuals will have had to exchange currency in order to have access to cash in their country of destination.

Upon inspection of the foreign exchange industry, I have reason to doubt the fairness of competition within it and from which consumers suffer.

These doubts are focused on two aspects to foreign exchange. Firstly, as already articulated, the changing of cash. Secondly, the use of remittances.

Even so, both depend from a consumer’s point of view on being able to identify comparable fees and com-

pare amidst a competitive market.

In layman’s terms; being able to identify the cost of the currency exchange.

By seeking to attract custom, many firms offer what they claim to be 0% com-

mission – an apparently free service. However, it has become clear that not only are such services costing unwitting consumers, but – which is worse – the fees are being hidden.

Some banks do not even guarantee an exchange rate until the transfer has been made, which makes the comparison and decision-making process for SMEs extremely challenging.

Under the Payment Services Directive, banks and money-service providers have a duty to disclose the amount of any charge levied for a payment transaction and a breakdown of charges.

Even so, foreign exchange providers rarely do so, arguing that a mark-up on the mid-range rate between the

10

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ERS & GREATER TRANSPARENCY Tonbridge, Edenbridge and Malling price to buy and to sell isn’t a charge.

No matter how it is packaged, this mark-up is in real terms an added cost levied by the provider and should, according to the Directive, be disclosed very clearly.

Especially considering the significant cost implications it can have.

I have examined a number of well-known high street banks and exchange bureaus online during the week commencing 18 July.

I calculated the cost not simply by looking at the price charged to buy or sell currency but at the difference between them, because this gap (‘the spread’) is the margin from which the currency dealer profits.

It therefore follows that the larger the gap, the higher the Edition #3

|

commission.

The worst example I discovered was a spread of 22 per cent. To illustrate the effect of such a spread, exchanging £1,000 into US Dollars and immediately back into Pounds will cost £217.

The bank in question is taking circa 10 per cent per transaction (while advertising 0% commission).

The World Bank estimates that the total global volume of foreign exchange transactions is $26 trillion, of which $5.6 trillion belongs to the SME sector. The implications on UK trade are considerable. 44 per cent

of British SMEs send or receive international money transfers, and 1 in 10 send £1 million or more during the course of the year.

It’s standard business practice. One in five (19 per cent) of small businesses who send money overseas fortnightly admit to having no idea how much their bank charges them.

According to McKinsey’s Global Payments report, small and medium-sized businesses conducted currency transactions worth an estimated $200 billion in 2015. Large

July 2016 | www.transparencytaskforce.org | The Transparency Times

11

businesses account for many times that.

Looking deeper into the implications, for example even only as part of the Erasmus scheme over 13,000 British students study abroad and may receive funds from their families in the UK. Clearly, in our mobile, multicultural society, many send funds to relatives around the world.

Dr Carlos Vargas-Silva, senior researcher at Oxford University’s Center on Migration Policy and Society (COMPAS) highlights the following in his March 2016 study ‘Migrant Remittances to and from the UK’: • The UK is one of the top 10 remittances-sending countries in the world.

• The cost of remitting from the UK varies per destination country and transfer method.

Money transfer operators (e.g. Western Union, MoneyGram) typically charge from 7 to 11 per cent of the total amount remitted.

So, what can be done?

1. Individuals are already recommended not to use credit and debit cards abroad due to the fees (often nearly 3 per cent, on top of which exchange rates are added) such transactions attract.

2. Individuals are recommended to check the exchange rate in both directions (i.e. from Pounds to foreign currency and back) before they exchange money.

By examining the spread, the

12

customer can perceive the bank or exchange bureau’s level of profit.

Equally, individuals are recommended to prefer providers who offer the best service and rates. For interest, the best provider I found during my research was TransferWise, with a spread of circa 1 per cent.

3. However, banks, foreign exchange bureaus and others who profit in this industry should be compelled by the Advertising Standards Agency to advertise their true commission.

I am a Conservative because I believe in free markets. They are the best way to enable individuals to make the best decisions for themselves.

But free markets only work when they are fair markets.

When fees are hidden com-

petition is diminished to zero. Forty one per cent do not think they would benefit from switching currency exchange providers, but they will. It is inertia that is stopping them.

The effect is felt disproportionately outside of the remit of this industry.

I will call on the Government to move quickly to ensure foreign exchange bureaus advertise the full fees they charge. If we are to promote foreign trade, travel more widely, and encourage greater inward investment, we must know what we’re paying for in the services we need and use.

That way we can be confident the market is working for the people, not just the dealers.

Tom Tugendhat was elected MP for Tonbridge and Malling in May 2015. Before Parliament, he served as military assistant to the Chief of the Defence Staff (adviser to the professional head of Britain’s Armed Forces) and contributed to publications around the world on foreign affairs and politics.

Tom served in combat in Iraq and Afghanistan and with the Foreign and Commonwealth Office. He helped establish the National Security Council of Afghanistan; the first non-warlord administration in Helmand, Afghanistan; and maritime security operations along the Atlantic coast of Africa. Tom began his career as a journalist in Lebanon before creating a public relations firm for international clients operating in Beirut, Damascus and Amman. He returned to London to work as a management consultant on financial products in EU and EUaccession nations before moving to the City as an energy analyst. He commissioned and joined the Intelligence Corps, Reserve.

Tom graduated in Theology and Religious Studies from Bristol University and went on to take an MPhil in Islamics from Cambridge University. He is fluent in French and Italian. His Arabic, Dari, Spanish and Helmandi Pashto are now pretty rusty.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Editor’s Comment: This is the second of two great articles for us by Tom Tugendhat MBE MP; his first was in our launch edition back in May and it focused on the problems caused by a lack of transparency on pensions. And now we learn that he also has his sights on the problems of opacity in FX. Tom Tugendhat may be a relatively new MP but it’s perfectly clear to me that he means business and that he knows how to get his point across very well indeed - watch BBC’s Question Time of 7th July to see what I mean. If you can’t, here’s a comment from Kent Online: ‘Mr Tugendhat, who was elected to office in 2015, won plaudits after he appeared on BBC’s Question Time. In a moving and measured speech the former army officer said errors of the Blair administration highlighted in the Chilcot report had not surprised him and went on to deliver a scathing critique on senior commanders of the armed forces and foreign diplomats. He told the audience: “There are many generals who should have realised that the strategy (in Iraq) was not working and stayed silent and, while it was not for me to judge the actions of politicians it’s absolutely the duty of generals and diplomats to look after the men and women who are executing the orders of Her Majesty’s government in the field.’

He won widespread praise for his words with many taking to Twitter to commend the speech:” I suspect and hope that in Mr Tugendhat we have an MP who is prepared to “tell it as it is” and his articulation of the whole market efficiency case for greater transparency is totally compelling I am sure that those of you that heard him speak at our Transparency Symposium of 22nd June will agree. We need more MPs like this please!

He can be followed on Twitter @TomTugendhat

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

13

ARTICLE: RICHARD FIELD

A BRIEF HISTORY OF TRANSPARENCY

by Richard Field, Director | Institute for Financial Tra

In the following excerpt from Transparency Games: How Bankers Rig the World of Finance, I discuss how all aspects of the global financial system came to be based on transparency.

In the run-up to the Great Depression, the global financial system was based on the principle of caveat emptor (buyer beware).

Under this principle, buyers were responsible for all losses on their investments whether the investment was a bank savings account or a financial product sold by Wall Street.

The principle of caveat emptor gave rise to the idea the marketplace is best regulated by market discipline that results from the self-discipline of cautious individual investors. Underlying this doctrine was the assumption that buyers would protect themselves from losses by demanding all the useful, relevant information before making an investment.

The Roaring 20s showed

14

this assumption to be false as Wall Street rolled out and sold increasingly opaque products whose primary beneficiary was Wall Street.

To prevent this from happening again, the FDR Administration and Congress redesigned the financial system and put in place through legislation, specifically, the Securities Acts of the 1930s, the philosophy of disclosure.

As the Congressional Oversight Panel’s January 2009 Special Report on Regulatory Reform states: From the time they were introduced at the federal level in the early 1930s, disclosure and reporting requirements have constituted a defining feature of American securities regula-

tion (and of American/global financial regulation more generally).

President Franklin Roosevelt himself explained in April 1933 that although the federal government should never be seen as endorsing or promoting a private security, there was ―’an obligation upon us to insist that every issue of new securities to be sold in interstate commerce be accompanied by full publicity and information and that no essentially important element attending the issue shall be concealed from the buying public.’

FDR’s description of the philosophy of disclosure is very important for what he includes and what he excludes.

What he includes is the

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Y

ansparency idea investors should know what they are buying or know what they own and are selling. This is the bedrock principle for both protecting investors and ensuring unrigged financial markets.

As FDR said, the buying public should have access to “full information” in an appropriate, timely manner so they can independently assess this information and make a fully informed investment decision.

FDR’s statement is clear that the intention is to error on disclosing more rather than less. He sets a very high standard for “full information”. This standard is “no essentially important element … shall be concealed from the buying public”.

What makes this standard for disclosure so high is to meet it requires the experts in the buying public have access to what they consider all the essentially important information. Disclosure is based on what the most demanding expert considers an important piece of information and not what the non-expert, unsophisticated investor (basically everyone other than a professional money manager) Edition #3

|

thinks is important.

FDR’s statement acknowledges the experts are able to handle additional complexity even if the unsophisticated investor cannot.

Therefore this difference in ability to use the disclosed information should not place limits on the information disclosed.

While insisting on full disclosure, FDR’s statement acknowledges the fact investors are not required to invest in or have any exposure to an investment where they cannot make a fully informed investment decision.

It was understood in FDR’s time unsophisticated investors have two choices.

First, they don’t have to invest where they cannot make use by themselves of the disclosed information.

Second, they can rely on their trusted advisors and experts who can use the disclosed information for help in

making an investment.

FDR’s statement recognizes while disclosure is for all investors, it should not be constrained by the notion of one-size fits all. Hence, disclosure is effective only when it is timely, easily accessible for analytics and, from the most demanding expert’s perspective, complete.

This definition of effective disclosure recognizes that it is impossible to know all the ways different investors will choose to use the information disclosed to value an investment or exert market discipline. For example, what a shareholder might find they need could

July 2016 | www.transparencytaskforce.org | The Transparency Times

15

and does differ from what a counterparty to a trade might need. By focusing on full disclosure, this definition of effective disclosure also eliminates the ability of issuers and Wall Street to gain a foothold to argue against more disclosure.

It is only the investors and their trusted third party experts who have the relevant say on what needs to be disclosed and not Wall Street or the issuers of the securities.

Please note FDR’s statement included a very specific prohibition. Governments are prohibited from endorsing or promoting a private security. This prohibition exists for two reasons. First, violating the prohibition creates a moral obligation on the part of the government to protect the investors in the security from loss. This moral obligation is created because it can be reasonably assumed investors relied on the government’s endorsement in making the decision to invest. Second, the prohibition reinforces the obligation to provide “full

information”. Governments might be tempted to endorse an investment if they are in possession of information that is not available to investors. Rather than provide an endorsement, governments are responsible for ensuring “full information” and making sure the information they are in possession of is disclosed.

Specifically excluded from FDR’s statement is the notion there should be a cost/benefit analysis performed to justify disclosure requirements for each individual financial product Wall Street creates.

The goal in adopting the philosophy of disclosure was to prevent opaque financial securities causing another financial crisis.

Avoiding another financial crisis was a benefit that far outweighed the costs of requiring disclosure.

If the cost of providing full information so that no essentially important element is concealed is so high that it makes a security unattractive for the issuer to offer, the intent is the security should not be offered.

With this description of the philosophy of disclosure, FDR drew a solid bold line between the state and investors, including the financial sector. The state is responsible for disclosure.

Investors are responsible for risk-taking and the results of this risk-taking.

Going forward, opacity became not just a market failure, but also a government failure.

The financial crisis that began on August 9, 2007 revealed a fundamental flaw in the design of the global financial system. The global financial system was designed in the 1930s recognizing market participants need the transparency of a clear plastic bag rather than the opacity of a brown paper bag if the invisible hand of the market is to operate properly.

The fundamental flaw

16

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

was the design created the illusion investors could depend on the global financial regulators to maintain disclosure regulations so investors would always have the transparency of a clear plastic bag. As revealed by the recent financial crisis, this did not happen across large areas of the global financial system. This regulatory failure resulted in investors losing hundreds of billions on investments in opaque securities that met the disclosure requirements established by the financial regulators.

Why did the financial regulators fail to require disclosure so investors could have the transparency of Edition #3

|

a clear plastic bag in every corner of the global financial system?

While we will never know exactly why, one fact sticks out. Wall Street dominates the financial regulators’ process for setting disclosure requirements.

Wall Street dominates the process for setting disclosure requirements because it is willing to spend much more time and money lobbying for opacity than investors are willing to spend lobbying for transparency.

Wall Street is willing to spend the time and money because the ben-

efits from opacity are concentrated in a few firms while the harm from opacity is spread across many investors.

Frequently, Wall Street’s dominance of this process has resulted in disclosure requirements that are inadequate for the purpose of investors being able to know what they own or are thinking of buying.

A classic example of this failure to create adequate disclosure requirements is the SEC’s Regulation AB. This disclosure regulation

July 2016 | www.transparencytaskforce.org | The Transparency Times

17

was first adopted prior to the financial crisis and covers structured finance securities including the infamous opaque, toxic subprime mortgage-backed deals at the heart of the financial crisis.

