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December 2016

This month’s contributors include: Alan Salamon

Martin Veasey

Oren Kaplan

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Henry Tapper

Andy Woolmer

Mike Ellsmore

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Principal, CORPIAS

Founder, Pension PlayPen

Professional Trustee

CEO, New Change FX

Co-Founder, SharingAlpha

Adam French

Co-Founder & Managing Ptnr, Scalable Capital Page 20

Chair, CIPFA Pensions Panel Page 28

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


...is the campaigning community dedicated to driving up the levels of transparency in financial services, right around the world.

...is 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.

...is 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.

...is awarded to one individual/organisation at each of our Transparency Symposia, in recognition of the contribution they are making to encourage greater transparency.

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


IMPORTANT UPDATE - 3 NEW TTF TEAMS LAUNCHED!

The Transparency Task Force launches 3 new Teams:

by Andy Agathangelou, Founding Chair | The Transparency Task Force, and each of the new teams’ first leaders

Who do you know that ought to get involved with one of the TTF’s three new teams? - read on to find out! The Market Integrity Team’s first Leader - Steve Conley, Managing Director, Workplace Pensions Direct, CEO of Values Based Adviser (plus former head of investments at HSBC, and also former Chair of the British Bankers’ Association Bancassurance Steering Group in the run up to The Retail Distribution Review.) Steve explains the rationale for the Market Integrity Team: “The overall purpose of the Transparency Task Force is to drive up the levels of transparency in financial services, for the benefit of consumers and to help fix the self-inflicted reputational damage the sector has been suffering, for decades. It has become clear that many of the sector’s failings have their root in a lack of market integrity, and that’s

a dangerous and systemic risk that needs to be mitigated. We want to shine a light on this issue in a constructive way, because it only takes a few ‘rotten apples’ for the well-being of the whole market to be damaged. As such we shall now extend our scope of interests to include those thorny issues

that can be captured under the heading Market Integrity; including fairness, stakeholder orientation, fiduciary duty, personal integrity, business ethics, data security and sustainability. It has been my personal mission since I left the banks in 2012 to do whatever I can to restore trust in an industry

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that is the least trusted globally, where trust is the be-alland-end-all for our clients. I’m highly motivated to do my bit to improve things so I’m delighted to be leading this new activity for the Transparency Task Force.

ters such as: · Identifying the root causes of miss-selling · Acting in good faith and in the best interest of customers · Maintain independence, objectivity and impartiality

We’ll aim to raise levels of personal integrity and business ethics. You’ve only got to think of the reluctance that some have to put the interests of the client first to recognise how much needs to be done. It’s shocking really, but we are where we are. I know many others feel the same way and our initial priority will be to look for other volunteers to form the core of the new team. The first discussions will be about scope, priorities, objectives, time-scales and so on. I think this could get very interesting and I’m looking forward to driving forward some real progress.

We’re sure that if we can foster greater market integrity it will ultimately lead a healthier sector, so we should be something of a ‘force for good’.

I imagine we’ll deal with mat-

Andy Agathangelou, Found-

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· Abiding by rules, laws, regulations and the spirit behind them · Dealing fairly, objectively and impartially with stakeholders

ing Chair of the Transparency Task Force comments: “Steve is very much the driving force behind this development and it will fit neatly into what the Transparency Task Force is all about – it’s a very positive development indeed, and I’m very grateful to Steve for putting his considerable energy, expertise and experience into the project. Interested parties should get in touch through andy.agathangelou@ transparencytaskforce.org

· Maintaining confidentiality and data integrity · Whistleblowing

The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


The Foreign Exchange Team’s first Leader - Andy Woolmer, began his career in FX at Kleinwort Benson in 1994. After periods at Citibank and Prudential he worked at SEB as Portfolio Manager for the SEB Multi-Manager Currency Funds. In 2012, he founded the groundbreaking financial technology company New Change FX. He is a leading expert in transaction cost analysis, and he has been a key advisor for various global regulatory bodies over the development of independent foreign exchange benchmarks. The Foreign Exchange Team is being launched due to the very high levels of opacity known to exist in that market. Andy Woolmer explains the thinking behind the new development: “We’ve seen how useful developing collaborative communities can be within the Transparency Task Force structure and it is clear that a bright light needs to be shone into the FX market. It’s a notoriously opaque sector and it’s been that way for far too long. The costs associated with FX are higher than people realise

