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November 2016

This month’s contributors:

Henry Tapper

Founder, Pension PlayPen Page 10

Andy Agathangelou Founding Chair, The Transparency Task Force Page 3

Con Keating

Head of Research, Brighton Rock Group Page 20, 24, 28 & 32

Pete Glancy Head of Industry Development, Scottish Widows Page 12

Emma Gleaves

Employee Benefits Consultant Page 36

Erik Conley

Founder & CEO, Conley Investment Group, Inc. Page 16

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

ABOUT: the campaigning community dedicated to driving up the levels of transparency in financial services, right around the world. the official publication of the Transparency Task Force. It is a great opportunity for our community to share news and views, insights and ideas, right around the world. how we bring people togethor to discuss and debate the key issues and to listen to thought leaders on the vital topic of transparency in financial services. awarded to one individual/organisation at each of our Transparency Symposia, in recognition of the contribution they are making to encourage greater transparency. 2

The Transparency Times | | November 2016 | Edition #7


Hooray, FCA! by Andy Agathangelou, Founding Chair | The Transparency Task Force Andy Agathangelou, Founding Chair of the Transparency Task Force reflects on what he sees as a major breakthrough in protecting the consumer’s interests brought about by the FCA’s Interim Report to their Asset Management Market Study. Honesty is the best policy Having joined the financial service sector way back in 1986 and having lived and worked under various regulatory regimes including LAUTRO, the PIA, the FSA and now the FCA, I admit to not having been much of a fan about the way the sector has been regulated over the years. Whilst running the inevitable risks of over-simplification and mass generalisation I would characterise the regulatory regimes we have had in the last 30 years as being: - Well-intended but ineffective; on the basis that they have failed to prevent all sorts of scandals from happening. - Well-intended but inefficient; on the basis that regulations have been horrendously expensive to create, implement and adhere to.

- Well-intended but weak; on the basis that time and time again professional lobbyists with access to enormous financial resources and ‘contacts in high places’ have been able to protect the commercial interests of influential market participants, at the expense of the consumer.

much, much more.

All change

Was the whole exercise going to be another well-intended piece of regulatory intervention that resulted in some pro-consumer niceties and a little bit of ‘light cosmetic surgery’ that failed to tackle the real issues?

But on 18th November 2015 the FCA published the Terms of Reference to their Asset Management Market Study and looking back we can see now that it was to change everything. The scope was extensive and included all the obvious issues the sector has such as: conflicts of interest, lack of incentive to manage-down the costs the consumer bares, failure to put the welfare of the client first and foremost, the issue of unusually high profit levels enjoyed by the Asset Management industry as a whole and

It was clear that the FCA’s Asset Management Market Study had the potential to be a serious attempt to fix the market’s competition failings. But would that potential be realised?

To over-simplify again, was the FCA working to the brief of: ‘Fix what you can, but don’t upset Asset Managers’; or were they working to the brief of: ‘Fix what you can’? Well, we now know. It was

Edition #7 | November 2016 | | The Transparency Times


the latter, for sure, because the FCA’s long-awaited Interim Report to their Asset Management Market Study, published on Friday 18th November is seriously hard-hitting; far harder-hitting than many will have expected.

not succumbed to pressure from industry lobbyists that will have been doing their best to maintain the status quo. The Report In their Interim Report:

In my opinion it is exactly the real-world investigation and analysis the market has been crying out for. It is a terrific victory for all the pro-consumer activists and campaigners that have become increasingly discontent with the status quo.

- The FCA highlight the fact that despite a large number of firms operating in the market, the Asset Management industry has seen sustained high profits over many years; indicating the FCA believe the market doesn’t function effectively - competition in the sector just doesn’t work properly.

It certianly seems to me that the FCA have paid a great deal of attention to the many pro-consumer individuals and organisations that have actively engaged with them over the last year, including the Transparency Task Force and they ought to be recognised for having

- The FCA comment that fund performance is not always reported against an appropriate benchmark. This is known by many in our campaigning community to be a major issue, as inappropriate benchmarking distorts the view of true performance, and amongst other ills


can sometimes be used as an unjustified basis for selecting active investing over passive investing. One wonders whether this world view might increase the ratio of passives to actives in the UK; at the moment we’re at roughly 20% passive, 80% active, whereas in the USA it is fast-approaching 50/50.      - The FCA have found concerns about the way the investment consultant/fiduciary management market operates, so much so that they have made a provisional decision to ask the Competition & Markets Authority look into the Investment Consulting sector; that’s a very serious move indeed. Could this be the opening of a ‘can of worms’ that no regulatory intervention has been bold enough to open until now?   - The FCA are seeking to strengthen the duty on asset managers to act in the best interests of investors. This piece

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alone will be seen as great news to pro-consumer organisations who have been calling for this for years. I suspect that the Investment Association might find themselves revisiting the list of principles that had been championed by their more-enlightened leadership in the form of Daniel Godfrey before some of their members ousted him for being too pro-consumer. - The FCA are even talking about the idea of introducing an all-in fee to make it easy for investors to see what is being taken from the fund. Wow, this would be a highly progressive approach to costs disclosure and is exactly the kind of regime that is needed. Let’s hope this helps avoid the ‘patchwork quilt of protocols’ that trade bodies seem to prefer over market-wide regulation.    There are many more points of great significance in the Interim Report; I am sure that anybody reading it will conclude that it is going to lead to a seismic shift in the way things will work moving forward in the UK; and I expect it coud be something of a trailblazer for other countries too. A very bright light has been shone on the Asset Management sector and it has been

found to work the way that many of us have suspected for a long time – badly; very badly. If ever there was a game-changer in financial services regulation this is it. The FCA have done their job well, really well, and on that point it is worth reflecting on what the FCA is there to do. The FCA states: - “We aim to make financial markets work well so that consumers get a fair deal” and they seek to do this through ‘protecting consumers, enhancing market integrity and promoting competition.’ That is precisely what they have done. Their Interim Report shows they know what needs doing and they are willing to take on the industry to bring about the changes that are needed. We need to keep at it But as a campaigning community it’s too early to take our foot off the gas. We can expect fierce opposition to the FCA’s proposals by the lobbyists and trade bodies that would like to maintain the ‘sustained high profits’ the sector has enjoyed at the expense of the consumer for many, many years.

We mustn’t be naïve and we must remember that for some ‘Opacity = opportunity, transparency = threat’ and when we think of how much money is at stake (particularly for senior execs in the asset management sector) we must assume there will now be clever and crafty campaigning (probably in private) to try to counter the FCA’s sublime move. Predictable counter-arguments It’s worth thinking about that. I predict there’ll be quiet conversations about: - ‘Excessive red tape’ - ‘‘Job losses & jobs leaving the UK’ - ‘Asset managers moving resource to other jurisdictions’ - ‘A brain drain of top talent moving overseas’ - ‘Falling revenues to HMRC due to the reduction in taxable profits in the sector’ - ‘Damage to the confidence in the sector’ - ‘Adverse publicity that will discourage savers from saving’; and so on.

Edition #7 | November 2016 | | The Transparency Times


But to counter the inevitable excuses that will be given by those that would rather maintain the status quo and therefore why the FCA should not pursue their transformation of the sector, we must remember that: Many sectors have had to go through a period of painful metamorphosis to regain relevance and remain vibrant; the Asset Management sector does not have a protective cloak to protect against market realities (any more). The sector should remember that the FCA’s central purpose is to drive up the value for money that the consumer gets, and on that basis Asset Managers ought to think through what they can do now to improve their offerings and thereby attract market share towards them. It’s all in the response They should be asking: - How do we respond positively, swiftly and constructively? - How can we harness FinTech more effectively to strip out costs? - How can we individually and collectively promote the virtues of the sector to attract more monies into it?

Term Incentive Plan for the CEO and the senior executives so that our commercial energies and resources are fully aligned with the objective of delivering good outcomes for our customers?

gently engaging with the fast-growing Evidence-Based-Investing community?

- How do we get truly comfortable with transparency?

I think the FCA’s Interim Report will prove to be very troublesome for many Asset Managers; not for what it is per se, but for how badly some Asset managers will respond to it; those firms whose leaders are pre-disposed to denial and defensiveness and who live in the ‘dark ages’ may see their share prices fall and fall, and then fall some more.

- How do we proactively and properly police against poor practice? - How do we move from denial to acceptance; and then to willingness to change and be changed? - How do we embrace the inherent advantages of passive investing and bring comparable, competitive products to market? - How do we look afresh at the whole issue of hidden costs and charges and stop ourselves from dismissing it all as ‘like looking for the Loch Ness Monster’? - How do we shake ourselves out of a state of ‘comfortable cognitive dissonance’ and accept that radical change is ahead? - How do we start intelli-

The cream will rise to the top

Conversely, those that are led by enlightened individuals who understand and accept that the Asset Management industry exists to serve its customers and the better value-for money they provide the better they will do, can continue to look into the future with a sense of optimism and a sense of pride, because they will be willing and able to adapt. To illustrate the point, consider this: There was a fantastic MoneyBox programme on BBC Radio 4 on Wednesday 9th November. It includes the first

- How can we drive up market efficiency through M&A activity? - How do we undergo something of a long-overdue ‘cultural transfusion’; so that the regulatory requirement to put customers first become something that we actually want to do? - How do we redesign the Long


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ever UK interview of the Founder of Vanguard, Jack Bogle. It’s a ‘must-listen’ for two reasons: Firstly, because any Jack Bogle interview is a ‘must-listen’; and secondly because of the sense of passion and purpose displayed by an enlightened leader of a UK asset management firm – it’s exactly the kind of leadership that will study the FCA’s Interim Report and see it for what it is – an opportunity to wash away the grime of inferior market attitudes and practices that don’t serve anybody in the long run; and on that basis is a much-needed catalyst for change. I suspect that all Asset Managers will be saying ‘We welcome the FCA’s Interim Report’ but only some will truly mean it. Here’s a link to that MoneyBox programme: So, ‘Hooray, FCA!’ for doing the market a favour that EVERY market participant can benefit from, depending on how enlightened their response to it is. The next battle for the FCA’s Becky Young, Mary Starks, Kate Blatchford, Robin Finer and all their colleagues involved will be

to defend themselves and their Interim Report from the clever, crafty and cunning campaigning they will no doubt be on the receiving end of over the next eight months or so. But based on the courage they have shown in their work so far I have every confidence that they will stand their ground. They’ve been brave and bold enough to ‘tell it as it is’ and all they need to do now is withstand the pressure and intensity they can expect from the not-yet-veryenlightened. Here’s to the new (and far better) paradigm they have created; and here’s a link to their Interim Report: The Transparency Task Force are putting together a Response Team that will provide our formal response to the FCA’s Interim Report. We only have until February 20th to do so. If you would like to express your views on this development and/or get involved with our Response Team

please complete a very short survey that you can access through this link: https://www.surveymonkey. Finally, I am pleased to advise that in light of these very positive developments the Transparency Symposium on 14th December is going to be dedicated to the taking a close look at the FCA’s Interim Report, and discussing its likely implications. Representatives from the FCA are going to be presenting to us so this will be a great opportunity to engage. We will also be hearing from Dr. Anna Tilba and Professor Michelle Baddelley, who carried out important market research on behalf of the FCA. You can book your place now - look out for the links throughout this edition of the Transparency Times but please don’t delay, places are likely to be going fast.