On August 27, 2014, after years of heavy lobbying from Wall Street, the SEC finalized its post-financial crisis update to these disclosure requirements. The updated disclosure requirements provide all the transparency of a brown paper bag as the SEC rejected providing the transparency of a clear plastic bag 18

on the grounds it could not justify the cost to the issuers. As a result, under the updated disclosure requirements investors still won’t know what they own or are thinking of buying for either publicly traded or privately placed structured finance securities.

The Transparency Label InitiativeTM is the investors’ response to prevent future losses from the ongoing failure of the global financial regulators to require transparency that achieves the clear plastic bag standard not just for structured finance securities but in all the opaque corners of the global financial system. It ends the investors’ reliance on the financial regulators for ensuring transparency as investors recognize there is a better alternative to ensure this level of transparency than the status quo with its dependence on the regulators.

The Transparency Label InitiativeTM makes the investors’ view, rather than the financial regulators’ disclosure requirements, the global standard for adequate disclosure. It gives investors the final say on disclosure. This is appropriate as it is only the in-

vestors who can say either there is or there is not adequate disclosure so they can know what they own or are thinking of buying.

In exchange for having this final say, investors recognize their responsibility for absorbing all losses on their investment exposures rather than being bailed out. This responsibility for losses gives the investors a strong incentive to both independently assess the information disclosed and use the result of this assessment to practice self-discipline by restricting the size of their investments to what they can afford to lose.

Equally importantly, under the Transparency Label InitiativeTM, investors take full responsibility for ensuring the transparency of a clear plastic bag across the global financial system. The TLI Label is only awarded where publicly traded securities, private placements and global financial benchmarks and commodity prices meet the following criteria: All the useful, relevant information is made available in an appropriate, timely manner so market participants can independently assess this information and make a fully informed decision.

Where there is a label, investors know there is adequate disclosure. Where there is a label, investors can independently assess the disclosed information

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

and know what they own or are thinking of buying.

Regardless of what the existing disclosure requirements might be, what financial regulators might claim or what a security’s rating might be, where there is no label investors know there is inadequate disclosure.

Where there is no label, investors know there is inadequate information for them to truly know what they own or are thinking of buying.

Investors recognize in the absence of a label they are not investing, but rather are blindly gambling.

The TLI label is not a credit rating. The TLI label is not a guarantee that an investor will not lose money buying a TLI labelled security. The TLI label is not a recommendation to buy, hold or sell any security or invest in a private placement. The TLI label is not a recom-

mendation to enter into any arrangement based on global financial benchmarks or commodity prices. Rather, the TLI label is solely to help investors and other market participants distinguish between safe and unsafe financial products, rigged and unrigged markets and where there is adequate disclosure so they can make a fully informed decision and where they are blindly gambling.

Richard Field is the Director of the Institute for Financial Transparency, an organization focused on bringing valuation transparency to all the opaque corners of the financial system and the sponsor of the Transparency Label InitiativeTM. Since the mid-90s, he has been a leader in defining and implementing transparency in the structured finance industry. Mr. Field designed, developed and patented a low cost information system to handle all of the complexity involved in making each structured finance security transparent. His solution uses a data warehouse to provide all market participants with easily accessible, standardized collateral level data on an observable event basis over the life of each deal.

In April 2008, Mr. Field wrote a Learning Curve column for Total Securitization that described the gold standard for transparency for structured finance securities. Subsequently, he consulted with the National Association of Insurance Commissioners on their July 2012 white paper on financing home ownership. In both of these widely read publications, he discussed the need for both timely disclosure of the underlying collateral performance information and the use of a data warehouse to capture, standardize and disseminate this data.

Apparently, while his call for timely disclosure was ignored, his call for the use of a data warehouse was heard. In Europe, the European Central Bank championed the creation of the EU Data Warehouse to provide transparency into structured finance securities. in the U.S., Fannie Mae and Freddie Mac are in the process of building this data warehouse for residential mortgage-backed securities. It is called the Common Securitization Solutions LLC. About these two data warehouses, Mr. Field remarked, as the beaver said to the rabbit looking down on the Hoover Dam, “I didn’t build it all by myself, but it is based on an idea of mine.”

Earlier in his career, he worked as an Assistant Vice President for First Bank System and as a Research Assistant at the Federal Reserve Board. Mr. Field has an MBA from the J.L. Kellogg Graduate School of Management at Northwestern University and a B.A. in Economics and Political Science from Yale University.

Editor’s Comment: In my view this article is simply brilliant from beginning to end. I found the text that I have placed in extra-large font size off-the-scale insightful and informative. It has helped me to understand so much. The history of disclosure back to the 1920’s is all news to me. I am staggered at how clear-thinking FDR’s approach to transparency was. I’m extremely pleased to advise that Richard has joined our International Best Practice Team. Thank you for an amazing article. Please submit another; perhaps tell us more about how the Transparency Label Initiative is developing and maybe share your thoughts on how the same/a similar idea can be used in other countries.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

19

ARTICLE: ADAM FRENCH

DON’T LET MILLENNIALS CARRY THE B

by Adam French, Co-Founder & Managing Director | Sca

“Only when the tide goes out do you discover who’s been swimming naked” - Warren Buffett Much has already been written on the topic transparency in pension funds. I’d like to share my thoughts on why transparency in investing is particularly essential for the millennial generation, and how technology will drive the change towards transparency.

My story started almost two years ago when I decided to quit my job at Goldman Sachs working with institutional clients, to pursue a passion of mine: trying to create an investment proposition that I would be truly happy to recommend to my friends and family.

The fact that I (as well as my co-founders) didn’t feel that this service existed already is a poor reflection on the industry. Obviously, transparency is not a core competency of the traditional investment industry.

Even the word transparency gets me a little angry… somehow the industry feels like it can hide away from the truth - it is stealing from the pockets of regular people. What we are really talking about is theft, in my view.

The millennial generation faces a future of opportunity. It is hard not to get excited when you look at some of the most innovative industries and think about how these technologies could improve the lives of the many as they develop over the coming years.

However not everything is exciting and rosy; there are a number of huge issues which we face, which, if not changed from their current trajectories will devastate our generation and future generations. I’m talking about massive issues such as climate change, a slow-

20

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

BURDEN OF HIDDEN FEES

calable

Capital Limited

down in global growth and the need for more renewable sources of energy. But I’m also talking about the other big elephant in the room: ageing demographics and ultimately having to save for our retirements.

We will be the first generation which has to pay for the pensions of the generation before us (as the defined benefit pensions are thankfully phased out) as we as paying for our own retirements as well.

We cannot rely on the pockets of the next generation behind us. The Ponzi scheme is finally coming to an end.

The bottom line is that our generation will have to save more and ultimately have to invest more to be able to ensure we have enough for our retirement.

This means we can no longer carry the burden of unnecessary costs and hidden fees, which are prevalent in the industry today. The financial industry needs to change its current way of doing business.

They need to embrace technology as a means to remove costs and generate savings that they can then pass on to customers - effectively charging less withEdition #3

|

out becoming unprofitable.

Technology is a game-changer, but only for those who embrace the opportunities it presents.

This leads me to how I allocate my clients’ money as a technology driven investment manager. We want to make sure that our clients are able to invest into the underlying securities which reward them with a return in as cost-effective a way as possible. Any cost in the chain to our clients is money they are not investing and therefore not working in their favour in the markets.

We also use technology to power our risk targeting approach to make sure that the investments we make on behalf of our clients are in line with their risk tolerance at all times and in all market conditions. To do this we have to rely heavily on data. Data regarding real performance and data regarding the total cost of ownership. The brutal truth to the active fund industry is that it is only passive

instruments which give us this level of transparency.

Let me give an example. We know that a passive ETF is designed to track a specific index. They are not designed to try and beat the index and nor are they designed to deviate from the index. We can easily look at the tracking error of the fund and compare that with the index return to fully understand the cost of investing in that market.

If the fund underperforms by 0.25% in a given year, you know the costs of the fund which the end client pays to participate in that market is 0.25%. There is nowhere to hide. It isn’t as simple when looking at an active fund vehicle. As the active funds are designed to try and beat the market you have no raw comparison. If a fund underper-

July 2016 | www.transparencytaskforce.org | The Transparency Times

21

living in a more and more connected world.

The times of hiding are over. The tide is going out. I hope you have your bathing suits on.

Adam is Co-Founder and Managing Director of digital investment manager Scalable Capital. Prior to this, he spent the last 7 years working in London in the financial services industry at Goldman Sachs.

As Executive Director of Commodities Trading, he was responsible for the commodity structured products franchise including risk management and developing client solutions.

forms the market, you have no idea if it is due to bad investments or if it was just an expensive way to be invested in the markets.

But what about the Total Expense Ratio (TER) I hear some people say? - the problem with the TER is that it is not a total and it is not even a ratio. The calculation behind it is all but transparent and can sometimes represent less than half of the full costs incurred by funds. Imagine going into a supermarket and the price tags bearing no resemblance to the total price you pay at the till. All

22

these are hidden fees: no wonder the public has little faith in our industry.

Ultimately, change is going to come because of people like Andy and the rest of the great people involved within the Transparency Task Force.

We need to make changes. If the industry doesn’t change, someone else will come in and force the industry to change.

We can be sure of that. The retail investor is becoming empowered by technology.

Finance is ultimately a business of data and we are

Prior to this, he worked in Derivatives Trading where he was responsible for electronic trading for private clients in fixed income, currency and commodity products. Adam studied Business Mathematics and Statistics at the London School of Economics and Political Science.

Editor’s Comment: A great article. Adam makes an interesting reference to what he calls the ‘traditional’ investment industry. To any other non-traditional investment firms out there, please get in touch and tell the world about your pro-transparency propositions, through the Transparency Times.

Adam is a recently-joined member of the TTF’s Costs and Charges Team.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ARTICLE: GREGG McCLYMONT

UK PENSIONS: AVOIDING THE LEMONS

by Gregg McClymont, Head of Retirement Savings | Aberdeen Asset Management Adam Smith’s celebrated ‘Invisible Hand’ efficiently asserts its influence across much of our economic life.

Effective markets work on regular feedback loops.

Survival of the fittest; adapt or die.

Results and imperfections are assessed, with imperfections being ironed out; a constant process of improvement. If you buy a pair of shoes and they turn out to be dud, you vote with your feet (excuse the pun) and simply don’t go back.

The aggregate effect of this behaviour feeds through to revenue and profits.

And the resulting incentive structure of the market is as powerful a force as any.

But in some markets asymmetries of information wreak havoc with the whole transaction process. In these markets the invisible hand can’t work its magic.

Poor quality goods inevitably drive out good ones. In turn, the number of buyers collapses.

Nobel prize-winning economist George Akerlof’s The Market for Lemons is perhaps the most famous illustration.

The paper analysed the consequences of information asymmetries in the second hand car market. When the seller knows more than the buyer, in this case the true quality of the engine under the bonnet, the temptation to sell a ‘lemon’, as Ackerlof describes poor quality cars, is overwhelming.

Workplace pensions are not ‘lemons’. But as states across the world increasingly pass responsibility for retirement provision on to individuals, the existence of substantial information asymmetries must be confronted – a reality summed up in the age old industry adage of “pensions being sold not bought”.

Often a pension is a one-off purchase for life. As such, there is little possibility of the individual learning in the doing – such as is possible with, say, mortgage buying, or car buying. Nor is price comparison easy – since a pension’s value can only be measured in the long term, voting with

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

23

investments are made for the longer term.

A more active approach is taken to firms invested in, and this more active approach is communicated to the asset manager. What is rather unfashionably described as stewardship becomes more feasible. your feet might come too late.

Not that voting with one’s feet is a large-scale phenomenon.

Most people do not relate to their pensions as the invisible hand might suppose – but instead display the foibles that behavioural economics predicts whether short-termism, confirmation bias, or disengagement.

Even where an informed individual exists, a new twist on the principal-agent problem makes Albert Hirschman’s famous “exit or voice” treatise a theoretical construct. This is because with workplace pensions the ultimate consumers, employees, do not choose the product, employers do. The individual – even if aware of product deficiencies – is unable to switch for this reason. More widely, the principal-agent problem manifests itself via smaller employers, who do not have the time or expertise to monitor pension quality.

The Office of Fair Trading (OFT), the UK competition authority, concluded recently that “competition alone cannot be relied upon to drive value for money for all savers in the Defined Contribution workplace pension

24

market”.

Absent the magic of the invisible hand another means to drive up quality is needed. Otherwise, optouts from auto-enrolment might well rise – especially as contribution rates rise.

The OFT identified ‘buy-side’ weakness as the defining obstacle to a functioning market. The average size of a UK workplace scheme is 570 times smaller than in Denmark – the most successful pension system in the world.

Scale matters. In Australia a five-fold reduction in the number of schemes since the millennium has been associated with improved efficiency. In the UK public sector a somewhat similar process is getting underway – or at least that is one way to read the government mandated creation of Collective Investment Vehicles (CIVs) in the Local Government Pension Scheme sector.