and this is a significant issue for investors, particularly pensions savers. There is an information asymmetry that needs to be fixed otherwise the FX market cannot and will not function correctly. It’s a complex situation; there is very often the appearance of transparency but it just doesn’t stand up to scrutiny. To be blunt, the illusions created in the FX world - that you should measure cost through spreads, that the market is liquid and so on - are a cover beneath which clients are being charged billions of dollars a year. New Change FX are delighted to be involved in this important initiative. We believe that transparency in FX markets represents the future. Real transparency delivered through accurate and independent measurement of FX costs will deliver benefits for price makers as well as asset managers and other market users. 

It is only through cost transparency that the market will operate efficiently and fairly, and New Change FX are committed to ensuring that market users are no longer left in the dark over what they are paying. All like-minded organisations should get involved so we can campaign for the changes the investor deserves and the reputation of the sector needs. Enough is enough”. Andy Agathangelou adds: “Many people, are now realising just how expensive the FX market can be. That’s not great news when it comes to buying and selling holiday currencies but more importantly than that it’s a very serious issue indeed when you consider the drag on performance FX costs can have on investments, particularly those held for the long term such as pensions. I’m keen to get as many of the pro-transparency organisations involved as possible so we can all work togethor to determine how this new Team will be led and run; now’s the right time to join.

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The Banking Team’s first Leader - Heather Buchanan, is the Director of Policy and Strategy at the All Party Parliamentary Group on Fair Business Banking. The APPG is particularly focused on misconduct by banks that has impacted buinesses; its purpose is to consider the way in which businesses are treated by high street banks, specifically in relation to the mis-selling of inappropriate financial products. As such, Heaher is uniquely placed to lead the TTF’s Banking Team, and rather than re-invent the wheel we will be looking to do all we can to support the superb work that is already underway in Heather’s APPG. In particular, we will be helping to shine a light on some of the extremely opaque banking practices. I met Heather for the first time in December and I came away from that meeting feeling extremely motivated to support the great work that is already underway. Heather’s account of some of the business practices that have been going on in banking left me virtually speechless; there is a real and urgent need to protect the business consumer form the kinds of things that have been taking place - the realty is even worse than what has been reported in the papers so far: RBS’ Global Restructuring Group’s activities is just the start of it! One of the proposals be-

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ing developed is the idea of having a far more transparent approach to dispute resolution. This is very important because there does not yet exist a level playing field when a business needs to challenge a bank about the way it has been treated, and ‘the system’ means the business owner is not likely to get a fair hearing. That’s all very unfair; so much so that some business owners have lost their businesses unnecessarily, suffered depression and even worse... If you have any connection with the banking sector and want to help it move from opacity to transparency,

please get involved - having heard some of the things that have been going on I promise you this is a very worthwhile initiative. Heather and her colleagues deserve all the support the TTF can provide. A very special meeting is taking place on 17th January, at the House of Commons - if you would like to be considered for an invite please get in touch without delay through andy.agathangelou@transparencytaskforce.org and I will forward your Email to Heather for her consideration. The meeting will be led by George Kerevan MP, Chair of the APPG on Fair Business Banking.