To book your place at our Transparency Symposium largely dedicated to the FCA’s Interim Report click

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Edition #7 | November 2016 | | The Transparency Times


ARTICLE: Henry Tapper

POWER TO THE PEOPLE (NOW WE’RE TAKING T by Henry Tapper, Founder | Pension PlayPen; Director

If the People’s Pension, is really the people’s pension, why aren’t the people who are members being told what they are paying for membership? For some months, I have been saying privately to the management and Trustees of People’s Pension and the management and IGC of the B&CE insurance company (People’s parent) that we need to know the true cost for members of membership.

a lot of revenue. They can actually provide the fund manager with a way of offering fund management charges to B&CE at considerably less than cost, the cross-subsidy from stock lending making what appears unprofitable – profitable.

For some months I have been fobbed off with “limber vows”, so I will now broadcast my complaint a little more vociferously.

Ah – but here’s the rub…

Earlier in the year, B&CE swapped their investment management agreement (IMA) with Legal and General Investment Management for an agreement with State Street Global Adviser. This means £2,000,000 +of policyholder and trustee money transferred management. Under the old agreement with LGIM, when the underlying stock was lent to third parties, the revenues for the “stock-lending” returned to the member funds. Typically, this is not the case when State Street lend other peopl e’s money. State Street tend to retain stock lending fees for their own purposes. These fees can represent


Those stock lending fees are no longer benefiting the member, meaning there is a reduction in performance of the member’s funds. But the reduction of costs in the IMA to B&CE does not benefit the member either, it benefits B&CE. So were People’s to be offering State Street funds within the 0.50% cover all charge rather than LGIM funds, the member may be getting 1- 5 – 10% less for their money! Put another way, the equivalent price for the People’s Pension could be anything between 0.5% and 0.6% – depending on how much State Street are stock lending, and what percentage of stock lending fees they are retaining! So why aren’t The People’s

Pension responding to my requests? The People’s Pension recently finished plum last in a Share Action survey of workplace pension governance. B&CE are the only IGC whose IGC Statement I have not read (I cannot find it). Over the summer, People’s promised to get their act together and appointed Gregg McClymont’s excellent researcher – Andy Tarrant – to bolster it’s failing corporate governance team. But Andy’s arrival has made no difference (in this respect). The People’s Pension and B&CE continue to avoid making a statement on how much stock lending is going on with member’s funds and what percentage of the stock lending revenues are retained by State Street. This is in sharp contrast to LGIM who were transparent in this matter. What can be done? Because we cannot get the information, cannot currently give a conclusive rating on the People’s Pension’s investment product. We must assume that no news is bad news – at the

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THE RISK). | First Actuarial very least for People’s investment governance, but quite probably for member’s investment prospects. The People’s Pension overall rating has fallen substantially because of its failure to be open and transparent in its governance, this matter is a matter of prime importance. For this is no small deal- in the long term, it is the investment performance of People’s Pension that will determine the outcomes at retirement for its members. While reduced performance in the short-term will not harm People’s marketability, it would ultimately be a critical success factor of what People’s are doing.

ers, has only its policyholders and its management to reward. If the policyholders (of which People’s is one) are not being fully rewarded, then we can only conclude that the management are being over-rewarded. So it is in the B&CE senior management’s best interests to prove to us that they are not using stock lending as a means of transferring cost from their balance sheet to member’s returns.

I call upon the management of B&CE and the Trustees of People’s Pension to make a clear and conclusive statement as to what its IMA with State Street says about the distribution of revenues from stock lending activities and how (if at all) this differs from the IMA with LGIM.

All that can be done, in the short term, is flag the problem and ask People’s for the kind of transparency that their name and status as a “master trust” suggests. B&CE is a mutual insurer so, without shareholdHenry 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 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. Edition #7 | November 2016 | | The Transparency Times




by Pete Glancy, Head of Industry Development | Scotti

The proposals set out in the FCA’s recent consultation on ‘Transaction Charge Disclosure in Workplace Pensions’ is a welcome step in the right direction. I expect a myriad of stakeholders considering transparency through different lenses, to contribute to the consultation and I expect the FCA to have a wealth of ideas, proposals and legitimate concerns to work through following the consultation period. For me there are 3 simple tests to determine whether the eventual disclosure code is likely to be successful; 1) Does disclosure from those on the supply side (Asset Managers) answer all of the questions which those on the demand side (Trustees, IGCs, Advisers) should be asking? 2) Is the disclosure code for pensions consistent with the disclosure codes for other savings and investment products? 3) Does the new code allow us to take costs out of the system, creating more value for our customers, or does it introduce additional costs and complexity which ultimately eats into customer returns? Supply Side meets Demand Side: The ultimate prize here is to drive costs down and to ensure

that the invisible hand of the market passes this benefit on to customers through reduced charges. To keep costs down, firms need to spread fixed costs through economies of scale and to minimise variable (or transaction costs) through simple, streamlined processes – making best use of technology. The one sure way to avoid economies of scale and rack up the costs is to offer what I call a ‘mass niche’ proposition. By this I mean building a slightly different proposition for each customer. On the demand side of transaction cost disclosure, we have thousands of different trustee boards all asking for different information in different ways and we can now add IGCs and Master Trust Boards to the party. If we are going to give the asset management community a chance to produce something consistent, robust, intuitive and comparable, we must consense around a single set of core questions. This will effectively allow them to treat the industry as a single customer. For me the starting point is as


follows; 1) To what extent is the performance upside from trading likely to offset any dilution effect (or the ‘slippage cost’)? 2) To what extent was trading conducted in an efficient and effective manner which minimised market impact (e.g. spreads in markets)? 3) Where stock lending has been practiced, to what extent did savers benefit from the proceeds of that activity? It is likely that the best results will come from a standardised and comparable quantitative disclosure of costs, which then allows those on the demand side to have a meaningful and challenging qualitative discussion with their asset manager. Each qualitative discussion will be different and it should be. At present, those on the demand side can consider the performance of the fund looking at growth and volatility, which allows a fund to be placed on an efficient frontier and plotted against other similar funds

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for comparison purposes. As we know, past performance is no indication of future performance. However, it is possible to judge the future competency of firms or individuals based on the way they have behaved in the past. In considering the 3 questions above, those on the demand side will be able to form a view in terms of an asset manager’s judgement and best execution in the future. The FCA’s proposals appear to be backward looking, keeping away from future projections which in my view would be open to gaming and largely speculative. The proposals also seem to be pragmatic, looking at an overall and absolute ‘slippage cost’ which should provide an answer to questions 1 and 2 above. They also propose that costs associated with stock lending should be itemised separately which addresses question 3.

Else: Pensions as we know accounts for about £2bn of the £6bn held in private savings and investments in the UK. Scottish Widows research in 2013 (see Table 1) showed the variety of savings products which people use for their retirement. In the ‘2016 Workplace Savings Report’ issued by Scottish Widows, research shows that more people still see cash accounts and cash ISAs as playing a more important role in their retirement than people who consider individual pensions or company pensions to be most important. Within the pensions industry we tend to be a bit introspective, looking to do things in different ways for pensions than for other products. Every time we do this we confuse customers who continue to perceive pensions as being too complex, creating illogical savings habits

where customers miss out on employer contributions, tax relief and even make mistakes at retirement under the new pension freedoms. Example: To illustrate this point, I’ll consider SMPI illustrations, which apply to both Trust Based and Contract Based pensions. Providers and administrators are required to illustrate growth in real terms, making an allowance for inflation. The FCA currently requires that we assume an inflation rate of 2.5%. Great work has been done in recent years to harmonise the illustration basis

I don’t under estimate the challenge for asset managers in building the necessary data collation and reporting infrastructure and wouldn’t feel qualified to offer guidance in that regard. However, I do feel it is important that in developing a detailed disclosure code, this is assessed in terms of its ability to answer all of the key questions which those on the demand side should be asking. Pensions & Everything Edition #7 | November 2016 | | The Transparency Times


used in both Trust and Contract based arrangements, but being introspective we have completely missed the point that planning tools for all other products and even the new State Pension Calculator expresses growth in absolute terms, with only a footnote to the effect of inflation. The result – growth rates for private pensions appear to be 2.5% per annum lower than everything else and pensions can mistakenly seen as a pretty bad deal relative to the alternatives.

ing the income of Corporate Advisers and Employee Benefit Consultants following the Retail Distribution Review.

A very important statement within CP16/30 is the FCA’s desire to have a disclosure code for workplace pensions which is consistent with the emerging codes for other products. Frustratingly the further delays to PRIIPs emerging from Europe could delay getting to an end game. However, it is important that we avoid a misguided product arbitrage driven by different disclosure standards.

If we over engineer transaction cost disclosure, we run the risk of introducing additional costs and people between customers and their money.

Cost / Benefit Analysis: The idea here has to be to take costs out of the system and not to introduce new costs through unintended consequences. We have seen the invisible hand of the market put pressure on pension wrapper costs following Hard Disclosure in 1995 and the adoption of Mono-Charge in 2001. We are currently seeing the invisible hand squeez-

There is a strong argument and plenty of precedent to suggest that ‘fat’ will be squeezed from the system when transaction charges are more transparent as the invisible hand of the market does its work. However, there is also a risk that a poorly thought through or poorly executed solution actually adds additional costs.

Rather than work bottom up, brainstorming every potential charge that could possibly apply, let’s consider the top line ‘slippage cost’ and initially the largest components which are likely to have a material effect, everything else could be in a bucket classed as ‘other’ in the short term. If Trustees or IGCs are happy with the growth, volatility and headline slippage cost, then no further work is needed. If the slippage cost is higher than is reasonable or expected, then a deep dive into the level of slippage cost can be undertaken. In industries which are more modern, for example digital platforms or Apps for smart phones, firms develop what they call a ‘minimum viable

proposition’. This is the minimum proposition that they think will meet customer needs and therefore sell. They have a much longer list of ideas and deliverables, but they add these over time through a series of regular updates and they also continue to test new ideas with product users so that they know they are continuing to head in the right direction as the world continue to change around them. Notwithstanding the potential delays resulting from further slippage in PRIIPs, it does make sense for us to quickly get to a solution which makes a really meaningful difference, keeping the bells, whistles and additional levels of granularity for further enhancements to the disclosure code over time. What will disclosure tell us? For DC pensions I expect the biggest element of transaction charges to be stamp duty on UK Equities. This is likely to open up another industry debate in its own right. Earlier this year we saw the conclusion of the consultation on pensions taxation where the merits of the TEE and EET options were considered. Everyone takes the middle ‘E’ for granted. However, whilst growth is free from Capital Gains Taxation, transaction charge disclosure is likely to highlight how much ‘T’ there actually is in the middle ‘E’. One for another day!

Pete has been with Scottish Widows for 25 years and has held many senior roles across the business. Most recently Pete spent 5 years as head of Individual Pensions before spending a further 5 years as Head of Corporate Pensions. Pete is presently Head of Industry Development where he is tasked by Lloyds Banking Group to work with industry stakeholders to help develop the pensions market for the benefit of its customers.