This scaling should not just be a matter of reducing costs (important though that is). In economies such as Denmark and Australia (or indeed, Canada) where pension funds have scale, governance structures are more easily geared towards ensuring that

Rather than asset managers measuring a company’s “alpha” – how a company performs against its competitors – more significant becomes “beta,” a measurement of how a company is performing overall, not just against the competition. In this way pension schemes enable asset managers committed to good stewardship, rather than in-the-long-run destructive alpha chasing (asset managers can hold equities that are falling in value, but which are still generating “alpha”).

Common sense dictates “the market where possible, the state where necessary” as an approach to the design of pension systems.

In workplace pensions the reality of profound information asymmetries between sellers and buyers suggest a government role. If not the virtuous cycle of the invisible hand, government encouragement of greater scale at least offers the possibility of greater efficiency at the scheme level and better stewardship across the economy.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Gregg McClymont, Head of Retirement Savings at Aberdeen Asset Management, brings a consumer focused perspective to the rapidly changing world of pensions and investment.

Previously a professional historian (St Hugh’s College, Oxford) and a politician (MP and Shadow Pensions Minister), Gregg joined Aberdeen in July 2015. Gregg is a Visiting Fellow at Nuffield College, Oxford and sits on a number of pensions industry related policy and technical committees. Gregg’s new co-authored book Towards a new pensions settlement: the international experience (Rowman and Littlefield, 2016) is just published.

Editor’s Comment: Best articulation of why the markets alone can’t seem to sort the FS sector I’ve read yet. Also, good to be reminded that countries outside the UK are ahead in the progress towards systemic transparency in financial services. Thank you very much Gregg

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

25

ARTICLE: JANICE LAMBERT

INSIGHTS FROM THE OECD’S PARIS FO

by Janice Lambert, Former Europe and International Ma

The skies in Paris may have been grey and cloud heavy but the atmosphere and buzz in the OECD’si conference on Productive Societies, Inclusion and Growth was light and energetic.

One of the overarching themes of the May/June conference was that of aging populations and what needed to be done to ensure a quality retired life.

Apart from health, the biggest component of a quality lifestyle in the retirement phase of life is that of having sufficient retirement income, so there has to be sufficient financial understanding earlier in peoples working lives for them to set aside the necessary resources.

rangements will contribute to financial understanding and boost confidence in the long term project of saving for retirement.

The work in the Transparency Project in shining a light on the need for more clarity in investment ar-

One discussion was led by The Aegon centre for Longevity and Retirementii. This research group is now in its 5th

The issue of financial understanding, confidence and willingness to save was a topic of much discussion during the conference.

year of producing its annual Retirement Readiness Survey which collects data from 15 countries, spanning Europe and UK, the Americas, Asia and Australia.

Their study shows that habitual saving is critical for success, but that many people struggle to get started and only save intermittently, if at all.

Less than half of the respondents (38%) described themselves as habitual savers with 23% saying they were occasional savers, 21% ‘aspirational savers’ (good intentions but no actions) 12% past savers (had done some saving in the past but were not now currently saving) and 6% having neither saved nor having any intention to do so).

The Aegon study also demonstrated that this understanding which leads to correct savings actions is not yet in place. Some small progress has been made (the UK being one such example), but overall the pace is too slow

26

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ORUM

anager at the

Pensions Regulator

to ensure that individuals will achieve the retirement income they will need later in life.

One key to nudging people into better savings behaviour is that of improving their financial understanding and literacy, and underpinning this is the need for the industry players to be transparent.

Of course it is not the only factor, but a lack of transparency, feeds into low confidence levels so that people fail to enter into product arrangements that are in their long term financial interest.

The Aegon study shows that across 15 developed (and wealthy) countries, 62% of people are not saving regularly for their retirement, if at all.

This is a situation that has to change, as the rise in ageing populations continues and governments across the globe find it untenable to fund retirement from a tax base of ever shrinking working populations.

Most people do expect to stay in good health and to work longer by a few years, but they also expect to have a longer number of years in full retirement spanning at least two decades or so.

If faith in retirement products increased only a few percent, the investment industry stands to tap into a huge market of unmet need, and individuals stand to gain a well-resourced retirement.

The investment industry could start moving voluntarily towards building trust and confidence in their products.

Surely this is a win-win situation for all?

[i] The Organisation for Economic Co-operation and Development [OECD] is an international body with a mission to promote policies that will improve the economic and social well-being of people around the world – www.OECD.org [ii] The Aegon center for Longevity and Retirement ‘The Aegon Retirement Readiness Survey 2016’ A Retirement Wake-Up Call’ www.aegon.com/thecenter

Notes re author: Janice Lambert was invited to the conference by the Organisation for Economic Co-operation Development as an independent pensions expert. She attended OECD technical pensions meetings in her former role as the Europe and International Manager at the Pensions Regulator.

Janice, a former senior pensions’ expert at the Pensions Regulator, has a comprehensive understanding of the whole pensions and financial services landscape and retains particular strengths in leadership and strategy. Her previous experience includes consultancy projects with insurance firms and employment with the then FSA (now FCA).

Comment from the Editor: It is great to learn from Janice’s article that the OECD have the topic of transparency as an important agenda item in their activity. Janice is an active member of the TTF and she did a great job working alongside Judith Donnelly of Squire Patton Boggs in delivering an extremely impactful workshop on the many troublesome contract clauses that asset owners may encounter; many of which have crept in to mainstream pension contracts from the world of hedge funds and private equity.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

27

ARTICLE: JONATHAN PARKER

THE NATURE OF CHARGING STRUCTU SAVINGS PRODUCTS

by Jonathan Parker, Founder & Managing Director | Jo

With the continuing march of auto-enrolment and the possible introduction of other long-term savings products, millions of people in the UK are being introduced to the world of investing, perhaps unwittingly, for the first time. What this also means is that they will be entering into a contract with a financial services organisation – an insurance company, master trust or platform. Along with their bank account provider, mortgage company and hopefully their spouse, these organisations will form part of one of the longest relationships most people will have throughout their lives. And yet, little is really known or understood about the services these companies deliver and how they make their money.

Many column inches have been devoted of late to the costs and charges levied by asset managers, but relatively little to the companies that actually sell the products (the pension or ISA) in which the investments sit. The purpose of this article is to lift the lid on some of the other

services that you receive (and are charged for) when you become a member of a workplace pension or buy one the increasing number of flavours of ISA. This will not be an exhaustive exposé on all the charges or charging structures that exist in the market, but rather a

chance to highlight the main ones and to remind readers that it is not just investment management where there is a need for more transparency.

The desire of policymakers to encourage individuals to become more responsible for their financial futures has seen much of the risk of poor outcomes gradually being shifted from employers and the state to ordinary people. With this change, millions of people have begun a relationship (consciously or otherwise) with a financial services organisation whose main aim is to help them build up a pot of money to spend in the future on some big life event – buying a house, delivering an income in retirement.

For ease of reference, I will

28

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

URES FOR CONSUMER

onathan

Parker Consulting

collectively call these organisations, ‘providers’ from now on.

company, master trust and platform. All clear and transparent so far?

There are a number of different types of providers in the market; for workplace pensions (including drawdown), they are usually insurance companies or master trusts.

For products like ISAs or other savings accounts, there is a wider range of providers including banks and platforms.

When you buy (or are auto-enrolled into) a pension or ISA from one of these providers, you will pay for a number of services. These could include some or all of the following:

A ‘platform’ is industry jargon to describe (in the words of the FCA), “…a service that is used by intermediaries (such as financial advisers) and sometimes consumers directly, to view and administer their investment portfolios... as well as providing facilities for investments to be bought and sold, platforms are often used to aggregate and arrange custody for customers’ assets”.

As implied by the FCA definition, there are different types of platform – those that will only take your money if you have a financial advisor (e.g.

Nucleus or Transact); and those that will only take your money if you deal with them directly (e.g. Hargreaves Lansdowne or AJ Bell). At the risk of muddying the water still further, some providers (for example, Standard Life) will perform multiple functions including being an insurance Edition #3

|

• Day-to-day administration services – setting up your account; collection, processing and investment of the money paid into the product; dealing with enquiries (online / telephone); • Platform services – online functionality where you can do lots of mundane things like change your address or more exciting things like buy or sell exotic financial instruments; tools to help you choose what investments might be right for you or how much you need to save to reach your goals; advice or guidance tools; • Communications – sending a periodic statement to show what your pot is worth; producing helpful booklets and guides; • Investment /asset management – typically offered by third party fund managers rather than the product provider themselves.

In addition to the services

that you receive, the providers have lots of others costs associated with running their business that they have to recoup through their charges – otherwise they won’t be in business for too long.

Outside of the usual costs of running a business (staff, buildings, marketing etc), these include things like: • Regulatory capital – money held to cover unexpected shocks or losses • Governance – for insurance companies that sell workplace pensions, this might be for the Independent Governance Committee; for master trusts, this would be independent trustees.

After paying for all of these services and costs, hopefully there’s a bit left over for some profit for the provider.

And finally, onto charging itself. There are about as many ways of structuring charges as there are providers in the market, but they broadly split into two camps; bundled and unbundled.

‘Bundled’, as the name suggests, means that the cus-

July 2016 | www.transparencytaskforce.org | The Transparency Times

29

they have a belief in say active management or greater asset class diversification; where as someone else might believe that a passive fund that tracks the UK stock market is most appropriate.

Looking at this 0.75% through the lens of transparency produces a rather blurred picture.

But is it possible to deduce how much goes on investment and how much on other services?

One way is actually to look at the publicly available information you can get about unbundled charges. If you approach your friendly platform provider to buy an ISA, you can see from their websites the specific cost for investing in a fund from one of the available asset managers.

tomer pays a single charge – i.e. everything is rolled into one headline amount.

This is how most workplace pension providers make their money and the charge is usually on an ad valorem basis (percentage of the value of your pot).

For example, the default fund for a workplace pension used for auto enrolment must not be more than 0.75% each year. This way of charging is arguably easy for the customer to understand, but it is not clear how much of the 0.75% relates to what service.

For an ‘unbundled’ charging structure, instead of presenting a single all-in charge, a customer is presented with multiple charges relating to specific services. This ap-

30

proach is used by many of the platforms and includes separately quoted fees for platform services, investment management and possibly many others depending on what you invest in, how often you buy/sell etc. Some fees are expressed as percentages, some might be pounds and pence, some have sliding scales, some don’t. A more transparent way of doing things? Possibly, but more complicated certainly.

Returning to the question about how much of the 0.75% bundled charge for a workplace pension goes to pay for each of the underlying services, the answer will differ between providers. Some may choose to use more of the 0.75% for investment management services because

For a UK equity tracker fund this will be between 0.10% and 0.20% each year. For a more exciting active fund or one that invests in more asset classes, you can pay considerably more. It is not unreasonable to assume that as an individual you will pay a little more for a UK tracker fund than an insurance company or master trust would, which means that for a workplace pension with a 0.75% charge, the lion’s share of this amount goes to pay for the other services.

Those who have been more fully marinated in the nuances of bundled charging will know that the picture I‘ve presented here is a much simplified version of what actually goes on.

There are a myriad of moving parts that might affect both the total bundled charge and the split

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

– things like how big your employer’s workplace pension is; whether asset management services are provided in-house or outsourced; how good the provider is at negotiating fees with the third party fund managers.

However, what is clear is that if you are the proud owner of a workplace pension with a bundled charging structure, you will not know how much of your hard earned money goes to pay the provider and how much is passed on to the asset manager. This information is considered commercially sensitive and as far as I’m aware, not openly

disclosed.

Whether this actually matters or not depends on your perspective. When I buy a plane ticket from British Airways, I don’t know how much BA passes onto Airbus for the plane, or Rolls Royce for the engine or Shell for the jet fuel.

Supply chains are complicated. What does matter is that I know that if I am being told my 0.75% is an ‘all-in’ charge, that this is indeed the case.

For those whose responsibility it is to oversee workplace pensions (IGCs and trustees), they also have to grapple with the added complication of whether these charges represent value-for-money. This opens up a whole new Pan-

dora’s box of considerations, which I will not address in this article.

In summary, is it possible to conclude whether there is a preferred approach to structuring fees for pensions or ISAs? As with many seemingly simple questions, the answer is much more complicated (anyone remember “Should the United Kingdom remain a member of the European Union or leave the European Union?”). But in short, it depends.

However, from a transparency perspective, it is difficult to argue against unbundling and fees charged in pounds and pence.

Jonathan is founder and managing director of Jonathan Parker Consulting, an independent pensions and investment consultancy specialising in helping businesses design, develop and deliver solutions for the global savings market.

Prior to setting up the firm, Jonathan was Regional Director and Head of DC for EMEA at Dimensional Fund Advisors. Further roles he has held include Head of Investment Proposition at Barclays, where he helped the Bank to establish a workplace consulting business unit. From 2008 to 2013, Jonathan worked for Zurich Corporate Savings as Funds Strategy Director with responsibility for the investment proposition within the workplace business.

Jonathan also worked for eight years at Towers Watson where he was a senior investment consultant, advising a wide range of multinational clients on strategic investment issues relating to their DC pension schemes. He was also a member of a number of the firm’s DC research committees.

Jonathan is CFA Charterholder (2005) and holds the Diploma in Financial Planning. He graduated from Bristol University with a BA (Hons) in Ancient History.

Editor’s Comment: Jonathan does a great job in his article to convey the important point that the supply chain to the consumer buying savings and investments products is complex; and that many market participants other than just asset managers (such as product providers) generate revenues.