The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


VERY IMPORTANT: ABOUT HOW YOU CAN BECOME ‘PART OF THE SOLUTION’ If you’re completely new to our community and want to know ‘what it’s all about’ here are the basics: The Transparency Task Force is the collaborative, campaigning community dedicated to driving up greater levels of 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 to deliver better outcomes and better value for money to the consumer. Furthermore, because of the correlation bet ween transparency, truthfulness and trust worthiness, we hope and expect that our work will help to repair the self-inflicted reputational damage the sector has suffered for decades. We operate through volunteer-led Teams. All the Transparency Task Force Teams have a conference call on the first Tuesday of the month, so the next “Team Calls” are on Tuesday 3rd January, at the following UK times: NEW TEAM: Market Integrity Team: 9:00 to 10:00; get involved with this team if you want to help shine a light on the importance of ethical behaviour in the financial services sector and want more of it! NEW TEAM: Foreign Exchange Team: 10:30 to 11:30; for people that understand the opacity that exists in FX and want to put right what is very, very wrong un that market! NEW TEAM: Banking Team: 12:00 to 13:00; for those that want to drive up the professionalism in banking and in particular, want to help business account holders get treated more fairly by High Street Banks Costs & Charges Team: 13:30 to 14:30; for those that want to help all types of investors get better value for money from all types if investments; by helping to shine a light on all costs in all their forms Stewardship & Decision-Making Team: 15:00 to 16:00; if you understand the ‘a symmetry of information’ problem that the financial services sector is dogged by and how it can lead to poor stewardship and decision-making, please help us illiminate the opacity and obfuscation that is getting in the way of optimal outcomes International Best Practice Team: 19:00 to 20:00; wherever you are in the world (we have members from every continent), if you want to help the nations around the world to learn more efficiently from each other, get involved - we’re working on a Global Transparency Index and it’s at a very exciting stage! If you care about the financial services sector and want it to do a better job of looking after the needs of its customers and clients please join the 150+ people that are operating as volunteers within the Transparency Task Force Teams. It doesn’t matter how experienced or how senior you are. It doesn’t matter if you’re an expert or not. All that matters is that you understand the potential power of transparency in helping to drive the changes that are needed, and that you’re comfortable working collaboratively with others - the Transparency Task Force is very much a ‘team sport.’ If you or anybody you know want to become ‘part of the solution’ by being involved with one or more of these TTF teams please make contact without delay through andy.agathangelou@transparencytaskforce.org THANK YOU VERY MUCH - YOU MIGHT MAKE THE DIFFERENCE THAT MAKE’S ALL THE DIFFERENCE! Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: ALAN SALAMON

PENSION FUND MANAGEMENT MARKET STUDY

by Alan Salamon, Principal | CORPIAS

As all those interested will know, in November the Financial Conduct Authority (FCA) published interim findings on their asset management market study. The study lasted a year, seems pretty thorough and focussed particularly on the corporate or workplace pension sector, taking evidence from many long serving sector experts, companies and customers. In short the FCA found much was wrong with all parties to the process of pension fund investment. At 208 pages the report is a lengthy read but the main findings and implications include…  - A recommendation that advice to pension schemes becomes regulated by the FCA. (you may not realise it wasn’t). - Fees are complicated and not transparent. - Price competition is weak in a number of areas of the industry. - Active fund management overcharges for the fund performance it provides. - Passive funds have reduced prices over the years while active funds have become relatively more expensive and have not performed better than passive funds.

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- Fund performance is not always reported against an appropriate benchmark. - This makes it easier to show ‘outperformance’ than would be the case against the appropriate benchmark. - The market in investment consultancy is heavily concentrated. 60% of market share belongs to Aon Hewitt, Mercer and Willis Towers Watson. - An intention to refer the investment consultancy sector to the Competition and Markets Authority. - Consultants are unable to identify asset managers that will outperform the benchmark. - It’s difficult to assess and monitor the investment consultant. Data is not

made available. - Too many pension schemes stick with the same investment consultant for too long. Implying pension schemes are not challenging enough and both consultants and schemes get complacent with the arrangements and each other’s expectations. - Investment consultants have significant conflicts of interest where they also provide fiduciary management. (Also called delegated consulting). - Criticism of trustees and plan sponsors for not being better stewards. If they step up after this report, change to the other areas should come quicker.   The FCA propose a significant package of remedies to make

The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


Y AND 5 ACTIONS TO TAKE competition work better in the market, including…. - Strengthen the duty on asset managers to act in the best interests of investors and to be held accountable. - An inclusive single fund charge so investors can see what is being taken from the fund. Because some sales and operation charges are deducted before monies are allocated to the investors account. - Measures to help individual investors better identify the most appropriate fund.

- Measures to protect individual investors unable to actively engage with their investment manager. This is a wakeup call for the industry. Although the FCA’s final report is at least 6 months away some participants may spend more time lobbying to reduce the report’s impact than planning for the future. However those asset managers and consultants who start reviewing their business models, structures, operations, and client

services, earlier will be well positioned for the coming changes. The direction of travel with respect to business models, opacity, fees and customer fairness is clear. We’ve seen it with the banks and insurance companies already and there is no reason to expect