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WE’LL HAVE ANOTHER GREAT LINE-UP OF SPEAKERS: This Transparency Symposium will be largely dedicated to the FCA’s Interim Report to their Asset Management Market Study. The event will include presentations by senior executives at the FCA plus Dr. Anna Tilba and Professor Michelle Baddeley, who carried out important market research as an integral part of the FCA’s Interim Report. It’s definitely a not-to-be-missed event. The final speaker line up and programme details are yet to be announced so we will update the booking page as soon as possible. Meanwhile, you can still crack on and book your place - click on the link below. Note that if the ticket price of £150 is genuinely beyond your budget please Email me at and we’ll look to sort something out for you - we don’t want cost to prevent people genuinely keen on helping to achieve greater transparency in financial services being able to attend - but please be quick as there are a limited number of reduced price tickets available. Thank you. Where & when? Aberdeen Asset Management, Bow Bells House, 1 Bread Street, London EC4M 9HH Wednesday 14th December, 9:30 to 16:30

To book click


Edition #7 | November 2016 | | The Transparency Times




by Erik Conley, Founder & CEO | Conley Investment G

As an independent, non-profit advocate for the interests of investors, I spend a fair amount of time perusing the websites of the opposition – namely, the firms that promote the interests of the industry. There is a large and influential network of lobbyists, consultants, marketers, and advertisers who cater to the $800 billion investment advice and management industry. Their mandate is to help their clients maximize the revenues and profits of their businesses. Exploring the strategies and tactics that these advisors-to-the-advisors use reveals an unsurprising effort to keep things as they are – opaque, complex, and


confusing. Since joining the Transparency Task Force, I’ve been paying particular attention to the ways and means the industry is using to fight back against the demand by investors for a more open and transparent system, especially as it relates to the true cost of products and services that are sold to them. The issue of cost transpar-

ency is front and center for the financial services industry. It comes up at conferences, seminars, and board meetings. Industry lobbyists have been fighting the implementation of the Mandatory Fiduciary Standard by the U.S. Department of Labor for years, and the fight is becoming fiercer by the day. In an apparent Mobius strip of logic, the industry argues that placing the interests of the client ahead of their own

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Group, Inc. would not be in the client’s best interest! When it comes to the issue of cost transparency, I’ve noticed that industry advocates have come up with a new term – price saliency. Why they feel a need to substitute the term saliency for transparency is beyond me, but that’s the preferred term among the industry cognoscenti. The industry argues that price saliency may be good for the consumer, but it’s bad for business. Here are a few of the arguments I’ve come across in my re-

search into price saliency. Consider the willingness of customers to purchase insurance and investment products where the agent is paid a commission by the company that manufactures the product. Consumer behavior studies show a lack of awareness about the amount of compensation paid to salespeople on an insurance policy or investment product. In fact, many consumers of these products are unaware of the fact that such compensation arrangements even exist. These fees, which are paid by the customer, must be disclosed by law. But they are usually buried deep within a multi-page

offering document, where few customers will put forth the time and to find them. Have you ever read a prospectus or an insurance proposal from front to back? The investment advice industry knows that consumers will usually tolerate higher commissions and fees when the pricing is less transparent. The reduced transparency of the payments to the agent reduces the pushback to the amounts that are being paid by the consumer. Consumer willingness to accept high fees also works well for the assets-under-management (AUM) model, which may be attributable to the low transparency of the cost. When fees are deducted directly from an investment account without the client being asked to write a check, the transparency is reduced. This makes the client less aware of the cost, and less likely to object to cost increases over time. How can the industry make prices more transparent? One way is to provide clear disclosure of all of the costs borne by consumers. This can be

Edition #7 | November 2016 | | The Transparency Times


easily accomplished by providing documentation prior to the purchase of a financial services product or financial planning service. If the method of payment has low-transparency, then use full and clear disclosure to ensure that the consumer has a proper understanding of how much s/he is paying. Another way to make costs more transparent is to change the method of payment and compensation. For instance, the approach being adopted in the UK starting in 2013 under their Retail Distribution Review (RDR) is to ban commissions altogether, and require clients to agree in advance to the advisor’s charges, which will be paid separately and therefore with greater transparency. Clients can request to have the payment deducted from an investment, but only after the client gives written authorization for the payment.


Another way to improve transparency is to switch from an AUM-style business model to a retainer model. Asking clients to make a separate payment of retainer fees by check is clearly a more price transparent approach. What is the outcome of this effort to increase cost transparency? A world where clients are more aware of and sensitive to the prices that they pay, which in turn helps to ensure that appropriate value is being delivered for the cost. With greater transparency, clients will be appropriately sensitive to price increases, to ensure that they are justified. Is More Cost Transparency Good For Advisers? Although the focus of the transparency movement, and other reforms to financial services

around the world, is to reduce the adverse consequences that occur when cost transparency is low, the advice industry believes that increased transparency is not always a good thing. While cost transparency by definition means that consumers are more aware of the prices they pay – thereby ensuring they give due consideration to the value being offered for the cost being paid and don’t allow prices to rise to an unjustified level – the transparency also means a higher likelihood that consumers will push back on costs in general. As a result, businesses that operate on a higher-transparency pricing model may struggle to attract and retain clients from competitors who use less transparent fee models. The firms with the more transparent cost structure will be pressured into charging lower fees and gen-

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erating less revenue from the same base of clients. If the transparent model is adopted by the firm, this is clearly good news for the consumer. However, a more transparent pricing structure could actually make a firm less competitive, effectively forcing the firm to undercharge for products and services in order to remain competitive. This may explain the struggles of many financial planners who have adopted the hourly pricing model – the most cost-transparent model in the industry. While the model has all the virtues of highly transparent pricing – clear transparency, and an opportunity for consumers to immediately judge the cost relative to the benefits – it also struggles with all the disadvantages – price sensitivity and a difficult challenge to justify the costs of service. The fact is that highly transparent costs are a double-edged sword. They’re great for consumers overall in that they make it harder for businesses to overcharge for the value they provide, but they’re bad for the growth of the business due to pushback from consumers about pricing and difficulty attracting clients who balk at the immediate adverse impact of making a highly-cost-transparent purchase, especially given, in the case of financial services,

a rather vague and intangible benefit. In the end, what may be best for consumers overall to keep costs reasonable may be bad for financial advice and planning businesses. Even if the business charges a fair price for the services it renders, the ones with transparent pricing are likely to have more pushback than the ones that set an appropriate price but then implement on a nontransparent basis.

Level the regulatory playing field As long as the current system of financial incentives to intermediaries remains in place, the move towards greater transparency will be slow and incomplete. One way to hasten the arrival of a fully open and

transparent system is to convince our policy makers that this issue is so important that it should be mandated as part of the regulatory framework. The Dutch have come very close to making transparency the law of the land in their country, by requiring all agents who are part of their pension system to fully disclose all costs that savers incur. Importantly, these costs must be expressed in dollar terms as well as in percentages. Other countries can adopt the Dutch model as an industry best practice. If investors know what everything costs, there will be no penalty for those who stand alone today in making full disclosure to their clients.

Erik Conley is the Founder & CEO of Conley Investment Group, Inc. He was a Trader & Portfolio Manager, from 1975 - 2001. Former head of equity trading at Northern Trust Co. in Chicago. Now a private investor, founder of a nonprofit investor advocacy firm, and private investing coach. ‘It gives me great satisfaction to teach small investors the same skills and strategies that I used with my high net worth clients as a private wealth manager. It may be a cliche, but giving something back to the community is more rewarding to me than helping very rich people get even richer.’ Erik is also a member of the Transparency Task Force’s International Best Practice Teanm. Edition #7 | November 2016 | | The Transparency Times




by Con Keating, Head of Research | Brighton Rock Gro

The debate over the disclosure of costs and fees for investment portfolios has been long, often obscure and even occasionally bad tempered. It seems likely that the current interest of the FCA and other official bodies will bring to an end the prevarications, obfuscations and misunderstandings so that meaningful disclosure may become the order of the day. It is worth understanding the magnitude of fee effects in portfolio management – a 2% fee based upon the value of a portfolio (ad valorem) is equivalent in effect to 20% volatility or risk in the portfolio. Twenty percent is, of course, the order of magnitude of risk or volatility of equity market portfolios. There is also a hidden sting in the tail. A 2% ad valorem fee applied to the period end portfolio will also capture a proportion of the portfolio’s return over that period. Let us suppose that the portfolio returns 5%, then the fee amounts to 2.1% of the period’s initial value. The situation gets


worse as we move into period two, with the higher opening of period capital value (102.9 after fees) and again a 5% return, the fee rises to 2.16% of the initial capital value. After two years, this simple 2% ad valorem fee has left only 57% of the total available value added for an investor, and it continues to decline. The fund manager charging this type of fee is getting repeated bites at the same performance cherry. More egregious is the practice that has developed of levying costs and charges in addition the stated management fee. These can be substantial indeed. Of particular concern, and likely to grow now that

research will be unbundled from execution costs, is the practice of funds being charged for research – the simple argument is that these expenses should surely lie with the fund manager as they form part of the intellectual property of the fund manager that supports the service they offer and charge for. Since the work of Chopra and Ziemba in the early 1990s, we have known the relative magnitudes effect of changes in the mean return, variance and diversification (correlation) parameters of portfolio asset allocation optimisation routines. Changes in the mean return are at least an order of magnitude more important than changes in volatility or correlation co-

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oup efficients, and of course, costs and fees are first and foremost changes in returns. Charges on alpha. There are some important lessons to be taken from this fact; for example, that there are many investment strategies, which though potentially justifiable using diversification arguments, that make no sense after consideration of their costs and fees. Charles Ellis, a legend in fund management circles, has long argued for fee disclosures to be based not on the portfolio value, but upon the return achieved by the manager of the portfolio; the argument is simply that this is what the manager is trying to achieve, a value added given a particular pool of wealth to manage. In implementation, the fee is reported as a proportion of the return achieved – a five percent return and 2% fee would show the fee as 40% of the return. That simple shift does more to domesticate hedge fund fee structures than any other.

argues for reporting fees as a proportion of the portfolio income, though income is an easily manipulable metric, and the second argues for fees to be reported as a proportion of the investment manager’s value-added, rather than total return achieved by a manager. Value for money evaluations are simple exercises when fees are expressed in terms of returns, though they do require the use of benchmarks. Suppose a portfolio benchmark exists and that the portfolio returns 3% over this and incurs explicit costs of 0.5%, then we see immediately that the manager charging 1.5% in fees delivers only 1% in return performance – scarcely a situation that should be allowed to continue. There are still many who contest the feasibility of

comprehensive performance reporting; their arguments are that there are many unobservable implicit costs, such as those arising from transactions as principal with market makers. The reality is that the Dutch regulator already requires comprehensive reporting of investment costs and fees, albeit that principal to principal transactions have imputed costs. In fact, it is possible to estimate the aggregate of these “hidden” costs by comparison of the portfolio outcomes with a passive benchmark – indeed that benchmark could be the initial portfolio allocation,