Furthermore, he has helped explain the relative merits of bundled v unbundled when it comes to transparency.

The key take-away for me from Jonathan’s article is that there is an enormous amount to be done to make saving and investment products straightforward and transparent enough for the consume to understand and have confidence in.

Jonathan has made a fantastic contribution to the Transparency Task Force; he has been an active and very helpful member of our Costs & Charges Team from pretty much Day 1.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

31

ARTICLE: RICHARD METCALFE

LET’S RISK IT!

by Richard Metcalfe, Independent Consultant

Is risk disclosure the forgotten sibling in the transparency debate? Few doubt that the investment ‘industry’ needs urgently and radically to improve disclosure of costs, the prize being to reduce the latter to a level that can be justified by fund managers, rather than merely exploited by them. But a grown-up dialogue about what investors want, expect or understand in terms of risk is clearly highly relevant to the overall relationship between customer and provider. This article sketches out why it is an indispensable companion to cost disclosure – and why the aforementioned rentiers-managers should get their act together on risk disclosure as well as costs.

The first exhibit in my ‘case for the prosecution’ is that the EU’s PRIIPs legislation tackles both. PRIIPs is the Regulation that governs relatively complex products

32

– anything in a wrapper and anything ‘structured’ (to combine derivatives-like returns with traditional investments). These are of course collectively referred to as

Packaged Retail Investment and Insurance Products.

In fact, going back 10 years, the earliest proto-discussions in EU policy circles focused

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

exclusively on the risk-disclosure dimension. And that was arguably too little too late, given how many credit-linked notes were sold (by banks) to retail customers in some EU countries in the later stages of the noughties credit bubble.

Either way, the European Commission understandably enough thought about making the legislation apply to all products that could be sold to retail, including plain vanilla equities.

While this might have been a little self-indulgent on the part of Commissioner Barnier – and might easily be taken to suggest that other legislation such as MiFID is not in fact up to the job – it is not completely outlandish, given the apparent ignorance of the average citizen as to what they are getting; or getting into.

I cannot swear for, say, the Romanian education system but I doubt it does any more than the UK or any other EU member state to explain what shares or bonds are, let alone credit-linked notes. And in those circumstances, the pragmatic policy response is to push for a better discourse on risk.

But let’s not rely purely on the somewhat lazy argument that regulation is always right.

(Prohibition, anyone?) Let’s Edition #3

|

consider further why this risk focus makes sense, whatever the legal-supervisory ask.

Take the range of activities involved in financial markets.

Buy/hold/sell remains fundamental but even there you have volatility and correlation to look at. And as soon as you mention those, one’s thoughts turn to derivatives, which can help you target them more precisely.

Yes, there is some attention paid to tracking error but if ever there was a misleading measure of riskiness relative to one’s liabilities that is it. So how about more consideration of what Con Keating and Bill Shadwick have dubbed ‘omega’ , which brings degrees of risk-aversion into the equation? Heavens, one could also translate the signals in the volatility ‘smile’ and risk reversals into valuable, relevant information, in the way that the VIX index has done.

Also, there is securities lending to take into account – a nice little earner that too often has not been passed on to the customer and where there is counterparty risk. And what about the risk management of FX exposures related to investments in overseas markets?

In this area, recent history suggests that the level of customer care has been dire, with responsibility having fallen into an unsatisfactory grey area somewhere between the manager and the custodian, while not nearly enough attention is paid to the costs relative to the risks.

The list of subtle failings is dispiritingly long and includes the practice of frequently renewing short-dated forward contracts – incurring the bid-offer spread every time an old contract is ‘rolled’ into a new one – when fewer, longer-dated contracts would do the job nicely.

Does the risk merit this? If so, we should know why.

No one is saying there is a simple way to reduce all the various considerations to single risk number. In fact, that is almost certainly the wrong way to go. (The European Commission did include a summary risk indicator in PRIIPs, in spite of its sensible aversion elsewhere to reliance on credit ratings. But it certainly does not rule out supplementary narrative, just

July 2016 | www.transparencytaskforce.org | The Transparency Times

33

This is not entirely the fault of journalists, even if it is juvenile and unhelpful. Market commentators are in a Warholian race for profile and so linguistic inflation is rife. But it rapidly becomes a knee-jerk thing. It’s probably easier to count the articles that do not automatically characterise derivatives as ‘complex’, as opposed to the ones that do. as it allows a break-out of the aggregate costs number.)

The existence of more than one moving part does not mean one should simply ignore risk. The very exercise has to be beneficial in an industry that clearly spends way too long focusing above all else on performance relative to the herd and not nearly enough on matching the risk exposure to the investment objective.

Investment is of course about taking risk. That’s why there is the potential for reward. So, arguably what you are paying for

when you consume any financial service beyond the most basic payments or deposits is risk management.

And even payments entail operational risk. So let’s get a better sense of what we are paying for.

Of course, that’s not how the dialogue goes at the moment.

Way, way too often in the last 5-10 years, press coverage has reduced discussion of risk to a supposedly binary question. To the extent that investments are characterised at all, it is either as ‘risky’ – perhaps occasionally, when the editor is feeling especially excited, ‘toxic’ – or not at all.

Risk, meanwhile, is a continuum and that should be recognised.

It could even benefit the fund managers to do so.

Their stock could – metaphorically speaking – hardly be much lower and the likes of you or I might even feel that we were getting something more for our money if they developed a meaningful language of risk.

Fail to challenge them, though, and it only continues to contribute to the ‘us and them’ divide.

So, let’s open up this new front.

Richard Metcalfe is a global financial-services regulatory expert, with extensive experience over 15 years at ISDA and in the investment management industry, as well as a decade as a journalist. He can be reached on LinkedIn. Editor’s Comment: I think Richard is absolutely right to open up the issue of the lack of transparency on risk and my own thoughts are that if the consumer is unaware of risks that he/she is taking from which others are gaining the reward then we really must try and shine a light on that kind of thing; the market behaviours around stock lending ought to be looked into properly. I wonder if the FCA will be referring to that particular problem in their Asset Management Market Study interim report, due out soon.

34

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ARTICLE: SOPHIA MORRELL

ASSETS THROUGH THE LOOKING GLASS: WHY TRANSPARENCY IS CRITICAL TO REPUTATION

by Sophia Morrell, Independant Media Consultant A friend recently asked me for some advice on how to invest a windfall, couched in the following caveat: “I don’t want to place it with a manager. I don’t understand how they justify their fees and seeing as they call their clients ‘muppets’, I’d rather go it alone.”

This brief and damning summary of financial services from a potential, fairly average customer shows the scale of the challenge facing the industry.

While asset management as a whole may bear no

Edition #3

|

responsibility for how Goldman Sachs refers to its clients behind closed doors, in the minds of the public the sector is homogenously untrustworthy – the 2016 Edelman Trust Barometer showed financial services

remains the least trusted of all sectors.

These issues are deep-rooted. Before the financial crisis and the implementation of the Retail Distribution Review (RDR), some firms were able to rely on opacity

July 2016 | www.transparencytaskforce.org | The Transparency Times

35

to create a structure that put their own gains before the needs of the client. In good times, this did not attract much scrutiny, but today’s landscape affords no such hiding places and it demands an overhaul of how the sector communicates with its customers.

Transparency needs to lie at the heart of that relationship.

There is not just a regulatory and moral case for treating customers fairly. Rather, coming to the first part of my friend’s qualms with the asset management industry, being upfront and honest with customers is a vital part of the sector demonstrating its raison d’etre.

Ambiguity around fees and charging means a lack of clarity about what services are actually being offered, their value and purpose.

This will be difficult to achieve without the first foundational step of improving financial literacy in the UK, beginning with objective financial education from a young age.

This will produce adults who understand what they are paying fees for and which services they genuinely need.

Asset managers and banks have noticeably evolved their customer marketing in recent years to focus on their customers’ “life moments”,

such as buying a first home, starting a family, retiring or starting a business. These campaigns are emotionally powerful which is why they are so popular and effective, but a knock-on advantage has been to help clarify what exactly the industry is offering and make that more relatable to individual circumstances.

Clearly explaining what services are and how much they cost is the next logical and essential step in rebuilding a relationship based on trust. Customers, even those with a very basic level of financial education, must be able to take a cost for basic services and compare them.

Nowhere is this more important and urgent than in the retirement industry. The retirement prospects facing millennials are barely recognizable compared to those of their predecessors. The disappearance of generous defined benefit employer schemes, longer life expectancies, risk free returns near zero and little to no prediction of what state benefits will look like by 2050, all mean younger people will need to be much more closely involved with their retirement savings than previous generations.

Every penny will count, so

it will be essential to know who is slicing off what, when, and what for, particularly given the huge impact of just one or two percentage points in fees on the ultimate return.

What’s more, millennials are much more accustomed to interacting with technology companies whose style is clear, transparent and direct.

To compete with low cost, robo-advisers, which are painstakingly clear about how much is being charged and what for, it is difficult to see how traditional managers can do anything other than adopt a similar approach to their communication with customers if they want to compete to win this segment’s business.

As the industry considers this communications challenge, I believe there is scope for developing a new industry-wide lexicon to agree terms of reference for itemized charges in pensions which everyone can use and understand. This is not designed to trigger a race to the bottom on fees.

There is potentially space for both Prada and Primark in this industry – but the customer has to be clear on which it is they are buying and what the precise cost is. Rather, it is about equipping individuals with the right knowledge so they

Sophia Morrell is an independent media consultant with nine years’ experience in financial services as both a journalist and public relations practitioner. Sophia was most recently an Associate Director at Lansons, and now specialises in creating compelling content for a portfolio of clients. Sophia has worked on communications campaigns for some of the world’s largest asset managers, investment banks and fintech companies, including AXA Investment Managers, Invesco PowerShares and the Royal Bank of Canada. She is active in policy development and is Vice Chair of the Young Fabians Finance Network as well as sitting on the steering committee for Labour in the City, where her focus is on creating a fairer and more diverse financial services sector.

36

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

can assess value for money independently, rather than getting lost in reams of T&Cs and jargon they have no hope of following between different providers. Terms such as “total expense ratio” are likely to be meaningless to many, as is “annual management charge” when it does not

include underlying dealing costs. These need to be spelt out, itemized and explained in a language everyone can understand.

The best communications strategies reflect great work that is already taking place within a business. Anything less than sincere in an era of heavy scrutiny will be

instantly exposed. Companies that are ready to take a fiduciary approach, genuinely putting the customer first, will reap the business benefits as well as creating positive change, but must make a wholesale and genuine commitment to their goal of transparency if they want to shout about it.

Editor’s Comment: A great article by Sophia that gets straight to the heart of the importance of reputation management in the financial services sector. Those organisations that do embrace transparency as a commercial virtue will win; if they know how to articulate their position to the market.

If you missed May’s Launch Edition, not to worry, just click here!

If you missed June’s Edition, not to worry, just click here!

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

37

ARTICLE: JOHN BELGROVE AND ZOE TAYLOR

AIN’T MISBEHAVIN’

by John Belgrove and Zoe Taylor | AON Hewitt

We place great confidence in doctors – an Ipsos MORI poll ranks them as the most trusted profession, and one could argue that surgeons in particular are at the height of this profession. They have years of training, expertise and experience behind them, but do they make good decisions?

The surgeon and writer, Atul Gawande, looked at this question in his 2009 book, ‘The Checklist Manifesto’. One study he references looked at the simple routine task of inserting a central line (or catheter) – a procedure with steps that have been known and taught for many years. After introducing a checklist to govern the procedure, within one year, central line infection rates had dropped from 11 percent to zero, with an estimated 1,500 lives and $175m saved over 18 months.

So what does this have to do with pension fund investing? Well first we won’t claim that trusteeship is akin to

performing (or undergoing!) surgery, and nor will we draw any inferences as to where investment consultants might appear in an Ipsos MORI poll of trusted professions. We are however interested in how we can take practical learnings to assist trustees in making more effective decisions.

This thinking underpinned our research into how behavioural biases might impact on trustee decision making. Partnering with behavioural insight agency Behave London, we set up focus groups with trustees that were observed by a behavioural psychologist. These sessions identified some of the key behavioural biases that trustees might be subject to, and specifical-

ly which impacted trustees most. Why do these biases matter? Put simply, if biases creep into decision-making unchecked, the best you can hope for is to be ‘right for the wrong reasons’.

We found that a lot of research to date has looked at group decision making - however not specifically related to trustee decision making. We found that there are areas that are particular to the unique nature of trustee decision making - mostly driven by the fact that trustees are making decisions on behalf of others, rather than for themselves.

The research identified six key biases: Authority – we tend to like experts to help us make decisions. While we will bow to a person’s experience and authority in an area in which they have expertise, we also tend to lend these people’s opinions more weight in areas where they are not the ‘authority’.

Herding – way back in our

38

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

history, sticking with the group had a tangible impact on our chances of survival, but today things have changed.

Decisions that arise from Group Think are less likely to achieve successful outcomes for trustees.

Loss aversion - the pain of a loss is greater than the pleasure from a gain of the same size. This can bias decision making towards loss aversion, and decisions shaped in this way often ‘feel’ right when they are likely logically wrong.

Status quo – we are not referring to the rock band.

This bias describes our reluctance to move away from a default, and the fact

Edition #3

|

that people tend to feel they have not made a decision if they have not changed anything. Remember – inaction is a decision.