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the asset management industry will be treated any more lightly.   In addition there is now an imperative on pension trustees, and other clients of asset managers and investment consultants to be tougher on the issues concerning them. The futurelooking providers will grow their client base at the cost of the wait and see’ers. Does all this mean the demise of the asset management and investment consultant sectors? No! Only for those wedded to the status quo.   It is certain that the value of financial assets requiring management and advice will grow. This makes it worthwhile for firms to enthusiastically change and adapt.   What’s to be done?  This is not a fully inclusive list by any means but a taster of 5 areas to review. 1) Consider, and where necessary change, your fund benchmarks and

inform your clients about the simple measurement that demonstrates its appropriateness, which you will start publishing on factsheets. 2) Look in detail at how your systems record the buy side and sell side costs and consider the most effective way of bringing them together so they can be sliced and diced correctly for all necessary purposes such as tax, accounting and customer. Not forgetting our acronyms IMC, OCE, AMC, OGC/OCF, TER. 3) Reduce the numbers of older funds that no longer receive the great focus the more recently launched funds receive. (This will reduce the negative drag on active fund performance by eliminating the worst performing and most expensive funds as well having other benefits such as freeing up resources and reducing overheads). It’s also an excellent reason to be engaging with your clients.

walls’ including own staff forbidden to promote own fiduciary service. 5) Consultants, such as the three that constitute 60% of business, agree their standard for appropriate disclose of their firms’ metrics that pension schemes are most interested in.  These changes cannot be made speedily and they are too complicated for many people to even consider. However, they are manageable when broken down into their constituent parts and individual actions identified. Firms and participants who can adapt and modernise relatively quickly will thrive over those who only start planning when forced by new rules.

4)  Where consultants want to provide fiduciary management improve the structure. Such as spin off entirely, consolidate with others, or enforce ‘Chinese

Alan Salamon provides company pensions expertise, including governance, strategic, operational, client and change services, on a contract basis to financial service providers and company pension schemes. He has over 30 years’ DB and DC experience covering many disciplines within the industry. He has been pension manager at ABF and Marks and Spencer in their DB days and head of DC clients at Fidelity. He has led, or been subject matter expert, on many projects for some of the UKs most significant pension and investment businesses. Alan holds the Award in Pension Trusteeship, the Investment Management Certificate and Prince2. He is passionate about solving client’s challenges and enjoys family time, good conversation, skiing and horse riding. Alan is also a Leader in the TTF’s Stewardship & Decision-Making Team.

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


DON’T MISS ANOTHER VERY SPECIAL EVENT!

OUR FIRST CONFIRMED SPEAKER IS RICHARD HARRINGTON MP, PENSIONS MINISTER The February 8th event will feature: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money, after all costs have been taken into account. We saw at our last Transparency Symposium just how strong the views are on this issue and I am very keen that this special event is used constructively to inform, educate and share insights on all the important factors around this incredibly interesting but often very divisive subject. There will be talks, debates and panel sessions and I’m as sure as I can be that it will be an event to remember. The Financial Conduct Authority won’t be speaking but they will be in attendance; observing the proceedings with great interest, I’m sure.  This very special Transparency Symposium will be considering issues such as:- Is it as simple as “Passive = Good, Active = Bad?” - What do we expect to happen to the market share moving forwards? - What part will technology play in all this? - What are the potential litigation risks for trustees? - Is it true that “You can’t scale skill?” - How will the momentum towards greater transparency on costs effect the market dynamic? - Is Active the only effective option if an investor has strong ESG preferences? - Is the FCA’s Asset Management Market Study Active Management’s saviour or has it thrown it into crisis? - Is all the regulatory activity now taking place the wake-up call the Active Sector has needed to force long-overdue change? - What potential impact might the ‘Market Investigation Reference’ about the Investment Consulting Sector by the FCA to the Competition & Markets Authority have on investment Where & when? solution decisions forward? Bow Bells House, 1 Bread Street, London Aberdeen Assetmoving Management,

EC4M 9HH

Without any doubt whatsoever the Active/Passive issue is at the epicentre of significant

Wednesday 9:30 to 16:30 changes taking14th placeDecember, in the way the market as a whole is going to function in the future and as such this event is an excellent opportunity to increase your understanding of the many complex issues the FCA have raised in their Market Study.