There are however two issues with this: the first is that, in the long-run, the real equity return reduces to dividend income, and the added value, if any, of an active equity fund manager is only a small proportion of the total return. The first of these Edition #7 | November 2016 | | The Transparency Times


rescaling) of those returns such that they occupy the same range of support.

which would offer insight into the effectiveness of all subsequent trading activity. Portfolio turnover is an important contributor to management expenses. Turnover is also a good guide to the investment horizon to which a portfolio is being managed. Portfolio turnover is simply a matter of the sales and purchases made within a period, though complicated by the flows of cash into and out of a portfolio. Indeed even the simplest portfolios usually experience such flows if

only from the dividends, coupons and maturing proceeds of investments. However, the techniques for dealing with such situations are well known from experience with pooled funds. Contrary to the beliefs of many, it is not necessary to invoke the elementary theory of the capital asset pricing model, with its alpha and beta. The comparison of distributions of portfolio returns can be effected by affine transformation (that is to say translation and

Tracking error has found favour as a risk measure in portfolio management. In its original use with passive index funds where there was no expected deviation in return from the benchmark, its definition as the standard deviation of the returns of the differences between the portfolio and the benchmark was correct. However, when applied to active management where the objective is to generate a return in excess of the benchmark, then the calculation formula needs to be extended to accommodate the difference in returns. Not surprisingly, this measure of tracking error is strictly higher than the measure currently in use. In fact, if a measure of portfolio risk is required we need go no further than the difference between the arithmetic average of the returns and the geometric average return – and we will see that a 2% difference between the geometric and arithmetic average return indicates a portfolio risk of 20%. Ending here, with no discussion of derivatives might seem like a cop-out, but other than for the costs of collateral management, their reporting is fundamentally no different from elementary securities. Collateral management, including activities such as repo, really present no significant new challenges. Perhaps the greatest challenge is how to handle outstanding recoveries of taxes withheld, which may require an opportunity cost approach.


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WE’LL HAVE ANOTHER GREAT LINE-UP OF SPEAKERS: This Transparency Symposium will be largely dedicated to the FCA’s Interim Report to their Asset Management Market Study. The event will include presentations by senior executives at the FCA plus Dr. Anna Tilba and Professor Michelle Baddeley, who carried out important market research as an integral part of the FCA’s Interim Report. It’s definitely a not-to-be-missed event. The final speaker line up and programme details are yet to be announced so we will update the booking page as soon as possible. Meanwhile, you can still crack on and book your place - click on the link below. Note that if the ticket price of £150 is genuinely beyond your budget please Email me at and we’ll look to sort something out for you - we don’t want cost to prevent people genuinely keen on helping to achieve greater transparency in financial services being able to attend - but please be quick as there are a limited number of reduced price tickets available. Thank you. Where & when? Aberdeen Asset Management, Bow Bells House, 1 Bread Street, London EC4M 9HH Wednesday 14th December, 9:30 to 16:30

To book click


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by Con Keating, Head of Research | Brighton Rock Gro

After many years of festering in the background, the pension liability valuation arguments have recently flared up publicly again. A wide range of commentators has expressed disquiet with the status quo. The valuation of liabilities is fundamental to pensions management, and so is the nature of the problem. Much of the debate, which is very much a dialogue of the deaf, consists of shouting around whether the yield on gilts, or the yield on AA corporate bonds, or the expected return on assets should be used. It should not surprise that this debate has found no resolution, as all are wrong. It is surprising that discount rates of any kind should appear in the valuation of pension liabilities since they do not figure in determination of the pension payments promised and projected. Longevity, wages and earnings do, but not interest rates or yields. They also do not appear in contributions; they are a simple proportion of current pensionable salary.


This has led to the correct description of interest rate hedging as hedging of the measure, the discount rate, not the liability itself. It is worth examining the treatment of liability valuation in insolvency procedures; the courts have been valuing liabilities for a very long time. These operate from the ground up; the valuation of a liability, which is known as the admitted claim, consists of the principal originally advanced plus the accrued unpaid interest on the obligation. ‘Acceleration’ is not about bringing some projected, or even promised, future to the present but about making the principal previously advanced and unpaid accrued interest as originally promised under the terms of the obligation immediately due . So the holder of a

10% coupon bond issued at par entering insolvency six months after the previous coupon was paid, now has a claim for the amount advanced, £100, plus unpaid but accrued interest of £5 (0.5*£10.00). No creditor has any right to look to the future and base their claim on what might have been, even if such ‘might-have-beens’ were explicitly promised by the company. If that were possible, all creditors would have created visions of wishful ‘unicorns’ and become billionaires, and, as it implies no meaningful recoveries for the honest creditor, that would have the result that credit would simply be unaffordable or entirely unavailable for just about all. The debates and

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oup disputes over the equity risk premium and similar arguments around the use of the expected return on assets should be seen in this light. Let us consider two zero coupon bonds, which mature at the same time five years from now. One was issued twenty years ago, at a price of £9.23, implying a yield to maturity of 10%. The second was issued ten years ago at £48.10, implying a yield to maturity of 5%. In insolvency, the admitted claim for the first would be £9.23 plus the accrued unpaid interest of £52.86 making a

total of £62.09. For the second, the admitted claim consists of £48.10 plus the accrued unpaid interest of £32.25, making a total of £78.35. Here we have two claims which mature on the same date, with values today which differ markedly. These values retain the specific information of the company promises made in support of their issuance. Markets in distressed securities reflect these differences in their pricing. Any single discount rate, no matter how chosen, will return a single value for these two bonds, discarding information. Pension liabilities may be

valued in a similar way. The principal is the contribution made. Together with the projected value of benefits promised, this determines an accrual rate. This is the rate of return which equates contribution with projected benefits. It is unique. It is fixed at time of award in just the same way that the rates of return of the zero coupon bonds were fixed at issuance. It does not gyrate with the

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animal spirits of any market or any portfolio of assets. This makes explicit the fact that the cost to the corporate sponsor has two elements; the contribution made and the rate of accrual of that contribution, a fact which is usually lost on scheme members. In this view, the role of the pension fund is to offset or defease the accrual cost to the sponsor employer. The pension fund also serves as security for scheme members. Pension liabilities may be valued without reference to or use of any external discount rate. Moreover, this valuation will retain all of the information implicit in the contributions and promises made by the sponsor employer. This proposed method reports accrued liabilities at the time of measurement, while current-employed protocols return a discounted present


value of liabilities, of which there are infinitely many. By any test, the accrual rate is objective; with market-consistency, the objectivity is in the process of selection, not the item selected. The accrual rate possesses one further, but very important property; it is time-consistent. This means that if it were to be used to discount future benefits, it would return that same value as is calculated by accumulation from the contribution forward. Neither market-consistent yields nor expected asset returns are time consistent. Put another way, rates chosen in these ways will not return the correct value of the original contribution if used in a backwards projection. A consequence of this is that changes in the scheme valuation are unreliable, and form a very poor basis for any decision. Time-consistency is an important property if a company’s accounts are to satisfy their statutory requirement to be “true and fair”; most notably that earnings state-

ments be accurate and reliable. It is clear that the volatility of liabilities arises principally from its introduction through the discount rate utilised. The accrual rate may change, but that requires revision of the benefits projections, or of the contributions made. The question which arises immediately is how wrong can these current methods be? I looked at a section of a particular DB scheme. The total liabilities projected amount to £365.29 million. Using a discount rate of 2% the present value of these liabilities amounts to £260.28 million. The scheme has assets, at market value, of £207.44 million, meaning that under the current convention, it is regarded as being 79.7% funded. Going forward these assets need to earn a return of 3.58% to be sufficient to meet all benefit payment liabilities

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as projected. The portfolio of investments has achieved a return of 8.21% p.a. historically. The accrual rate implicit in the contributions made and awards of benefits outstanding was, and is 6.07%. The accumulated or accrued value of the contributions made, the current, accurate value of scheme liabilities is £153.37 million. The level of funding of this, the commitment as originally made, albeit implicitly, is 135.5%. Put another way, the investment portfolio has done extremely well, exceeding the rate of accumulation promised, and with which we were comfortable, by a total of over 35% or £54.067 million. The discrepancy between the ‘market-consistent’ discount rate based valuation and this rate of accrual method is £106.90 million, or 69.7% of the accurate liability. This is the magni-

tude of the error introduced by this ‘market-consistent’ discount rate. It is 29.27% of the total liabilities ultimately payable. The amount which needs to be reported in order to satisfy the statutorily required ‘true and fair’ view of UK companies law is £153.37 million. It is the value which is equitable to other stakeholders, other creditors and shareholders. Clearly, the market-consistent present value of £260.28 million is materially different from this, and would fail any ‘true and fair’ view test. While the error in this case is that ‘market-consistency’ overstates liabilities, the converse is also possible; in the 1970s when market yields were extremely high, had these conventions applied, the present value of liabilities would have been understated to a similar, and sometimes larger, degree. With error

on this scale, it is scarcely surprising that occupational defined benefit schemes are widely regarded as unaffordably expensive, and that perverse actions and management strategies should have been undertaken and adopted. Many of these actions have themselves raised the cost of the rump of occupational DB provision. The current accounting or valuation practices have done more than any other genuine risk factor to destroy the UK occupational DB system; the current methods are simply not fit for purpose. Once we have resolved this, then and only then can we address scheme funding and member security properly. I expect and await an onslaught of protests; I recognise that the vested interests are substantial.

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by Con Keating, Head of Research | Brighton Rock Gr

In the course of preparing the earlier article on the valuation of corporate DB pension liabilities, discussions with pension professionals indicated that they hold a surprisingly wide range of views on this subject. Many questions appear to have passed unasked or at least not to have been considered widely or deeply. Why do companies opt for the institutional forms we observe; why do trustees accept the arrangements established? What are the costs and benefits of these and other possible arrangements; what motivates the choices made? By way of starting point, it should be recognised that a sponsor might well retain contributions internally while making a DB pension promise. No fund is in fact necessary. Pensions are paid when due by the sponsor employer. The pension is offered by the sponsor employer as part of an employment contract, and this form of organisation would have the attraction of being simple and reflecting that basic commercial reality. There appear to be no tax or National Insurance obstacles. Some ‘unfunded’


schemes do exist in the UK, but they are almost invariably supplements to other arrangements which themselves assure adequate or even good retirement incomes; for the beneficiary, these are cream for the cake they already have. In this arrangement the retained contributions constitute part of the capital base of the employer and are shown in company accounts as a book liability. They might serve to reduce a company’s indebtedness to banks or dependence on capital markets. The scale

could be significant – for a mature scheme, with terms similar to those commonly observed in the DB world, these might amount to book liabilities of between four and six times the annual wage bill. This would be long-term finance, which may otherwise be either unavailable to or unaffordable by the company. Of course, for a mature scheme with a stable workforce, the payment of pensions to retired workers would place cash flow demands upon the company, and under plausible assumptions, these cash flow calls may