Endowment – when something belongs to us, we require to be paid more to sell it, than we ever would have agreed to buy it. If this effect creeps into decision making, you risk not taking a decision, or moving in too small steps from your current position.

Reputation and responsibility – trustees are different in that they make decisions as custodians of people’s life savings, rather than for themselves.

Maintaining reputation was historically important because it reduced the risk of being pushed out of the group and increased the chance the group would support you in times of trouble.

The danger here is

that scheme needs may not always be aligned with trustee needs. This is not saying that trustees do not take their responsibility very seriously they do – but they may sometimes take them so seriously, that it inhibits conviction.

So how can we avoid these biases in decision making?

There are two key ways to try to influence behaviours – covert and overt. For example; to stop people going over the speed limit, road humps would be an overt measure. You could however paint the road marking closer together to make drivers feel they are travelling faster and slow down without realising why – a covert measure.

Checklists are an overt measure. The Aon Trustee Checklist we developed from this research showed us that trustees with the checklist took twice as long to consider their answer as those without.

The checklist put a brake on the quick, intuitive reasoning and made trustees stop and think more about the decision. With the checklist, the behavioural trap set in each

July 2016 | www.transparencytaskforce.org | The Transparency Times

39

test question was avoided by 71% of trustees, compared to only being avoided by 59% of those without the checklist.

We thought the most interesting result however was the impact on confidence in decision making – there was no change. Without the checklist, trustees were very confident in their ability to make these decisions.

With it, we would now suggest that confidence is matched by a solid decision making framework.

The research will not be ending here though. In partnership with Dr Iain Clacher of Leeds University Business School, we will be exploring trustees’ perception and understanding of costs and value, investment risk and return, manager selection, as well as the role of bias in all these areas. The research will also consider issues including trustee board dynamics, diversity and the role of advisors.

investigations there is more to learn, and that there is great appetite from trustees for practical solutions to help mitigate the negative effects of our sub-conscious biases.

This applies both within the group and in the way information is presented to the group and should support more effective decision making which in turn hopefully leads to better outcomes.

It is clear from our initial

John Belgrove John is EMEA Head of Investment at Aon Hewitt and a Senior Partner. He has over 30 years of consulting and fund management experience.

He is also UK Head of Content Development activities where he has responsibility to oversee idea generation and thought leadership across the UK Retirement and Investment business.

John advises a portfolio of UK based private and public sector clients and is a regular commentator on pensions industry trends and he also represents the firm on FTSE’s Policy Advisory Board. John joined Aon Hewitt in 2003 following 13 years at Barclays Global Investors (now BlackRock) where he was a Director and Head of BGI’s UK Institutional Client Group.

Zoe Taylor Zoe joined Aon Hewitt in 2003 and is a Principal in Aon’s Global Investment Practice. She has provided advice to a broad range of clients in both size and structure, including Trustee and Corporate, and currently advises one of the world’s largest Institutional Investors. Zoe is a member of Aon’s investment leadership team looking after Clients and Growth, and she has recently developed and launched Aon’s ViewPoints consulting framework. Zoe enjoys public speaking and has represented Aon Hewitt at conferences and in the media.

Zoe is a CFA Charterholder and holds a 1st class degree in Mathematics from Kings College London. Outside of work, Zoe is kept busy looking after her two young sons, and she enjoys boxing to keep fit.

Editor’s Comment: John and Zoe’s article shines a light on a very important topic, a topic that is at the heart of the TTF’s Rational Decision-Making Stewardship Team. There are many reasons why a Trustee Board or an Investment Governance Committee might be prone to making irrational decisions; without doubt an important factor is a lack of transparency on information that is needed to make decisions in an objective and scientific manner. John is an active member of the TTF’s Rational Decision-Making Team; get in touch of you’d like to know how you can participate too.

I’m looking foreward to learning more about the Dr Iain Clacher who is another popular member of the TTF community.

40

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

WHAT’S HAPPENNING ON THE 21ST SEPTEMBER?

WE HAVE ANOTHER GREAT LINE-UP OF SPEAKERS:

To book click

HERE!

Where is it?

Dimensional Fund Advisors, 20 Triton Street, Regent’s Place, London NW1 3BF

When is it?

Wednesday 21st September, 9:30 to 16:30 Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

41

ARTICLE: ANDY WOOLMER

BRINGING TRANSPARENCY TO CURRE

by Andy Woolmer, CEO | New Change FX

Foreign exchange markets have been historically managed by a form of benign neglect. Never quite as important as equities or fixed income markets, the FX markets developed along their own path, limited geographically to a couple of significant centres and a few influential voices. They were a necessary, profitable, but unexciting part of any bank’s global markets business. This continued until FX traders created a financial storm of unprecedented magnitude. Fines levied on banks in Foreign Exchange are amongst the biggest corporate fines ever. These fines have served to change attitudes amongst customers, and now transparency tops the FX agenda. Before reaching for solutions however, it may be sensible to look at some of the peculiarities of, and assumptions about, the global foreign exchange markets and how those anomalies might influence decisions when seeking transparency in FX markets.

Currency Market Transparency.

The main issue with attempts to deliver transparency in FX markets is that the markets are widely assumed to be inherently transparent already. After all, if the markets turnover is over 5 trillion dollars every day, then how could they not be? Price discovery and transparency are surely built in? These assumptions are flawed, and actually serve to create

42

much of the market’s inherent opacity. The market is not nearly as liquid as it is given credit for. The key is to understand the market components, and how they might be misread, or even manipulated.

Liquidity.

Recent years have seen rapid growth in FX trading volume, rising to over 5.1 trillion USD being transacted every day according to the 2013 BIS survey. There has been simultaneous and related

growth in assumptions of the availability of liquidity, almost irrespective of the size of a deal being done.

If we look at the headline liquidity number of USD 5.1 trillion and start to break it down, then we come to some fairly stark conclusions. The first, and most important step is to remove from the turnover data trades done in the swap and option markets as these have a different form of impact. This process reduces the total daily FX volume

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ENCY MARKETS sharply to around 3 trillion dollars. This daily volume is not divided uniformly across each hour, so we must create an estimate of the proportion of the day’s flow done during

each hour of the day (see Chart 1).

This chart shows how volume fluctuates over time. From this we can extrapolate the available liquidity at any moment during the day. By applying the BIS weightings for each currency pair, we start to get a picture of how much business may be being done at any given moment (see Table 1).

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

43

This then gives us a sense of what amounts of business might be executed at what speed, and the answer is surprisingly low. It is impossible to give an accurate estimate for how long it takes to match a deal in the FX markets, but something like 10 milliseconds might be a fair estimate.

The consequence of this is apparent. If one were to trade EUR 10,000,000 at 3pm (the busiest time of day), then that relatively small trade has absorbed roughly half of the total available EURUSD market liquidity for 1 second.

The market-maker making the price has to source the desired currency from inventory, cross the spread to obtain it or accept an unhedged exposure on the trading book. It is these choices made by the dealer that contribute to market impact. Prices in FX markets are therefore being formed ex-ante, not ex-post as in an equity market.

Measurement From a transparency perspective, the question is when to measure in order to understand the actual cost

44

of the transaction. Should the client measure before or after the execution point?

The answer is that the client should always measure the market at the point immediately before they asked the market to price the trade. This is the only point at which the market is not directly affected by the transaction itself. By comparing the achieved rate on the ticket with the mid-rate of the commonly quoted price at a defined minimum size immediately prior to asking for that deal, the client can identify the entire cost of their activity. They know what the result was - they have the ticket themselves - so comparing it to the world immediately prior to execution then gives the entire cost.

In FX, the measurement of a trade against actual transactions, as one might do in the equity markets, means that the total cost of a transaction is missed, and that the transaction is most likely being compared to itself. The client already has the result of their action, as that’s the price on their ticket - what they need

to understand is the cost of that action - the cost of the liquidity absorption that they undertook.

Market Tapes An argument exists that there should be an ex-post ‘market tape’ for all markets so that users can see that their execution was conducted correctly. For order-driven markets, such as equities, this makes perfect sense as each tick in the equity price stream is generated by actual matched orders on an exchange.

In FX this is not the case, and a market tape created in the image of the equity market makes no sense. FX market prices are not created ex-post by the execution of orders, but ex-ante by quotes made against specific interest. The FX price is formed by the constant generation of quotations from one principal to another.

The structural reasons for this lie in the bespoke nature of individual FX relationships, but the effect is clear - different clients get different prices. Each client is its own entity and affects the market in a number of ways by their actions. By creating a ‘tick’

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

from certain clients’ information one gets a biased view of the rate. In addition, the FX market is in any case not on exchange and is therefore never captured in its entirety.

As we have seen from the liquidity argument, it is also most likely that when using millisecond data, it is in fact a view of your own rate.

Given that one misses so much information, and incorporates so many biases by measuring expost, it makes sense in a quote-driven market such as FX that one measures ex-ante or before your own trade is done. In addition, the market tape should be clean, untradeable and cover as many platforms as possible. By comparing execution to such a rate, one can understand the true cost of execution.

Manipulation In general, measurement on an ex-post basis might simply mean that a client is left in the dark about their costs, or that they are measuring against their

own transaction. This happens most frequently when the client uses the TCA tool supplied by the platform they traded on. Platform volumes are so low that it is most likely that you are comparing your trade against itself. The general issue with regard to manipulation is that it is very simple, given low volumes, to manipulate any price reference formed on an expost basis. Manipulation is also more or less undetectable as the market is decentralised. Measuring ex-ante removes this issue and enables pricing results to be accurately compared to a fixed point that has not been affected, manipulated or otherwise messed about.

Conclusion Transparency in Foreign Exchange markets is not a given, and in fact remains very difficult to achieve for many clients. The market is far less liquid than participants assume, and the costs are often higher than expected. These costs are completely hidden if the

client chooses to measure by selecting a benchmark derived ex-post from trades on a single platform as the client is probably making a circular comparison.

The only way to achieve effective measurement in Foreign exchange is to use a mid-rate that is gathered from a wide number of aggregated sources of firm quotes of a minimum size, that cannot be dealt on directly and that is calculated with high frequency. By comparing the execution result achieved to the independent mid- rate immediately prior to the start of the execution ‘event’, clients can understand what all of their execution choices cost them.

Transparency relies on illuminating the issue correctly, and that can only be done with the correct reference rate.

Andy Woolmer began his career in FX at Kleinwort Benson in 1994. After periods at Citibank and Prudential he worked at SEB as Portfolio Manager for the SEB Multi-Manager Currency Funds. In 2012, he founded the ground-breaking financial technology company New Change FX, which provides an independent live streaming mid-rate for foreign exchange.

He is a leading expert in transaction cost analysis, and he has been a key advisor for various global regulatory bodies over the development of independent foreign exchange benchmarks.

NCFX’s clients include some of the world’s largest pension funds, asset managers, and banks.

Editor’s Comment: The world of foreign exchange is far more relevant to the savings and investments of ordinary people than is often realised. We’ve been told about the lack of transparency in the FX market many times before and having read Andy’s article I am now far better-informed on what is producing the opacity that exists and also how detrimental its impact might be. A highly educational article Andy, thank you.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

45

ARTICLE: OLIVIA SEDDON-DAINES

MOVING THE TRANSPARENCY DEBAT ‘ACTIVE VS. PASSIVE’

by Olivia Seddon-Daines, Senior Research Analyst | ET

The Spring 2016 proxy votes supporting the 2°C stress test resolutions at the Annual General Meetings of ExxonMobil (38.2%) and Chevron (41%) set certain expectations and generated a warm investor base for the 2017 AGM season. While significantly lower than votes for similar resolutions at EU and Canadian companies, the outcome of the vote has drawn attention to the role of ‘passive’ capital in driving board-level disclosure/action on climate risk. What would have happened if the world’s largest passive index funds had been involved?

Growth of passive funds According to Morningstar, assets under management in passive mutual funds have grown 230% globally, to $6tn since 2007. (In contrast, assets held in active funds – where stock pickers try to beat the market – have grown 54%, to $24tn1).

The low-cost approach of the world’s largest mutual fund company Vanguard is proving irresistible2. Fees on its passive products, at 0.08% a year, are less than half the industry average of 0.18%.

Its actively managed products are even more keenly priced,

46

at 0.17%, compared with an industry average of 0.78%.

Indeed, one dollar in every five invested in mutual or exchange-traded funds (ETFs) in America now goes to Vanguard, as does one in every two invested in passive, index-tracking funds, according to the data provider Morningstar3. Vanguard’s investors own approximately 5% of every public company in the US and about 1% in nearly every public company abroad.

The Missing 60%4 Advocates of “Forceful Stewardship” – who can

be found within sovereign wealth funds, pension funds, asset managers and NGOs – consider climate risk to be financially material expect improved disclosure5.

They advocate investors make public demand on investee companies to publish robust analyses of their assessments of the physical, policy and economic impacts to their businesses of carbon budgets under 2°C and 4°C warming scenarios, respectively. And this year, the resolutions were supported by traditional global fund

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

TE BEYOND

ET Index Ltd. managers like AXA IM, LGIM, Hermes and HSBC Global Asset Management.