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roup lie in the range between 30 percent and 60 percent of the annual wage bill. By virtue of its high predictability, this is surely manageable. The objection that the liabilities reported in accounts would be highly volatile and could overstate the true cost of this pension capital to the company under current accounting standards may be true; and this could constitute an obstacle to their introduction now. However, that objection does not explain why they did not exist in the past. Most of the objections to

the book-reserve arrangement centred on the failure of the sponsor, the likelihood of employer insolvency, and many stated that this was why pension funds existed. Almost none had any informed idea of the prevalence of insolvency among companies in the economy as a whole, or of the Pension Protection Fund’s experience. The few that did offer an opinion seemed to think that it was extremely high and a number cited the alarmist study from the Pensions Institute which forecast 1,000 insolvencies in the coming de-

cade. If the current, low rate of insolvency (0.4% p.a. by number), which is reflected in the experience of the PPF, continues, this number is likely to be 250 insolvencies; a return to normal rates would see 350 occur, and it would take a rate of 1.8% for the projected 1,000 to occur. Such an insolvency rate is without sustained precedent in the post-war history of UK corporate finances. Those with experi-

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ence of covenant review for their schemes expressed these judgements qualitatively rather quantitatively, using expressions such as good, poor, high or low. Notwithstanding these observations, all were fully aware of the highly publicised difficulties of a few schemes. Given the catastrophic nature of sponsor insolvency, it is perhaps not surprising that perceptions might exceed and overemphasise the reality. While the prospect of insolvency should be and is a valid concern, this does not, in and of itself, warrant the creation and maintenance of a fund; other arrangements, such as pension indemnity assurance, may prove superior in any of a number of ways. This form of book-reserve arrangement is common in Germany where there are some 93,000 insured schemes and in Sweden, where the mutual PRI-Pensionsgaranti provides this insurance to the 1,400 book-reserve schemes of some 700 corporate sponsors. Indeed, there are examples of precisely this type of arrangement occurring in the UK during the 1930s. The cost of this insurance has historically been far lower than the costs of maintaining and administering a funded scheme;


0.3% of liabilities versus 2% of assets. These indemnity insurance arrangements pay the full benefits of scheme members, while funded schemes need to be funded to higher levels than full-funding of the best estimate of liabilities if they are to successfully run-off liabilities fully or execute a bulk annuitisation, post sponsor insolvency. With these costs of run-off or annuitisation in the range between 120 percent and 140 percent of the best estimate of liabilities, this represents an additional annual cost of the order of a further 35 to 70 basis points annually. In reality, few schemes will be so well funded at the point of sponsor insolvency and in most cases members will suffer a reduction in pensions to the levels set by the PPF. Put another way, funding a DB pension scheme is at best an expensive way to mitigate the risk of sponsor insolvency and at worst incomplete. Companies should, quite rightly, resist the efforts of trustees to fund to these higher levels and incur these extra costs, as should other stakeholders. It is only by consideration of the further effects of the presence of a funded scheme in the balance sheet and income statements that the management of a company may justify funding to such levels, and in general other

stakeholders should continue to resist this. It is notable that the majority of these further effects stem from the use of market-consistent discounted present value liability accounting rather than a true and fair view of the company position. While many other aspects of pension funds have been discussed in the academic and practitioner literature, these are incidental consequences of the existence of funds rather than motivations for their creation. Take the case of market liquidity: it is undoubtedly true that the presence of pension funds in traded securities markets enhances the liquidity of those markets for all. However, this particular benefit does not come without cost to the fund; by investing in liquid securities it is both paying the cost of liquidity and accepting the unique, high risks of the most actively traded securities in a market. With this large cost disparity between buying insurance cover and operating a pension fund, some additional motivation is needed to justify the wide-spread use of pension funds. Put simply, if the concern was merely with insolvency and its consequences, the scheme would simply buy pension indemnity and have this issue resolved cost-effectively and fully. Indeed, it seems likely, if these were the sole concerns and motivations, that we would by now have seen regulation of the credit standing and sustainability of companies permitted to offer authorised DB arrangements, as well as limitations on the generos-

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ity of benefits awarded by a company, notably with respect to the accrual rate embedded in awards. Indeed, if this were the complete motivation, the PPF would be expected to offer full, rather than reduced benefits to the members of schemes whose sponsor had failed.

and to pay their pensions on time and in full, it appears that the pension fund primarily exists to offset or defease the accrual cost of occupational DB provision the production cost of the sponsor employer, and only incidentally to offer a degree of security to members.

â€œâ€Ś when you have eliminated the impossible, whatever remains, however improbable, must be the truthâ€?

With this motivation for the existence of a fund, the responsibility and management of the fund rightly rests with its prime beneficiary, the corporate sponsor, and only secondarily with the trustees as the agents and representatives of scheme members. Moreover, this viewpoint goes far in explaining how the well-intentioned but fundand security-centric regulation could have so disastrously backfired and led to scheme closure and wide-

This, then brings us to the sponsor employer. In the earlier companion to this article, Pension Liability Valuation, the two elements of the cost of DB provision were distinguished: contribution and accrual rate cost. In contrast to the apparently popular and prevalent view that the pension fund exists to provide security to scheme members

spread cessation of provision of DB pensions. Finally, it would also explain many of the perversities of investment and scheme management that have developed in the past decade. It is notable that schemes outside of these regulations and reporting standards have not embraced these techniques to anything like the same degree. With this worldview, the objective function for investment management is simplicity itself; it is to achieve sustainably the accrual rate or better, a well-defined target. Realisation of this accrual target objective, in turn, makes pensions secure for members, and facilitates the continuing provision of occupational DB pensions.

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by Con Keating, Head of Research | Brighton Rock Gro

Given their basic, rudimentary and often personal nature, it is tempting to dwell upon the motivations of many of the very many who responded to my earlier articles on the subject of pension liability valuation and analysis. The theory of motivated reasoning, Veblen’s concept of trained incapacity and more recently Anant Admati’s invocation of wilful blindness all offer themselves as candidate methods, and there are many more. However, I shall apply the principle of charitable interpretation and treat all as if they are simply confusions and misunderstandings. At its most elementary level, all that I have pointed out is that the contributions made together with the projected or expected pension benefits fully define the pension contract. It is unnecessary to invoke or introduce any external factor, and to do so is to expose the analysis and reporting to the near-certainty of error in quantification, and can induce perverse behaviour and management practice. I am agnostic as to how those contributions were determined. By similar measure, I am agnostic as to the actu-


arial or econometric methods employed in the projections of benefits, including their calibration or parameterisation. The first, contribution amounts, are a matter of historic fact. The second are routinely calculated under existing approaches. I do not propose and there is no need for any change to those methods. While, for pedagogic simplicity, I describe the situation deterministically, these projections may be estimated in their full stochastic glory and complexity; this does not alter the fact that when taken together with contributions, the analytic problem is fully defined and determined.

The element absent from standard descriptions of pensions is their intrinsic (promised) investment attribute; this I have described as the accrual rate in recent articles and in earlier pieces as the investment growth rate. It is perhaps most easily understood in the context of a member’s voluntary contribution. Here the scheme member pays an amount of money, a proportion of his or her salary into the scheme and is promised a defined amount of pension. This is an investment contract in every sense. The accrual rate or investment growth rate is fully defined by what the member

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paid and what the member was promised by way of pension income. Technically, this is a deferred annuity. The investment accrual rate is the primary measure of the generosity of the pension. This is the baseline around which such things as risk and security assessments should be based. It is the promised investment return. It is unnecessary for such member contributions to entail similar benefit terms to those of employer contributions, though they may. Employer contributions made together with benefits projections define the accrual rate; it is the cost of production of the pension promises made by the employer. It is analytically

comparable to a zero-coupon bond issued by a company. The contribution corresponds to the principal advanced to the company and the repayments or pay-offs are a sequence or strip of amounts rather than a single payment – the accrual rate is also known as the internal rate of return of these cash flows. The diagram below shows, for an illustrative scheme, the contributions made prior to, and the benefits projections prevailing at the time of valuation (2016). It also shows, using the accrual rate, the accumulated value of those contributions together with the discounted present value of the outstanding projected benefits. The accrual rate is that rate

which equalises these cashflow sequences. It is unique and time-consistent. As members die, their outstanding contribution records and their associated liability projections are excised. For pensioners in payment, as benefits are paid and those liabilities discharged, their contribution records are amortised in

Diagram: Contributions, Projected Benefits and Accumulated Amounts.

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proportion to their residual life expectation. Another way of describing the valuations arising under the proposed method is as the degree of progress expected towards the complete and timely discharge of the promised or projected benefits. This is the value expected by both sponsor and scheme member, under the terms and conditions of their award. Of course, this is a definition scheme liability value. Several correspondents have raised the question of the contribution as part of the employer’s cost of provision of DB pensions. There are two parts to understanding this issue. First, that it is the contribution actually made that is one of the two determinants of the investment accrual rate. Second, that the question of the extent to which the contribution made is considered by employees in respect of their total employment compensation and in the employer’s overall labour costs is another quite distinct issue, but one which is irrelevant to the task

in hand, the correct estimation of the liabilities incurred arising from pensions awarded. In the case of the illustrative scheme, the accrual rate embedded in the stock of pensions promises is 6.07% and the capital value of the liabilities is £153.37 million. It happens that this rate is high relative to current gilt yields, but this rate is an accumulation of awards dating back as far as 1952, and includes periods in the 1970s and 1980s when the rate for new awards was in double digits. It is slowly moving. Currently-used methods produce a valuation of £260.28 million. Currently-used methods are shown to result in significant overvaluations of the liabilities. Had these currently-used methods been in use in the 1970s, the result would have been massive undervaluation of liabilities. Here, there would be the germ of an argument for the smoothing of discount rates if they must persist in being used. The more important point is that the pension must be attrac-

tive as an investment proposition to scheme members. This is obscured and distorted by both over and undervaluation. It may help to consider two pathological variants to the illustrative scheme. One in which contributions made were only half of those actually made (A) and a second (B) in which contributions were as made but benefits awarded were only half those promised in the illustrative scheme. The accrual rate in the first case (A) is 8.23%, and in the second (B) is 3.89%. The valuation of the first pathological scheme (A) would be £123.46 million. Note that this has the same promised ultimate liabilities as the illustrative scheme, but has a value of those liabilities almost £30 million lower. Contrary to the beliefs and assertions of many, the same future cash flows do not need to have the same value today; the value today is determined by the detail of the promises made. Accepting the more aggressive

In a career spanning more than forty years, Con has worked as an infrastructure project financier, corporate advisor, investment manager and research analyst in Europe, Asia and the United States. Con’s career commenced as a graduate trainee with Hambros Bank in 1969 and included periods with Kleinwort Benson, First Boston, Banque Paribas and CIGNA, and was characterised by specialisation in quantitative modelling and analysis. This has varied from the financial modelling of infrastructure projects, to credit, insurance and securities pricing and encompassed pension projection and valuation. He has served on the boards of a number of educational and charitable foundations and as a trustee of several pension schemes. He is currently Head of Research for the nascent BrightonRock Group. Con has been a a member of the steering committee of the financial econometrics research centre at the University of Warwick and of the Societe Universitaire Europeene de Recherche en Finance. As a research fellow of the Finance Development Centre he published widely on the regulation of financial institutions and pension systems, and also developed new statistical tools for the analysis of financial data, such as Omega functions and metrics. From 1994 to 2001, Con was chairman of the committee on methods and measures of the European Federation of Financial Analysts Societies and currently is a member of their Market Structure Commission. Con has also served as an advisor and consultant to the OECDs private pensions committee and a number of other international institutions.


The Transparency Times | | November 2016 | Edition #7

higher accrual rate (A), achieved through the lower contribution rate, is in this sense riskier to the scheme member. Suppose that it was possible to remove the scheme assets at the time of the valuation and that these schemes were fully funded, the illustrative scheme would need to achieve a new compound investment rate of 6.07% on assets of £153.37 million to achieve the benefits originally promised, while the aggressive scheme (A) would need to achieve a rate of 8.23% on assets of £123.46 million. Scheme (B) is also interesting; its value today, £99.53 million. Note that although the benefits are half those promised in the illustrative case, this is 65% of the illustrative case valuation. The hypothetical challenge would be to find an investment return of 3.89% on assets of £99.53 million. While, clearly, this should be easier and less risky than finding an investment return of 6.07% on assets of £153.37 million, and much more so than finding 8.23%

on assets of £123.46 million, it would be necessary to have two such entitlements to achieve the same retirement income. This analysis also points to a problem at the heart of the now-popular belief that consolidation of schemes can be achieved and will bring benefits of scale. This may be true when pension contributions and benefits are commonly negotiated and applied, and are in this sense a homogenous class, as they are in the Netherlands, but in the UK, schemes are very far from this. Heterogeneity in scale, design and history are almost a defining characteristic here. In order to keep this article to easily readable length, I shall defer discussion of further subjects and aspects to later articles. As for the epithets coming my way, such as crackpot, imbecile and moron, I must confess to having been inured to such things long ago. At the age of 13, I had

an A-level maths teacher: Irish, often incomprehensible, dishevelled, permanently clouded by his aura of chalk dust and dandruff, and with the only discernible colour, yellow-ochre nicotine stains on his fingers and teeth. At the least provocation, he would deliver diatribes to the beat of clips around my ears with his blackboard duster. Monologues that, without hesitation or repetition, would begin: doss, dolt, dunderhead, … and often continue far longer than a minute. Ducking the spittle and duster may be absent, but they bring back very fond memories of a brilliant teacher. To end, it seems appropriate to quote another grand Irishman: “I don’t think it helps people to start throwing white elephants and red herrings at each other.”

Edition #7 | November 2016 | | The Transparency Times



TRANSPARENCY WITHIN EMPLOYEE B by Emma Gleaves, Employee Benefits Consultant

Employers who offer employee benefits do so by their desire to obtain, retain and maintain a productive workforce. For the culture within a company to be one where employees work with the Employer and not against them is not only one where the employees feel valued, but is likely to be a company where transparency is seen as a key component. Transparency starts from the roots upward. To feel engaged and empowered in their workplaces, employees need to fully understand the company’s values and the Employer must be upfront and visible about the actions it takes and whether those actions echo its values. For employees to truly trust in transparency, they must feel safe – not just physically, but financially and emotionally too. The provision of employee benefits can play a huge part in physical, financial and emotional stability but so often the benefits available are not fully understood by Employers and their employees. Employee Benefits magazine carried out a survey where 64% of employers who had invested in employee benefits admitted they had failed to communicate the benefits to staff. Not only does this result in a poor return on their investment, research by Cass Business School showed that staff in workplaces that


offer benefits, but who are not aware of their availability, are “less likely to share the values of, and feel loyal to, their company, be proud to tell people who they work for and have a different (better) attitude than those working in companies that do not offer these benefits”. With regards to the employee benefits that are commonly provided, protection cover is particularly important as death, illness, accident and disability can happen to anyone at any time and are likely to have a life-changing impact on employees and their families physically, financially and emotionally. With recent research showing that 1 in 2 of us will now be diagnosed with some form of cancer this has to be a major issue for all employees and their employers. Most insured protective Employee Benefit policies such as Group Life Assurance (GLA), Group Income Protection (GIP) and Group Critical Illness (GCI) have

‘Added Value’ services such as Employee Assistance Programmes (EAP) attached to them where support tools are available to employees on a range of work/life issues either free of charge or at discounted rates. These can include Counselling, Occupational Health, Rehabilitation Support, Second Opinion Services, Virtual GPs, Health Apps and Wearable Technology. Tools such as these can hugely impact employees in terms of their physical, financial and emotional wellness and could help greatly in relieving worries. However, these Added Value services are often unknown and underutilised by employees as awareness of these initiatives is relatively low. The blame for employees’ non-understanding of these offerings will not always lie at the foot of the Employer - in some circumstances it is due to the Employer’s Adviser failing to provide full information and additional assistance in communication with employees. For insured products

The Transparency Times | | November 2016 | Edition #7

BENEFITS such as GLA, GIP and GCI there is currently little in the way of regulation leading to (in some cases) a lack of transparency from the Adviser about the full additional services provided and the true cost to the employer in terms of any remuneration provided to them via a commission structure. Workplace Pensions As part of the new workplace pensions legislation introduced in 2012 employees over the age of 22 earning at least ÂŁ10,000 a year must be auto enrolled into

a workplace pension. Despite this, research carried out by NOW: Pensions shows that three in five 18-30 year olds (60%) don’t even know what a workplace pension is. With auto-enrolment minimum contributions set to rise to 8% by 2019 (3% Employer and 5% Employee gross), a workplace pension is probably the biggest investment many employees will ever have and is likely to be the largest spend on employee benefits by an Employer so the value of the workplace pension is certainly something that should be fully understood by both parties. In cases where an

Employer is offering over and above the statutory minimum requirements, communication on this subject can go a long way towards the improvement of employee engagement. Employees should be receiving relevant, jargon free, easy to read simple explanatory communications rather than just statutory compliance communications and hard to digest investment option

Edition #7 | November 2016 | | The Transparency Times


booklets issued by some providers so that pensions are more understandable. In cases where Salary Sacrifice/Exchange is used for pension contributions, in particular on the SmartEnrol (‘opt out’) basis often put forward as an Employer National Insurance cost saving initiative to help fund the Employer’s pension contribution cost, the Employer’s Adviser should ensure that both Employers and employees are fully aware of the disadvantages that could apply. The complexities surrounding pensions are immense to the average employee who may be encountering a pension for the first time. The different types of pension scheme, contribution rates that may be voluntary or mandatory/matched/ capped and subject to statutory increases, tax relief, charges, default or self invest funds, death benefits and transfers are enough to frighten anyone and that’s before the minefield of which option to choose at retirement! Whilst all auto-enrolment schemes have to meet the


qualifying criteria, minimum standards and provide statutory communications and Occupational Pension Schemes and MasterTrusts have stricter governance requirements there are still issues with the level of understanding and engagement with the literature provided once a member of the scheme. It is likely that in many cases, with the time and financial cost of implementing Auto-Enrolment areas such as employee understanding of pensions will have been overlooked by Employers, predominately those with lower numbers of employees. This is perhaps largely due to the Retail Distribution Review where commission from pension providers paid to Advisers was banned from 31 December 2012. Historically, Advisers often used the remuneration generated from commission to fund financial advice, education and communication programmes for employees, however, it may not always have been clear to Employers that this was how such services were previously funded.

The removal of commission and consultancy charges, whilst providing a more transparent fee based model for Employers, has resulted in reduced Adviser service levels. This is because many Employers were put in a situation of having to pay their Adviser on a fee basis for the first time at a time when costs in pension contributions were already hitting. There are likely to have been many instances where the Employer is simply unable to afford the additional services provided by the Adviser in assisting with employee understanding – at a time when it was actually needed the most. In addition, the act of providing advice to Employers on workplace pension schemes is not currently a regulated activity. This means that the choice and implementation of an Auto-Enrolment pension scheme can be made by an Employer via an alternative Business Advisor rather than a traditional Financial Adviser and often without receiving ‘advice’. The Pensions Regulator have considered whether advice to Employers on pensions should be regulated with the Financial Conduct Au-

The Transparency Times | | November 2016 | Edition #7

thority, (FCA) but as yet nothing has been clarified by the FCA or the government. In the current ‘compensation culture’, a possible implication that may occur as a result of this non-regulated service are that employees may seek redress from their Employer if a selected pension scheme or default fund is not suitable for that individual or they were not given sufficient information to understand the options or make alternative decisions as, thanks to digital media, employees are better informed and expect more from their Employer. The lack of comprehension around pensions shows a clear need for financial education and the introduction of compulsory provision of workplace pensions means that more employers are likely to consider offering financial education (which may also cover additional areas such as debt management, savings schemes, protection and home buying) as an Employee Benefit. Although the government has increased the tax and National Insurance Contribution relief available for employer-ar-

ranged pensions advice from £150 to £500 and is currently consulting about a pensions advice allowance which would allow individuals to withdraw up to £500 tax free from their Defined Contribution pension scheme in order to pay for the cost of financial advice, Employer organised financial advice from a Regulated Advisor within the workplace is still presently far from the norm. With Pension Freedoms and the Lifetime ISA hot topics in the news, the issue of financial awareness has never been more prevalent. The government have recently announced that The Pensions Advisory Service, Pension Wise and the Money Advice service will be merged into a single public body offering free impartial advice on debt advice, money and pensions guidance but the level of use and public perception of this service are as of yet unknown. recently conducted research into the state of the nation’s finances and the subsequent impact this has on businesses. It revealed “70% of the nation’s workforce admit to wasting a fifth of their time at

work worrying about finances, in turn resulting in at least 17.5 million working hours lost per year as a result of employees taking time off work due to financial stress”. With figures such as these, it seems likely that more workers will look to their Employer for help with financial matters and it is in the best interest of the employer to assist them. Physical benefits Whilst financial stress does result in employee absence, health and dental related illness are still the most likely cause of absenteeism. In fact, new research shows that many common viruses and illnesses are actually related to poor dental health. Looking after employees’ health and wellbeing enables an Employer to reward and motivate their staff, and can also help them meet their duty of care. As such, many Employers are now choosing to offer additional employee benefits such Private Medical Insurance, Dental Cover, Health Cash plans and Gym membership increasingly on a voluntary basis where the employer discounted cost is paid by the employee from their gross salary.

Edition #7 | November 2016 | | The Transparency Times


However, the government’s consultation on Salary Sacrifice that is currently underway is likely to see a reduction in such offerings if the proposals for removal of Salary Sacrifice benefits other than pension contributions, childcare vouchers, payroll giving and Cycle to Work go ahead. The provision of Employer funded Flexible Benefits packages (where the employee chooses how a proportion of their remuneration is paid and/or to trade one benefit for another that matches their individual preference) may be offered by more Employers in the event of the green light for the Salary Sacrifice proposals but this would likely be dependent on the Employer paying an Adviser for assistance Employee Benefits are a fundamental part of the Employer/ employee relationship as physical, emotional and financial wellbeing are so interlinked with morale and productivity. The average benefit package


is currently worth 11.5% of employees basic pay and the removal of the Default Retirement Age and increase in State Pension Age leading to ageing workforces means that Employers need to keep a close handle on the suitability and broking of benefits and perhaps most importantly employee awareness and understanding to create an environment for better outcomes. With Employee Benefits increasingly being offered in lieu of a payrise, the landscape is continuously changing. Employers are seeing the advantages of increased personalisation of benefits alongside reward and recognition and Employee Benefit Apps are becoming more common as Employers promote employee engagement. The Employee Benefits industry needs to work with Employers to ensure true employee understanding so that both Employers and employees are getting the best out of their benefits as possible.