Vanguard, by contrast, failed to support a single climate-related shareholder resolution in 2015 (Figure 1)6. As a signatory of the UN Principles for Responsible Investment (PRI) it has committed publically to six principles. Whether it is adhering to Principle 2 “active ownership,” which entails actions such as supporting resolutions on environmental, social and governance (ESG) issues, and/or Principle 3 to “seek appropriate disclosure on issues by the entities in which we invest” is questionable. Even if it does, it could be doing so more transparently.

Vanguard “does not provide comments on specific votes/holdings”. This leaves investors, including pension beneficiaries, in the dark. This does not help the cause of proxy voting transparency.

ET Index believes that index investors can also be engaged investors. ET Index annually ranks the world’s largest listed companies according to their greenhouse gas emissions.

When ‘linked’ to the ET Low Carbon & Fossil Free Index Series, the ET Carbon Rankings work to incentivise companies (and their value chains) to reduce emissions and improve the quality and transparency of reporting.

Engagement is ‘baked-in’ to the methodology. Investors tracking ET Indexes can compliment engagement via shareholder resolutions.

The ET Low Carbon & Fossil Free Index Series sends a message to all passive investment providers, including Vanguard and their peers, that it is time for engaged and transparent indexes.

Financial Times. 2016. Passive funds grow 230% to $6tn. May 29, 2016. Available at: https://next.ft.com/content/2552ce62-2400-11e6-aa98-db1e01fabc0c#axzz4ADoUOvRM 2 Morningstar. 2016. Bogle: Fund Fees have Risen Over 60 Years. 9 May, 2016. Available at: http://www.morningstar. co.uk/uk/news/149465/bogle-fund-fees-have-risen-over-60-years.aspx 3 The Economist. 2016. Index we trust: Vanguard has radically changed money management by being boring and cheap. June 11, 2016. Available at: http://www.economist.com/news/finance-and-economics/21700401-vanguardhas-radically-changed-money-management-being-boring-and-cheap-index-we 4 The Missing 60% Initiative focuses attention on the fact that over 60% of shareholders abstained or voted against climate risk disclosure resolutions at Chevron, Exxon and some other US companies this year when substantially similar resolutions at European and Canadian oil & gas companies and European mining companies received over 96% support. I am a signatory in a personal capacity. See http://www.huffingtonpost.com/bill-baue/the-missing-60-exxonmobil_b_10265140.html; https://preventablesurprises.com/blog/the-missing-60-lets-make-sure-investors-do-better-in-2017/ 5 Preventable Surprises. 2015. Investors, Climate Risk and Forceful Stewardship: An Agenda for Action. Available at: https://preventablesurprises.com/wp-content/uploads/2015/09/Forceful-Stewardship-Report_Sept2015.pdf 6 Berridge, R & J. Cook. 2016. Is Your Mutual Fund a Climate Change Denier or Climate Champion? March 15, 2016.

Available at: http://ecowatch.com/2016/03/15/mutual-fund-climate-change/ 1

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

47

Figure 1. Mutual Funds Falling Short on Climate-Related Engagement (% climate-related resolutions supported 2014-2015)

48

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Part policy analyst, part anthropologist, part advocate, Olivia specialises in the global governance of critical risks. As Senior Research Analyst at ET Index, her role is to provide strategic advice and insight into global climate policy, climate finance and green bonds and to lead the company’s research and engagement projects. Olivia’s research experience includes projects undertaken for the University of Cambridge (Global Violence Reduction), the Financial Times (Foreign Direct Investment), the Foreign & Commonwealth Office (Tackling Contraband & Counterfeit Goods in Central America) and the Organisation for Economic Cooperation & Development (Illicit Trade in Environmentally Sensitive Goods and Wildlife). Olivia read Social Anthropology at the University of Cambridge then Law, Anthropology & Society at the LSE. Editor’s Comment: Given the ascendancy of passive investment it is important that board-level action and disclosure on climate change is maximised through greater transparency on passive instruments.

Olivia’s article makes this point extremely well, and constructively challenges leading players in that arena to play their part to the full. Olivia is a valued member of the TTF’s Stewardship Team.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

49

POSITION WANTED: VIDYA NATHAN

WHY I BELIEVE THERE IS A NEED FOR TRANSPARENCY IN THE FINANCIAL SE

by Vidya Nathan, Economics and Mathematical Sciences

“A lack of transparency results in distrust and a deep sense of insecurity” – Dalai Lama Instances such as LIBOR rigging scandals, data manipulation, corruption and collusion have been detrimental to the reputation of the financial sector and have caused a large decline of trust in finance professionals and the industry as a whole.

High levels of transparency are vital to earn back the trust of clients, colleagues and the general population at large. Take for example the pensions industry, the current shift from Defined Benefit pensions to Defined Contribution pensions means shifting the ultimate responsibility to individuals to ensure they have an adequate pension to fund their retirement.

At present, a large number of these individuals do not have the knowledge necessary to make these crucial investment decisions for their future and are therefore heavily reliant on those in the investment industry to be clear and transparent about all possible options as well as in some cases, manage the fund on their behalf.

50

Without trust and transparency, these individuals’ objectives will not be met and they could even end up below the poverty line after retirement.

As a young person aspiring to pursue a career in the investment industry, I strongly believe that anyone in my position should be entering the industry with an underlying mission to make the industry as ethical and transparent as possible and to help ensure that it aligns correctly with the interest of the consumer.

I am proud to be joining the movement created by Andy Agathangelou and the Transparency Task Force to drive the much-needed change that the financial sector so desperately needs and to make a positive difference to address the issues, increase awareness and provide solutions; not only influencing the financial sector for the better, but also ordinary people and the economy as a whole.

Vidya says: I am an Economics and Mathematical Sciences graduate keen to support the movement to promote greater levels of transparency in the financial sector. I am also an aspiring investment consultant currently looking for opportunities to pursue a career in the investment consulting industry. I am an ambitious, self-motivated and pro-active person with a strong work ethic and an eagerness for learning, improvement and growth. One of my mottos in life is “No obstacle is too big to warrant giving up on your dreams.”

Editor’s Comment: I met Vidya briefly at a great CFA Society UK event all about the need for greater professionalism in the investment industry. I believe ethically-minded people like Vidya are the future of the sector and if you are quick she could be a part of your organisation’s future too! Email me at andy. agathangelou@transparencytaskforce.org requesting Vidya’s CV and I will forward your email to her.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

R HIGHER LEVELS OF ERVICES SECTOR Graduate

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

51

ALL YOU NEED TO KNOW ABOUT:

T E A M S Rapid progress has been made since our first meeting on 6th May 2015. It is perfectly clear that there are many motivated and highly capable people who are dissatisfied with the status quo and, very importantly, are willing and able to work together to make a difference. These individuals are organised into into 5 teams, with each team having a particular area of focus:The following tables show the make-up of the teams; those in bold red are Team Leaders:

Who’s in the Costs & Charges Team?

First Name

Last Name

Job Title

Organisation

Adam

French

Co-Founder & Managing Director

Scalable Capital Ltd

Andrew

Evans

Chief Executive Officer

Smart Pension

Andy

Agathangelou

Founding Chair

Transparency Task Force

Andy

Tarrant

Head of Policy & Government Relations

B&CE The People’s Pension

Angie

Kirkwood

Senior Manager - Industry Development

Scottish Widows

Anna

Tilba

Lecturer in Strategy & Corporate Governance

Newcastle University Business School

Chris

Connelly

Principal Consultant

Aquila Heywood

Con

Keating

Head of Research

BrightonRock Group

Daniel

Godfrey

Non-Executive Director

Big Issue Invest Fund Management

Gayle

Schumacher

Retired

Former MD, Coutts

Graham

Cook

Portfolio Solutions

Macquarie Securities

Henrik

Pedersen

Managing Partner, Co-Founder

Clerus LLP

Henry

Tapper

Founder

Pension PlayPen

Iain

Clacher

Associate Professor in Accounting & Finance

Leeds University Business School

Iain

Cowell

Head of Investment Solutions, UK & Ireland

Allianz Global Investors

52

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Costs & Charges Team cont.

Imran

Razvi

Public Policy Advisor

The Investment Association

James

Monk

Head of DC Investments

Aon Employee Benefits

JB

Beckett

Consulting Chief Investment Officer and Author

New Fund Order Consulting

John

Serocold

Principal

Studio Serocold

Jon

Parker

Director

Jonathan Parker Consulting Ltd

Julius

Pursaill

Pensions & Investment Consultant

Independent

Lucy

Forgie

Policy Adviser

ABI

Malcolm

Small

Managing Director

Lynecombe Consultancy

Mark

Proffitt

Head of Sales

Scorpeo UK Ltd.

Markus

Krebsz

Interim Chief Risk Officer

UNECE GRM

Martin

Palmer

Head of Corporate Funds Proposition

Zurich Financial Services

Michelle

Baddeley

Professor of Economics and Finance

University College London

Mike

Webb

Consultant

City Noble

Natalie

Winterfrost

Chair/Client Director

CFA Society, UK/Aberdeen Asset Management

Neil

Morgan

Senior Pension Trustee

Capita Asset Services

Niall

Ferguson

Consultant

Independent

Ralph

Frank

CEO DC (UK)

Cardano

Robin

Powell

Editor

The Evidence-Based Investor

Ronnie

Morgan

Strategic Insight Manager

Royal London

Saul

Djanogly

CEO

Best Interest Consultants

Shyam

Moorjani

Partner, Financial Services Consulting

RSM Tenon

Stephen

Bowles

Head of Institutional Defined Contributions

Schroders

Stephen

Budge

Principal

Mercer

Sunil

Chadda

Managing Director

Cairn Consulting Ltd

Tim

Sharp

Economic and Social Affairs Department

TUC

Tim

Walton

Manager, Data Research and Analysis

Morningstar

Tim

Brown

Head of Consultant Relations

Dimensional Fund Advisors

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

53

First Name

54

Who’s in the Data Team?

Last Name

Job Title

Organisation

Andy

Agathangelou

Founding Chair

Transparency Task Force

Chris

Connelly

Principal Consultant

Aquila Heywood

Chris

Barrow

Christopher

Squirrel

Founder and CEO

Sciurus Analytics

Con

Keating

Head of Research

BrightonRock Group

David

Rich

CEO

Accurate Data Services

Elizabeth

Campbell-Warner

Managing Director

Gabriel Research & Management

Gerry

Wright

Partner

Smith & Williamson Investment Management LLP

Henrik

Pedersen

Managing Partner, Co-Founder

Clerus LLP

Iain

Clacher

Associate Professor in Accounting & Finance

Leeds University Business School

James

Singer

Senior Associate

P-Solve

John

Simmonds

Principal

CEM Benchmarking Inc

Margaret

Snowdon

Chairman

Pensions Administration Standards Association

Markus

Krebsz

Interim Chief Risk Officer

UNECE GRM

Nick

Fleming

Market Development Manager

British Standards Institute

Nils

Johnson

Co-Founder and Director

Spence Johnson Limited

Shaul

David

Fin Tech Sector Specialist

UKTI Financial Services Organisation

Stewart

Bevan

Product Manager Benchmarking

KAS BANK

Sunil

Chadda

Managing Director

Cairn Consulting Ltd

Tim

Walton

Manager, Data Research and Analysis

Morningstar

Scorpeo UK Ltd.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Who’s in the Rational Decision-Making Team?

First Name

Last Name

Job Title

Organisation

Alan

Salamon

Managing Director

Corpias

Andy

Agathangelou

Founding Chair

Transparency Task Force

Con

Keating

Head of Research

BrightonRock Group

Henrik

Pedersen

Managing Partner, Co-Founder

Clerus LLP

Henry

Tapper

Founder

Pension PlayPen

Iain

Clacher

Associate Professor in Accounting & Finance

Leeds University Business School

Jackie

Beard

Director of Manager Research Services EMEA

Morningstar Europe Ltd

James

Meenan

CEO

JNM Investment Governance

Mark

Miller

Employee Benefit Consultant

Barclays Corporate & Employer Solutions

Markus

Krebsz

Interim Chief Risk Officer

UNECE GRM

Neil

Morgan

Senior Pension Trustee

Capita Asset Services

Neil

Latham

Consultant

Independent

Philip

Brown

Head of Policy

LV

Rachel

Haworth

Policy Officer

ShareAction

Saul

Djanogly

CEO

Best Interest Consultants

Steve

Cave

Associate Director

Smith & Williamson

Tessa

Page

FIA, Principal

Mercer

Tim

Middleton

Technical Consultant

Pensions Management Institute

We are seeking new members in all of our teams.

To learn more about each team’s focus and to express interest in getting involved please email andy.agathangelou@transparencytaskforce.org

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

55

First Name

56

Who’s in the Stewardship Team?

Last Name

Job Title

Organisation

Andy

Agathangelou

Founding Chair

Transparency Task Force

Anna

Tilba

Lecturer in Strategy & Corporate Governance

Newcastle University Business School

Anna

Walton

Principal Consultant

Energised Environments Limited

Barry

Mack

Client Director

Muse Advisory

Con

Keating

Head of Research

BrightonRock Group

David

Weeks

Committee Member

Association of Member Nominated Trustees (AMNT)

Emma

Craig

Marketing Specialist

KAS BANK N.V.

Iuliia

Shpak

PhD Researcher in Finance/ Systematic Strategies

University of East London/Sarasin & Partners

Janice

Lambert

Pensions Consultant

Independent

Joshua

Card

Chief Executive Officer

Kukua

Judith

Donnelly

Partner

Squire Patton Boggs

Julia

Dreblow

Founder

sriServices and Fund EcoMarket

Luke

Hildyard

Policy Lead - Stewardship and Corporate Governance

PLSA

Michael

Kemp

Senior Pensions Technician

Pinsent Masons LLP

Nick

Fleming

Market Development Manager

British Standards Institute

Olivia

Seddon-Daines

Senior Research Analyst

ET Index

Paul

Lee

Head of Corporate Governance

Aberdeen Asset Management

Paul

Marsland

Deputy Director

High Pay Centre

Paul

Hewitt

Senior Development Manager

Vigeo Eiris

Rachel

Haworth

Policy Officer

ShareAction

Sarah

Hutchinson

Consultant

SJ Hutchinson Ltd

Sarah

Wilson

Chief Executive

Manifest

Sebastian

Reger

Partner

Sackers

Terry

Ritchie

Development Director

Trustee Solutions Ltd

Valborg

Lie

Director

Borg Consulting

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Who’s in the International Best Practice Team?

First Name

Last Name

Job Title

Organisation

Country

Andy

Agathangelou

Founding Chair

Transparency Task Force

UK

Alex

Mazer

Founding Partner

Common Wealth

Canada

Amy

Auster

Executive Director

Australian Centre for Finacial Services

Australia

Andy

Tarrant

Head of Policy & Government Relations

B&CE The People’s Pension

UK

Anna

Tilba

Lecturer in Strategy & Corporate Governance

Newcastle University Business School

UK

Chris

Tobe

Investment Consultant

Stable Value Consultants

USA

Con

Keating

Head of Research

BrightonRock Group

UK

Dana

Muir

Professor

University of Michigan’s Ross School of Business

USA

David

Knox

Senior Partner

Mercer

Australia

Elias

Westerdahl

Sustainable Business Analyst

The Centre for Synchronous Leadership

UK

Eric

Veldpaus

Strategy Director

Novarca Group

Holland

Eric

Plunkett

Owner

Redbrucke

UK

Erik

Conley

Founder

ZenInvestor

USA

Felix

Mezzanotte

Asst. Prof. Co-Team Ldr of Acct. & Law

The Hong Kong Polytechnic University

Hong Kong

Frits

Meerdink

Manager Fund Management

PGGM Investments

Holland

Graham

Wrightson

Partner

Stephenson Harwood LLP

UK

Heinz-Dietrich

Steinmeyer

Professor of Law, Director of the Institute for Labour Law, Social Law and Business Law

University of Muenster

Germany

Ian

Fryer

Head of Research

Chant West

Australia

Imran

Razvi

Public Policy Advisor

The Investment Association

UK

James

Meenan

CEO

JNM Investment Governance

Ireland

Janice

Lambert

Pensions Consultant

Independent

UK

Jerry

Moriarty

CEO

Irish Association of Pension Funds

Ireland

Jon

Lukomnik

Executive Director

IRCC Institute

USA

Jonathan

Hall

Head of Financial Services

Aquila

UK

Juan

Zuluaga

Mikael

Nyman

Editor in Chief

Exakt Media

Sweden

Nicholas

Morris

Visiting Fellow

The Martin School, Oxford

Australia

Nicholas

Firzli

Director-General

World Pensions Council

France

Nikki

Gwilliam-Beeharee

Food and Health Research Manager

Vigeo

France

Paul

Secunda

Professor of Law and Director, Labor and Employment Law Program

Marquette University Law School

USA

Rosalie

Degabriele

Academic Finance Superannuation & Banking

University of Technology

Australia

Richard

Field

Director

Institute for Financial Transparency

USA

Steve

Kenzie

Executive Director

UN Global Compact Network UK

UK

SV

Rangan

Senior Executive

AIG

UK

Tomas

Wijffels

Policy Advisor

Federation of Dutch Pension Schemes

Holland

Edition #3

|

USA/Columbia

July 2016 | www.transparencytaskforce.org | The Transparency Times

57

ALL YOU NEED TO KNOW ABOUT TRANSPARENCY STATEMENT Transparency Statements are a great way to show your support for our international campaign and to align your organisation with our intention to encourage greater transparency in financial services, right around the world.

We believe that higher levels of transparency are a pre-requisite for fairer, safer and more efficient markets that deliver better value for money and better outcomes for consumers.

Furthermore, because of the correlation between transparency and trustworthiness we believe our work will also have a positive impact on the reputation of the financial services market as a whole.

please complete the sentence:

That’s good news for all market participants and all governments, because the world needs a financial services sector that is trustworthy.

and email it to

To provide your transparency statement

Thank you very much indeed

“I believe there ought to be higher levels of transparency in financial services because..........................................................”

andy.agathangelou@ transparencytaskforce.org

Tom Tugendhat | Member of Parliament for Tonbridge, Edenbridge and Malling

“I believe there ought to be higher levels of transparency in financial services because it is the only way that markets can function without distortion to the benefit of the true customer, the individual.”

Angela Rayner | Former Shadow Pensions Minister, now Shadow Secretary of State for Education and Shadow Minister for Women and Equalities Frank Whiffen Head of Strategic Business Development | Ferrier Pearce

“I believe there ought to be higher levels of transparency in financial services because pension funds should be run with a constant eye on efficiency – every penny should be accounted for therefore costs must be transparent and easy to understand – they must be explainable without jargon. The duty is to pay pensions and ensure that the sponsoring employers enjoy the benefits of reduced costs, we must avoid funds entering the Pension Protection Fund, it should be the last option”.

“I believe there ought to be higher levels of transparency in financial services because this will enable better decision making. In turn, this should be communicated in an engaging way so that sensible and informal decisions can be made.”

Phil Ninness Business Development Manager | Accurate Data Services

“I believe there ought to be higher levels of transparency in financial services because consumers are obtaining different views and news and there is a trust issue. People need honesty in plain english.”

58

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

TS Henrik Wolff-Petersen “I believe there ought to be higher levels of transparency in finanDirector and Co-Founder | cial services because for being able to take rational decisions we Panda Connect need to have control of our data; independantly, timely and complete.”

JB Beckett “I believe there ought to be higher levels of transparency in finanAuthor #NewFundOrder | cial services because unless we do not put our city in order, techNew Fund Order, Assoc. nology will obsolete us, like Godzilla looming over us.” of Professional Fund Investors Dan Norman CEO | TCF Investment

“I believe there ought to be higher levels of transparency in financial services because the money belongs to the consumer and they need to be given the best chance of making their money work harder so they don’t have to.”

Pauline Skypala Journalist | Freelance

“I believe there ought to be higher levels of transparency in financial services because it is impossible to make competent investment decisions and fund manager choices without being in full possesion of all the relevant information. Costs are foremost in this as future investment performance is unknown.”

Julia Dreblow Founding Director | SRI Services

“I believe there ought to be higher levels of transparency in financial services because it is the best way to make sure that people get what they want through enhancing trust; an aspect that is desperately low in our industry.”

Judith Donnelly Partner | Squire Patton Boggs

“I believe there ought to be higher levels of transparency in financial services because pension funds and other institutional investors can only comply with their legal obligations to make informed decisions if they are able to access all relevant information”.

David Clark Director and Chairman Executive Committee | The Institute for Global Financial Integrity

“I believe there ought to be higher levels of transparency in financial services because without transparency investors lack the confidence to invest and markets fail to fulfil their true function of allocating capital efficiently”.

Angie Kirkwood Senior Manager Industry Development | Scottish Widows Chris Connelly Principal Consultant | Aquila Heywood

“I believe there ought to be higher levels of transparency in financial services because that is the only way we are going to gain the trust of our customers and allow us to simplify the way we talk to and engage those customers in making the decisions which will give them the best outcomes in their financial planning” “I believe there ought to be higher levels of transparency in financial services because we look after other people’s money and therefore their futures. It’s as simple as that”.

Robin Powell Editor | The Evidence-Based Investor

“I believe there ought to be higher levels of transparency in financial services because without it investors are unable to work out how much they’re paying and how much (or more to the point how little) value fund managers are adding to the investment process”.

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

59

TRANSPARENCY STATEMENTS Elizabeth Campbell-Warner Co-Founding Director - Head of Strategy & Research | Gabriel Research & Management Ltd John Greenwood Editor | Corporate Adviser

“I believe there ought to be higher levels of transparency in financial services because transparency is a prerequisite to building trust and trust is essential to the development of a healthy, sustainable financial services industry and the consumers it serves”

“I believe there ought to be higher levels of transparency in financial services because opacity is to journalists what a red rag is to a bull. As long as things are hidden, trust in the industry will remain low.”

Martin Palmer Head of Corporate Funds Proposition | Zurich

“I believe there ought to be higher levels of transparency in financial services because it will help to provide a level playing field as well as helping to restore trust and confidence amongst consumers that they are receiving value for money. This is particularly important at a time when increasing consumer engagement and understanding is so critical”.

Bryan Beeston “I believe there ought to be higher levels of transparency in Director | financial services because transparency builds trust, and all ITM Limited consumers and market participants will benefit from improved clarity and thereby increased levels of understanding enjoyed by the end customer”.

Olivia Seddon-Daines “I believe there ought to be higher levels of transparency in finanSenior Research Analyst | cial services because I am concerned that the everyday pension ET Index saver is embroiled in a system which charges fees at every turn, which invests in volatile markets that do not price in carbon risk, and, most importantly, that has proven itself unable/unwilling to accept ownership of endemic risks to the system, and the knockon effects to the real economy”.

Jon Parker “I believe there ought to be higher levels of transparency in CEO | financial services because without it, customers will simply Jonathan Parker continue to mistrust the industry and lose out financially. However, Consulting we would be wise to remember that more information and data can itself be a hindrance to improving outcomes”.

Nicholas Morris “I believe there ought to be higher levels of transparency in finanAcademic Visitor | cial services because financial services are key to our economy St Anthony’s College, and society, and transparency is necessary to encourage trustworOxford thy behaviour by financial services professionals. It is important that we define their obligations and responsibilities clearly, and then hold the industry and those who work within it to account.”

Shyam Moorjani “I believe there ought to be higher levels of transparency in Partner | financial services because pension scheme members are entitled RSM to know the full cost, including all transactions, for the administration and investment of their money. Transparency will also allow benchmarking and informed comparisons to allow investors to make informed and better investing decisions and to enable them to improve outcomes to reach their financial goals.”

60

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

Matthijs Verweij BD Mgr, Pensions | KAS BANK N.V.

“I believe there ought to be higher levels of transparency in financial services because more transparency leads to better governance and in control management of pension schemes in all aspects”.

Ralph Frank CEO - DC (UK) | Cardano

“I believe there ought to be higher levels of transparency in financial services because users of our services should be able to understand what is being done for them and the corresponding charges being levied”.

Sunil Chadda Managing Director | Cairn Consulting Ltd William Goodhart Chief Executive | CFA Society of the UK

Stewart Bevan UK Product Manager | KAS BANK N.V. Iuliia Shpak PhD Candidate Financial Economics/ Asset Pricing | University of East London Colin Meech National Officer | UNISON - Capital Stewardship Programme Anita Skipper Senior Analyst Corporate Governance | Aviva Investors Rachel Haworth Policy Officer | ShareAction

Edition #3

|

“I believe there ought to be higher levels of transparency in financial services because every customer has the right to know exactly how much goods and services cost at the point of purchase” “I believe there ought to be higher levels of transparency in financial services because it contributes to the establishment of trust which can improve consumer outcomes. To date, the focus has been on costs and performance, but the investment profession and its stakeholders would also benefit from an improved understanding of the purpose of investment and from the processes employed on their behalf.”

“I believe there ought to be higher levels of transparency in financial services because stakeholders deserve to have access to the right information, to inform the best levels of decision-making and improve outcomes”.

“I believe there ought to be higher levels of transparency in financial services because Transparency is critical for investor confidence and trust in financial markets” “I believe there ought to be higher levels of transparency in financial services because Pension scheme members should know how much it costs to be a member of their scheme. The full cost, including all transactions, for the administration and investment of their money”.

“I believe there ought to be higher levels of transparency in financial services because it is only through transparency that we can gain the trust required to succeed.”

“I believe there ought to be higher levels of transparency in financial services because ensuring institutional investors are directly accountable to the people whose money they look after is the only way to transform the system into one that serves savers, society and the environment”.

July 2016 | www.transparencytaskforce.org | The Transparency Times

61

TRANSPARENCY STATEMENTS Stephanie Baxter News Editor | Professional Pensions

“I believe there ought to be higher levels of transparency in financial services because we need to tackle unnecessarily high charges and ensure investors get value for money. This is integral to giving people the best possible retirement outcomes.”

Nils Johnson “I believe there ought to be higher levels of transparency in Co-Founder and Director | financial services because it is good for business. Confidence, Spence Johnson Ltd efficiency, growth and profitability are all enhanced – over the long term – by greater transparency”.

Andy Agathangelou “I believe there ought to be higher levels of transparency in finanFounding Chair | cial services because it holds the key to regaining the trust of the Transparency Task Force consumer, delivering value-for-money and operating a competitive market”.

Jonny Paul “I believe there ought to be higher levels of transparency in Freelance Journalist financial services because financial advice is still generally seen as the preserve of the wealthy and post-crisis there is still much distrust. So I believe that a campaign from within that homes in on greater transparency, focusing more on consumer outcomes, that does not stem from the regulators is a powerful way to show intent”.