In an ideal world, all employers would provide an array of benefits for their employees with health and financial wellbeing as an intrinsic part of the employment journey. Every employer would have the funds available to dedicate enough time in education, in particular around long term savings and income in retirement and employ a trusted Adviser who was continuously able to prove their worth in terms of brokerage, be transparent in all costs and provide advice in a clear, open and honest way. However, we do not live in an ideal world and it is only with access to the right information that Employers can assist their employees to have better informed decision making. Below are 5 top tips for Employers to help foster a culture of transparency around the Employee Benefits they provide; 1. Review Current Benefits - Any benefits currently or considering being offered should be based on clear business objectives - Ensure there are no overlaps in product and service provision (for example, an Employee Assistance Programme paid for separately but also included with a Group Income Protection policy or Health Cash Plan)

The Transparency Times | | November 2016 | Edition #7

- Contracts of employment should be checked if any benefits are being considered for removal or replacement 2. Have an open relationship with the benefit Advisor(s) - Question what services are received from Adviser(s) across all types of benefits. - Clarify the structure of each benefit and any attached Added Value services - Confirm service levels and remuneration - although intermediaries are not required by law to disclose commission levels to employers, they must issue a Terms Of Business letter setting out, among other things, the scope of services to be provided and how the Adviser will be remunerated for these. Disclosure of the amount of any commission paid helps to improve transparency between the Advisor and the Employer and is a pre-requisite to trust which will only benefit everyone in the long term. 3. Keep up with changes in legislation

- Where changes will affect the provision of existing benefits (such as the Salary Sacrifice Consultation) high priority should be given

employees often want the opportunity to ask questions and give feedback – especially on areas that concern their Work/ Life balance!

- Consider the provision of financial advice within the workplace utilising the increased tax and NI relief and how this will benefit your employees

5. Measure the return on investment

- Where appointing Adviser(s) look to ensure they have sufficient knowledge and experience and are able to provide clear, open and honest information 4. Communicate with staff - Ensure employee awareness, understanding and appreciation of the benefits available (Research from Cass Business School shows that communicating about employee benefits actually builds employee engagement and a more loyal workforce that takes less time off sick. An employer who offers benefits but doesn’t make their employees aware of them is no better than not offering these benefits at all)

- Employee benefits should not only support employees, but should make a difference to morale, staff retention and productivity, which are key business benefits. Ensure that staff turnover and absence rates can be measured in relation to the provision of benefits - Keep reminding employees of the benefits on offer to ensure maximum take up - Where possible, allow some kind of Adviser presence – this continues to enhance visibility from the top down via an informed, professional, ‘neutral’ and trustworthy brand organisation.

- Information should be understandable, relevant and accessible and have easy to digest language and formatting - Encourage open dialogue -

Emma has spent over 15 years in the Financial Services industry, the last 9 within Employee Benefits specialising in Group Risk and Pensions and assisting a number of employers with Auto-Enrolment. She is currently looking forward to finding employment with a company that shares her passion for providing Employers with a valued and transparent Employee Benefit proposition. SUGGESTED CALL TO ACTION: IF YOU ARE LOOKING TO HIRE AN EXPERIENCED EMPLOYEE BENEFITS CONSULTANT MAKE CONTACT THROUGH ANDY.AGATHANGELOU@TRANSPARENCYTASKFORCE. ORG AND I WILL FORWARD YOUR EMAIL TO EMMA SO YOU CAN GET INTO DIALOGUE. Edition #7 | November 2016 | | The Transparency Times



WE’LL HAVE ANOTHER GREAT LINE-UP OF SPEAKERS: This Transparency Symposium will be largely dedicated to the FCA’s Interim Report to their Asset Management Market Study. The event will include presentations by senior executives at the FCA plus Dr. Anna Tilba and Professor Michelle Baddeley, who carried out important market research as an integral part of the FCA’s Interim Report. It’s definitely a not-to-be-missed event. The final speaker line up and programme details are yet to be announced so we will update the booking page as soon as possible. Meanwhile, you can still crack on and book your place - click on the link below. Note that if the ticket price of £150 is genuinely beyond your budget please Email me at and we’ll look to sort something out for you - we don’t want cost to prevent people genuinely keen on helping to achieve greater transparency in financial services being able to attend - but please be quick as there are a limited number of reduced price tickets available. Thank you. Where & when? Aberdeen Asset Management, Bow Bells House, 1 Bread Street, London EC4M 9HH Wednesday 14th December, 9:30 to 16:30

To book click



The Transparency Times | | November 2016 | Edition #7

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 3 teams, with each team having a particular area of focus. The three teams are: - Costs & Charges - Stewardship & Decision-Making - International Best Practice The following tables show the make-up of the teams; those in bold red are Team Leaders: COSTS & CHARGES TEAM Job Title Organisation Co-founder & Managing Scalable Capital LimDirector ited CEO MyFutureNow Chief Executive Officer Smart Pension Head of Policy & GovB&CE The People's ernment Relations Pension

First Name Adam

Last Name French

Alan Andrew Andy

Browne Evans Tarrant



Founding Chair



Senior Manager - Industry Development



Brendan Callum Chris

Country UK Ireland UK UK

Transparency Task Force Scottish Widows


Lecturer in Strategy & Corporate Governance

Newcastle University Business School


Mulkern Mayor Barrow

Consultant Consultant Head of Business Development

Pen Partnership Pen Partnership Scorpeo UK Ltd.




Founder and CEO

Sciurus Analytics


Con Craig

Keating Rimmer

Head of Research Policy and Technical Specialist

BrightonRock Group Pensions Advisory Service




Non-Executive Director

Big Issue Invest Fund Management




Compliance Director

Cavendish Medical



Edition #7 | November 2016 | | The Transparency Times



Managing Director

Gayle Gerry

Campbell-Warner Schumacher Wright

Gabriel Research & Management Former MD, Coutts Smith & Williamson Investment Management LLP


Graham Henrik

Cook Pedersen

Portfolio Solutions Managing Partner, Co-Founder

Macquarie Securities Clerus LLP


Henry Iain

Tapper Cowell

Founder Head of Investment Solutions, UK & Ireland

Pension PlayPen Allianz Global Investors




Public Policy Advisor

The Investment Association


James James John

Monk Singer Simmonds

Head of DC Investments Senior Associate Principal


John Julius

Serocold Pursaill

Principal Independent Pension and Investment Governance Consultant

Aon Employee Benefits P-Solve CEM Benchmarking Inc Studio Serocold

Lucy Malcolm

Forgie Small

Policy Adviser Managing Director

ABI Lynecombe Consultancy Ltd






Mark Markus Martin

Proffitt Krebsz Palmer

Head of Sales Interim Chief Risk Officer Head of Corporate Funds Proposition

Pensions Administration Standards Association Scorpeo UK Ltd UNECE GRM Zurich Financial Services



Professor of Economics and Finance

University College London


Mike Natalie

Webb Winterfrost

Consultant Chair/Client Director

City Noble CFA Society, UK/Aberdeen Asset Management


Niall Nick

Ferguson Fleming

Principal Consultant Market Development Manager

Engaging Reward British Standards Institute


Peter Philip Richard Robin

Eggleston Miller Metcalfe Powell

Founder   Editor

BestX Pensions Focus The Evidence-Based Investor




Royal London




Strategic Insight Manager CEO

Best Interest Consultants



Retired Partner




The Transparency Times | | November 2016 | Edition #7



Fin Tech Sector Specialist

UKTI Financial Services Organisation




Partner, Financial Services Consulting

RSM Tenon


Stephen Stephen

Budge Bowles

Principal Head of Institutional Defined Contributions

Mercer Schroders


Terence Tim

Prideaux Brown

Head of Consultant Relations

Dimensional Fund Advisors




Manager, Data Research and Analysis





Economic and Social Affairs Department





Director, Co-Head Operational Due Diligence



Chris David

Connelly Rich





Associate Professor in Accounting & Finance

Equiniti Accurate Data Services Leeds University Business School




Jonathan Parker Con- UK sulting Ltd



Senior Pension Trustee


Ralph Stewart

Frank Bevan

CEO DC (UK) Product Manager Benchmarking

Capita Asset Services Cardano KAS BANK

Sunil JB

Chadda Beckett

Managing Director Consulting Chief Investment Officer and Author

Cairn Consulting Ltd New Fund Order Consulting







Founding Chair






Lecturer in Strategy & Corporate Governance Principal Consultant



Head of Research

Transparency Task Force Newcastle University Business School Energised Environments Limited BrightonRock Group

Henry Iain

Tapper Clacher

Founder Associate Professor in Accounting & Finance

Pension PlayPen Leeds University Business School




University of East London/Sarasin & Partners




PhD Researcher in Finance/ Systematic Strategies Director of Manager Research Services EMEA

Morningstar Europe Ltd


First Name Andy


Edition #7 | November 2016 | | The Transparency Times







Senior Partner

JNM Investment Gover- Ireland nance Aon Hewitt Â



Chief Executive Officer



Judith Julia

Donnelly Dreblow

Partner Founder

Squire Patton Boggs sriServices and Fund EcoMarket






Markus Michael

Krebsz Kemp

UNECE GRM Pinsent Masons LLP


Neil Neil

Morgan Latham

Policy Lead - Stewardship and Corporate Governance Interim Chief Risk Officer Senior Pensions Technician Senior Pension Trustee Consultant

Capita Asset Services Independent



Fleming Lee

British Standards Institute Aberdeen Asset Management



Market Development Manager Head of Corporate Governance

Paul Philip

Marsland Brown

Deputy Director Head of Policy

High Pay Centre LV




Responsible Investment Advisor

Rob Lake Advisors


Sarah Saul

Hutchinson Djanogly

Consultant CEO


Sebastian Steve Terry

Reger Cave Ritchie

Partner Associate Director Development Director

SJ Hutchinson Ltd Best Interest Consultants Sackers Smith & Williamson Trustee Solutions Ltd

Tessa Tim

Page Middleton

FIA, Principal Technical Consultant

Mercer Pensions Management Institute





Borg Consulting


Alan Barry David

Salamon Mack Weeks

Managing Director Client Director Co-Chair




Marketing Specialist

Corpias Muse Advisory Association of Member Nominated Trustees (AMNT) KAS BANK N.V.