Henrik Pedersen “I believe there ought to be higher levels of transparency in finanManaging Partner, cial services because it will be good for everyone. Consumers will Co-Founder | be able to compare and demand better value for money and the CLERUS LLP financial services industry itself will benefit from becoming more competitive, lean and effective”.

John Belgrove “I believe there ought to be higher levels of transparency in finanSenior Partner | cial services because consumers and clients need to trust the Aon Hewitt industry through having access to clear, open, honest, jargon-free information in order to make informed choices to meet their financial objectives.”

Alexander Adamou “I believe there ought to be higher levels of transparency in finanFellow | cial services because financial markets are social constructs and London financial services are a public good” Mathematical Laboratory Anthony Filbin “I believe there ought to be higher levels of transparency in finanChairman | cial services because it will have such a beneficial impact upon Capital Cranfield Trustees incomes in retirement”.

62

Adrian Holliday Reporter | Freelance

“I believe there ought to be higher levels of transparency in financial services because millions of consumers are reliant on it for their longterm savings future.”

David Weeks Co-Chair | AMNT

“I believe there ought to be higher levels of transparency in financial services because in times ahead, we must encourage people to save more in their working lives. We want them to be able to fund themselves for increasing numbers of retirement years. To do this, we must deliver, and be seen to deliver, prudent and open costs and charges”.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

RECOMMENDED READING This section is for academics and authors to advertise (without cost) their relevant books, white papers, academic articles, research findings and so on, so that all our members can know about the thought-leadership, considered opinion and analysis that is available through their work. If you would like to submit a piece of your own work, or the work of another that you would recommend to our members, please get in touch through: andy.agathangelou@transparencytaskforce.org

“What They Do With Your Money; How the Financial System Fails Us and How to Fix It”

Each year we pay billions in fees to those who run our financial system. The money comes from our bank accounts, our pensions, our borrowing, and often we aren’t told that the money has been taken. These billions may be justified if the finance industry does a good job, but as this book shows, it too often fails us. Financial institutions regularly place their business interests first, charging for advice that does nothing to improve performance, employing short-term buying strategies that are corrosive to building long-term value, and sometimes even concealing both their practices and their investment strategies from investors. In their previous prizewinning book, The New Capitalists, the authors demonstrated how ordinary people are working together to demand accountability from even the most powerful corporations. Here they explain how a tyranny of errant expertise, naive regulation, and a misreading of economics combine to impose a huge stealth tax on our savings and our economies.

By David Pitt-Watson, Stephen Davis and Jon Lukomnik, will be published in June. To find out more, visit: http://yalebooks.co.uk/display.asp?K=9780300194418

“Swimming with Sharks: My Journey into the World of the Bankers” Joris Luyendijk, an investigative journalist, knew as much about banking as the average person: almost nothing. Bankers, he thought, were ruthless, competitive, bonus-obsessed sharks, irrelevant to his life. And then he was assigned to investigate the financial sector.

Joris immersed himself in the City for a few years, speaking to over 200 people - from the competitive investment bankers and elite hedge-fund managers to downtrodden back-office staff, reviled HR managers and those made redundant in the regular ‘culls’. Breaking the strictly imposed code of secrecy and silence, these insiders talked to Joris about what they actually do all day, how they see themselves and what makes them tick. They opened up about the toxic hiring and firing culture. They confessed to being overwhelmed by technological and mathematical opacity. They admitted that when Lehman Brothers went down in 2008 they hoarded food, put their money in gold and prepared to evacuate their children to the countryside. They agreed that nothing has changed since the crash.

Joris had a chilling realisation. What if the bankers themselves aren’t the real enemy? What if the truth about global finance is more sinister than that?

By Joris Luyendijk. To find out more, visit: https://www.amazon.co.uk/Swimming-Sharks-Journey-World-Bankers/dp/1783350644?ie=UTF8&*Version*=1&*entries*=0 Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

63

“Capital Failure: Rebuilding Trust in Financial Services” Adam Smith’s ‘invisible hand’ relied on the self-interest of individuals to produce good outcomes. Economists’ belief in efficient markets took this idea further by assuming that all individuals are selfish.

This belief underpinned financial deregulation, and the theories on incentives and performance which supported it. However, although Adam Smith argued that although individuals may be self-interested, he argued that they also have otherregarding motivations, including a desire for the approbation of others.

This book argues that the trust-intensive nature of financial services makes it essential to cultivate such other-regarding motivations, and it provides proposals on how this might be done.

By Nicholas Morris and David Vines.To find out more, visit: https://www.amazon.co.uk/Capital-Failure-Rebuilding-Financial-Services/dp/0198712227

“#New Fund Order - A Digital Death For Fund Selection?”

Safe within its bubble, the City’s asset management industry has existed largely unchanged for over 20 years but no longer. A new digital threat lurks in the shadows.

Target assigned, Jon Beckett (‘JB’) hunts down the value chain between fund buyers and fund managers and tackles the difficult issues head-on. Get inside the head of one of the UK’s most controversial investment gatekeepers.

Think differently about buying funds, multi-manager and the way the industry works. A digital survival guide (of sorts) for anyone working in the fund and wealth industry. Wet work, it’s a dirty business!

By JB Beckett. To find out more, visit: http://www.amazon.com/NEW-FUND-ORDER-JB-Beckett/dp/1320639259

“Towards a New Pension Settlement” This volume presents the recent experiences of pension reform in seven countries: Australia, Canada, Germany, Netherlands, Poland, Sweden and the United Kingdom.

Faced with common problems of ageing societies and constraints on taxation levels, all are increasingly passing responsibility for saving for retirement to citizens.

However, there is enormous variety between countries in the degree to which the state intervenes to mitigate the risks which the individual can face in saving for a pension.

By Gregg McClymont and Andy Tarrant. To find out more, visit:

https://www.amazon.co.uk/Towards-New-Pensions-Settlement-International-ebook/dp/B01EYRKJCS/ref=sr_1_1?ie=UTF8&qid=1462913044&sr=8-1&keywords=gregg+mcclymont

64

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

RECOMMENDED READING Transparency Games: How bankers rig the world of finance This is the story of how bankers with help from the members of Wall Street’s Opacity Protection Team (this includes politicians, economists, think-tanks, rating firms, investment charter constrained asset managers and the financial regulators) undermined the global financial system by reintroducing opacity. The result of reintroducing opacity was the worse financial crisis since the Great Depression and the slowest economic recovery. Transparency Games is about the bankers of Wall Street and the City of London creating and maintaining a veil of opacity to hide behind as they rig the global financial markets for their benefit. Their bad behavior isn’t constrained to simply misrepresenting financial products like toxic subprime

mortgage-backed securities, but includes rigging the global interest rate, foreign exchange, commodity and equity markets so the bankers’ bets pay off.

By Richard G. Field. To find out more, visit: https://www.amazon.com/Transparency-Games-bankers-world-finance/dp/0990396819

Edition #3

|

July 2016 | www.transparencytaskforce.org | The Transparency Times

65

ALL YOU NEED TO KNOW ABOUT THE DIRECTORY OF PRO-TRA If you lead a pro-transparency organisation you can speak out and advertise in The Directory of Pro-Transparency Organisations. This is an important initiative because the market needs to know that there are many organisations that see transparency as a commercial virtue, and do not fear it as a threat. We are happy to consider different classifications to those shown.

All enquiries about advertising in the Directory to: Transparency Task Force Ltd, andy.agathangelou@transparencytaskforce.org +44 (0) 7501 460308

FIDUCIARY MANAGERS: Ralph Frank, CEO DC (UK) | Cardano E-mail: info@cardano.com Website: www.cardano.com Telephone: +44 (0)20 3170 5910

Cardano was founded in 2000 and now has over 150 staff with backgrounds in the areas of risk management, investment management, research, actuarial and investment advisory. Cardano studies the causes and impact of risk and costs in order to significantly improve financial performance and resilience. We currently provide Investment Advisory or Fiduciary Management services to over 1.3m pension fund beneficiaries with assets totalling over £120bn.

PENSION ADMINISTRATION: Margaret Snowdon OBE, Chairman | Pensions Administration Standards Association E-mail: info@pasa-uk.com Website: http://www.pasa-uk.com/ Mobile: 07983 565955

Is this also the right classification for you?

Is this also the right classification for you?

The Pensions Administration Standards Association (PASA) is a not-for-profit organisation which acts as a focal point to engage with industry and government on pensions administration matters. It was created to provide an independent infrastructure to set, develop, and provide guidance on pensions administration standards. It is an independent accreditation body, assessing the achievement of good pension administration standards by schemes and providers.

ACADEMIC INSTITUTIONS: Prof. Dr. Heinz-Dietrich Steinmeyer University of Muenster / Germany School of Law Universitätsstrasse 14-16D-48143 Muenster Phone 49-251-8329744 Mobile 49-171-8384816 Mail: steinmeyer@uni-muenster.de

Is this also the right classification for you?

I am a professor for Social Security Law, Labour Law and Civil Law at the University of Muenster Law School. My special field is pensions – occupational/ supplementary pensions as well as public pensions. I am doing consulting work nationally and internationally including international organizations (EU etc.). I am the Chairman of the European Network for Research on Supplementary Pensions.

INVESTMENT GOVERNANCE CONSULTANTS:

66

Also right for you?

Henrik Pedersen, Managing Partner & Co-Founder | Clerus LLP E-mail: henrik.pedersen@clerus.co.uk Website: http://www.clerus.co.uk/ Telephone: +44 20 3356 2845 Mobile: +44 7767 656234

We partner with pension schemes and other asset owners to review and improve investment decisions, governance and value-for-money, through independent and informed investment analysis. As a result, investment outcomes can be improved without the need to change service providers or taking on more investment risk. We offer a free initial assessment, so why not try us out?

James N Meenan, Principal | JNM Investment Governance E-mail: james@jnmresearch.com Website: www.jnmresearch.com Telephone: +353 (0)1 687 1027 Mobile: +353 (0)86 257 2646

JNM Investment Governance gives trustees independent coaching and support to develop strategies and techniques to stem the overwhelming resource handicap they face in discussions with investment professionals.

JNM’s objective is to facilitate a constructive two way dialogue with attendant benefits for all parties.

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3

ANSPARENCY ORGANISATIONS

DATA SERVICES: David Rich MIod, CEO | Accurate Data Services E-mail: david.rich@accuratedata.co.uk Website: http://www.accuratedata.co.uk/ Telephone: 01603 813366w Mobile: 07919918623

Is this the right classification for you?

David is Chief Executive of Accurate Data Services, a specialist data quality and positive people tracing business that is focused on unclaimed assets in the financial service sectors. ADS traces lost members, clients and policy holders for a variety of organisations including Life and Pensions funds, Banks and Asset Managers. The goal is to help businesses reunite their customers / members with their assets and deliver positive consumer outcomes. David is an active campaigner for transparency and action around the large unclaimed assets issues present in the UK.

INVESTMENT CONSULTANTS:

FINANCIAL PLANNERS:

WEALTH MANAGERS:

Is this the right classification for you?

ACTUARIES:

Is this the right classification for you?

PENSION SCHEME PROVIDERS:

PENSION SCHEME SELECTION EXPERTS:

ASSET MANAGERS:

Is this the right classification for you?

PENSION SCHEME CONSULTANTS

Is this the right classification for you?

RESEARCH ORGANISATIONS:

Is this the right classification for you?

INSURANCE COMPANIES:

Is this the right classification for you?

BANKS:

Is this the right classification for you?

REGULATORS AND GOVERNMENT DEPARTMENTS:

TRADE UNIONS:

Is this the right classification for you?

TRADE BODIES:

Is this the right classification for you?

CAMPAIGN GROUPS:

Is this the right classification for you?

PENSION SCHEME COST REDUCTION CONULTANTS

CONSULTING ACTUARIES: Edition #3

|

Is this the right classification for you?

Is this the right classification for you?

Is this the right classification for you?

Right for you?

Is this the right classification for you?

July 2016 | www.transparencytaskforce.org | The Transparency Times

67

THE DIRECTORY OF PRO-TRANSPARENCY ORGANISATIONS

ANALYTICS ORGANISATIONS:

Is this the right classification for you?

PR FIRMS:

Is this the right classification for you?

EMPLOYEE BENEFIT CONSULTANTS:

Is this the right classification for you?

BENCHMARKING CONSULTANTS:

Is this the right classification for you?

INDEX PROVIDERS:

Is this the right classification for you?

HEDGE FUNDS:

Is this the right classification for you?

PRIVATE EQUITY:

Is this the right classification for you?

PUBLISHERS AND PUBLICATIONS:

Is this the right classification for you?

INDEPENDENT TRUSTEES:

EMPLOYER COVENANT CONSULTANTS:

POLITICAL PARTIES:

Is this the right classification for you?

DATA SERVICES:

Is this the right classification for you?

BUILDING SOCIETIES:

Is this the right classification for you?

COMMUNICATION CONSULTANCIES:

Is this the right classification for you?

CUSTODIANS:

Is this the right classification for you?

LAWYERS:

Is this the right classification for you?

GOVERNANCE CONSULTANTS:

Is this the right classification for you?

68

Is this the right classification for you?

The Transparency Times | www.transparencytaskforce.org | July 2016 | Edition #3