Managing Partner, Co-Founder

Clerus LLP






The Transparency Times | | November 2016 | Edition #7



Pensions Consultant




Miller Seddon-Daines

Barclays Corporate & Employer Solutions ET Index



Employee Benefit Consultant Senior Research Analyst



Vigeo Eiris


Rachel Sarah

Haworth Wilson

Senior Development Manager Policy Officer Chief Executive

ShareAction Manifest




First Name Andy

Last Name


Agathangelou Founding Chair

Transparency Task Force




Lecturer in Strategy & Corporate Governance

Newcastle University Business School


Con James

Keating Meenan

Head of Research CEO

UK Ireland

John Janice

Belgrove Lambert

Senior Partner Pensions Consultant

BrightonRock Group JNM Investment Governance Aon Hewitt Independent

Aaron Alan Alex Chris

Bernstein Browne Mazer Tobe

Editor CEO Founding Partner Investment Consultant

Global Proxywatch MyFutureNow Common Wealth Stable Value Consultants

USA Ireland Canada USA




University of Michigan's Ross School of Business


David Elias

Knox Westerdahl

Senior Partner Sustainable Business Analyst

Mercer The Centre for Synchronous Leadership

Australia UK

Eric Eric Erik Francisco

Veldpaus Plunkett Conley Gomes

Strategy Director Owner Founder Professor of Finance

Novarca Group Redbrucke ZenInvestor London Business School

Holland UK USA UK



Manager Fund Management

PGGM Investments










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

Stephenson Harwood LLP University of Muenster

Pensioen Federatie




Edition #7 | November 2016 | | The Transparency Times




Director and Co-Founder






Irish Association of Pension Funds




Chief Operating Officer



Jon Jonathan

Lukomnik Hall

Executive Director Head of Financial Services

IRCC Institute Aquila






Tan Bhala

President and Founder




Senior Policy Advisor

Seven Pillars Institute for Global Finance and Ethics Australian Institute of Superannuation Trustees

Marcus Mikael Nicholas

Orione Nyman Morris

Editor in Chief Visiting Fellow

Brazil Sweden Australia

Nicolas Nikki

Director-General Food and Health Research Manager

Oren Pablo

Firzli Gwilliam-Beeharee Kaplan Arellano Ortiz

Exakt Media The Martin School, Oxford World Pensions Council Vigeo

Co-Founder & CEO Profesor de Derecho del Trabajo y Seguridad Socia

SharingAlpha Pontificia Universidad CatÌ_lica de ValparaÌ_so

Israel Chile



Managing Partner & Founder

Fiduciary Wealth Partners





Institute for Financial Transparency




Board Member

Association of Professional Fund Advisors




Academic Finance Superannuation & Banking

University of Technology




Chief Executive Officer

AES International



zu Dohna

Client Support Officer





Associate Director and Senior Fellow




Executive Director

Harvard Law School Programs on Corporate Governance and Institutional Investors UN Global Compact Network UK

Steve Suzanne SV

Cronin Shatto Rangan

Founder Retail Investor Senior Executive

Wise AIG

Dubai USA UK



France France


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Policy Advisor

Federation of Dutch Pension Schemes


Ian Paul

Fryer Secunda

Head of Research Professor of Law and Director, Labor and Employment Law Program

Chant West Marquette University Law School

Australia USA

CALL TO ACTION PLEASE! 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

Edition #7 | November 2016 | | The Transparency Times


A M B A S S A D O RS Some of our campaigning community are Ambassadors; individuals that are particularly aligned to what we are doing and why we are doing it; and as such are a profoundly impactful force for the positive change we are all collectively striving to achieve. Our Ambassadors are listed below: First Name

Last Name

Job Title

Organisation Country




Lecturer in Strategy & Corporate Governance

Newcastle University Business School



Catherine Con

Howarth Keating


Yes Yes







Chief Executive ShareAction Head of BrightonRock Research Group Non-Executive Big Issue Director Invest Fund Management






Director of Manager Research Services EMEA





Consulting Chief Investment Officer and Author



Ralph Robin

Frank Powell

CEO DC (UK) Cardano UK Editor The Evidence- UK Based Investor

Yes Yes


London Business School Morningstar Europe Ltd

New Fund Order Consulting

The Transparency Times | | November 2016 | Edition #7

ABOUT TRANSPARENCY STATEMENTS 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.

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

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 please complete the sentence:

Thank you very much indeed




Helena Morrissey Chair | The Investment Association Dr. Kara Tan Bhala | President and Founder, Seven Pillars Institute for Global Finance and Ethics

“I believe there ought to be higher levels of transparency in financial services because it’s the very starting point for establishing trust.’ “I believe there ought to be higher levels of transparency in financial services because transparency is a pro-ethical condition that enables us to fulfill our fiduciary duty and to achieve justice and the common good. Assiduous transparency yields continuous trust.”

Tom Tugendhat “I believe there ought to be higher levels of transparency in finan| Member of Parliament cial services because it is the only way that markets can function for Tonbridge and Malling 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.”

Iain Cowell Head of Investment Solutions, UK & Ireland | Allianz Global Investors

“I believe there ought to be higher levels of transparency in financial services because sharing clear and understandable disclosures will drive positive innovation and can empower the customers of the industry to improve their long-term outcomes.

Martin Campbell Director | Beacon Strategic  

Steve Conley Business Development Director | Workplace Pensions Direct


“I believe there ought to be higher levels of transparency in financial services because for decades the industry has systematically ripped off the customer, while hiding behind deliberate and unnecessary opacity, to become wealthy at the customer’s direct expense.” “I believe there ought to be higher levels of transparency in financial services because Transparency is a means to an end, where the end game is greater accountability, good decision-making and trustworthiness … which leads to better commercial outcomes for members, sponsors, markets through investment, and in the long-run - via improved reputation, public engagement and a reduced savings deficit - for the asset managers themselves and the financial services industry as an whole”.

The Transparency Times | | November 2016 | Edition #7

JB Beckett Author #NewFundOrder | New Fund Order, Assoc. of Professional Fund Investors

"I believe there ought to be higher levels of transparency in financial services because optimum economic value has become remote and distorted and by virtue active fund management and professional fund buyers fragile to digitalisation”

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”.

Terence Prideaux Managing Director | Morley Hall

“I believe there ought to be higher levels of transparency in financial services because the aspirations of savers and their advisors will not be met if managers take more than headline fees and trust in the financial system will not be won”.

Richard Metcalfe | Principal, Richard Metcalfe Consulting

“I believe there ought to be higher levels of transparency in financial services, and particularly in pensions, because we cannot afford for people not to save for retirement”

Edition #7 | November 2016 | | The Transparency Times


Elizabeth Campbell-Warner Co-Founding Director, Gabriel Research & Management

“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”

John Greenwood Editor | Corporate Adviser

“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.” Sophia Morrell | “I believe there ought to be higher levels of transparency in Independent Media financial services because I’m passionately committed to a fair Consultant and functioning City which benefits everyone. We have a worldclass financial services industry in London and by working together, we can ensure it serves equal purpose and value to its participants and users.”


The Transparency Times | | November 2016 | Edition #7

Matthijs Verweij BD Mgr, Pensions | KAS BANK N.V. Ralph Frank CEO - DC (UK) | Cardano 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

“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”. “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”. “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.”

Rachel Haworth Policy Officer | ShareAction

“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”. 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.”

Edition #7 | November 2016 | | The Transparency Times


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”.


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 | | November 2016 | Edition #7

Juan Zuluaga | Writer, InversionesSinllusiones. com Erik Conley | Founder, Zen Investor

Henry Taper | Director, First Actuarial & Founder, Pension PlayPen

“I believe there ought to be higher levels of transparency in financial services because it will help us to see what can be done better” “I believe there ought to be higher levels of transparency in

financial services because, as Vanguard founder John Bogle says: ‘the tyranny of compounding costs takes about two-thirds of the gains clients make. The client puts up 100% of the capital, and takes 100% of the risk, but only gets one-third of the return.’ Something is very wrong with our financial system. Investors deserve to know exactly what they’re buying and how much it will cost, today and over time.” “I believe there ought to be higher levels of transparency in financial services because people want to know what they’re buying. We cannot be trusted. Our system depends on trust and and fiduciaries managing our money. Until people consider themselves investing in a trustworthy way - we will remain untrusted. Transparency is the only way to break this vicious circle.

Clara Durodié | “I believe there ought to be higher levels of transparency Founding Partner, in financial services because trust is the birthplace of asset Cognitive Finance Group management” Richard Ellis | Institutional Relationship Manager, Sarasin & Partners Lesley James Director | Simplified Money

“I believe there ought to be higher levels of transparency in financial services because savers / pensioners need to be properly informed about the products they invest in; they achieve the outcomes they expect; and to help build trust in the investment industry that is lacking at present” "I believe there ought to be higher levels of transparency in financial services because none of this is our money! How can we expect clients to have trust in our services if they cannot even be sure of the price?”

Edition #7 | November 2016 | | The Transparency Times


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:

“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. To find out more, visit:

“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:*Version*=1&*entries*=0


The Transparency Times | | November 2016 | Edition #7

“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:

“#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:

“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: Edition #7 | November 2016 | | The Transparency Times


RECOMMENDED READING CONTINUED 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:

International Investment Management: Theory, ethics and practice International Investment Management: Theory, Practice, and Ethics synthesizes investment principles, Asian financial practice, and ethics reflecting the realities of modern international finance. These topics are studied within the Asian context, first through the medium of case studies and then via the particular conditions common in those markets including issues of religion and philosophy. This book has a three part structure beginning with the core principles behind the business of investments including securities analysis, asset allocation and a comprehensive analysis of modern finance theory. This book is an essential text for business and law school students who wish to have a thorough understanding of investment management.

By Dr. Kara Tan Bhala. To find out more, visit: B01EAI17WW/ref=dp_kinw_strp_1

Kentucky Fried Pensions: Worse Than Detroit Edition

Kentucky Fried Pensions follows my journey as the first public SEC whistleblower as I attempt to use the new Dodd-Frank law to clean up the culture of coverup and corruption in Kentucky Pensions. It explores the national links between corruption in investments via placement agents and corruption in underfunding that plague states like Illinois and Kentucky. It explores the Kentucky Employee Retirement System (KERS) for State Workers the worst funded state plan in the country (worse than any single IL plan) and how others can learn from its current death spiral. It also discusses the need for a Federal Bailout which is currently being discussed for Detroit and Chicago. It looks into the lack of transparency as evidenced by no disclosure of holdings in SAC Capital buried in a Blackstone fund for nearly a year after the scandal broke.

By Christopher Tobe. To find out more, visit:


The Transparency Times | | November 2016 | Edition #7

THE DIRECTORY OF PRO-TRANSPARENCY ORGANISATIONS 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, +44 (0) 7501 460308

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

PENSION ADMINISTRATION: Margaret Snowdon OBE, Chairman | Pensions Administration Standards Association E-mail: Website: Mobile: 07983 565955

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:

Is this also the right classification for you? 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.

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.

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.


Also right for you?

Henrik Pedersen, Managing Partner & Co-Founder | Clerus LLP E-mail: Website: 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: Website: 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.

Edition #7 | November 2016 | | The Transparency Times


DATA SERVICES: David Rich MIod, CEO | Accurate Data Services E-mail: Website: 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.




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The Transparency Times | | November 2016 | Edition #7


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Edition #7 | November 2016 | | The Transparency Times


The Transparency Times Edition #7 November 2016  

The Transparency Times is the official publication of the Transparency Task Force, the campaigning community dedicated to driving up the lev...