This is an absolutely not-to-be-missed event for which there is likely to be high demand, so to avoid disappointment please crack on and book your place - you can use the link below:

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: MARTIN VEASEY

A PERSONAL PERSPECTIVE ON TRANSPARENC by Martin Veasey, Professional Trustee

Transparency is a valuable enhancement of the flow of information which improves governance, trust and outcomes. I do not see it as a primary or intrinsic objective in itself, but significant benefits certainly flow from its introduction though there are cost and other factors that should be taken into consideration. It is tempting for the asset owner to see transparency as a one-way process: we request information from custodians and fund managers, but I’m not sure that this client-provider assumption best captures the spirit of transparency. My preference here is to evoke the Russian word ‘glasnost’, which became so popular

in the West in the 1980s, indicating openness in oneself and one’s own dealings with others. This openness can then be leveraged collaboratively by inviting others also to participate and imitate. Transparency is not just a ‘push’ function ... it is also a ‘pull’ – others can and should be encouraged rather than forced along

this path. As asset owners, we need transparency in order to ensure we are fulfilling our responsibilities and giving our beneficiaries the best outcomes possible. In a world of information asymmetry, where sellers often know more about products than buyers – the aptly named ‘Lemon Problem’, it is tempting to suspect sinister motivations in those we employ to manage our money but these are often simply not necessary to explain many issues with investments. As a risk manager, I bow to Murphy’s Law but I also subscribe to Hanlon’s Razor: “Never attribute to malice that which is adequately explained by stupidity [though here I prefer the word ignorance]”1 and this maxim is borne out in some examples that history has already shown us: Stock-Lending – the problems with stock-lending were thrown into stark relief by the 2008 Global Financial Crisis when the consequent issues

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with operational practices led to real financial losses. It soon became clear that whilst stock-lending revenues were being split between client and custody bank, all risk seemed to remain with the asset owner; yet it also seemed clear that no-one in the market has anticipated the problems and all had to wrestle with understanding the consequences. Transparency would have helped market participants better understand the practice in advance and perhaps served as a spur to mitigate some of the risks in advance Soft Commission – in an earlier world of largely fixed dealing costs and commissions, some brokerage houses sought to differentiate themselves by providing ancillary products and services to fund managers in return for receipt of trading busi-

ness. Dealing commissions are, of course, taken out of our money yet the manager was benefitting from a reduction in operating expenses. Would it surprise you that, whilst now being regulated, soft commissions are still permitted in some cases? Frankly, I would prefer lower commission rates though the light of transparency has forced the reduction in permitted scope of soft commissions unfortunately without stamping it out altogether Currency Conversion – pension schemes with segregated asset holdings routinely undergo low and ongoing levels of foreign exchange business, typically moving non-sterling cash (e.g. dividends) back into sterling. We also need sometimes to fund investments in non-sterling currencies. How is this being monitored by the agent responsible and how

do we know that the rates achieved are reasonable? If we don’t insist on transparency and hold our agent to account, who will? Cost Disclosure – in large part, the transparency debate has been sparked and sustained by the cost of investment management and many previous articles in the Transparency Times have rightly focused on this aspect. This is relevant for both DB and DC pensions: the former because every pound of costs has to be found somewhere– typically through the employer, the latter because the effect of costs are borne by those who have little say in how they are incurred and who are not in a good position to challenge value for money. Consequently, I applaud the efforts of the Pensions Regulator and the Financial Conduct Authority in

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Martin works as a professional trustee and as a writer on pension matters. Prior to this, he worked in fund management and commercial and investment banking for 25 years culminating in the role of Head of Investments for a large defined benefits pension scheme. promoting transparency in this area and regard the attempts of some in the investment world to dismiss rather than to address the problem with deep suspicion. It has been a long time since it was felt that pure fund manager fees told a satisfactory story in this regard and the introduction of the Total Expense Ratio has taken us some of the way to capture a broader and more representative picture of costs in a bilateral management arrangement. However two key questions remain in play: Scope of cost analysis: the Total Expense Ratio addresses fixed, predictable costs: manager fees, purchase/ redemption charges, custody/audit costs but does not capture costs associated with performance fees, annual

turnover of underlying investments, transaction costs and taxes and bid-ask spreads. These costs are variable and difficult to predict going forward in a consistent manner – yet nevertheless they are still important. Passive management is not to everyone’s tastes but it is often a viable investment option at strikingly low cost. Active management offers the tantalising prospect of additional returns but transparency shows us that indirect costs can dominate the more visible top-line manager fees. How much of our expected alpha are we losing in costs? How much lower is the DC pension pot expected to be as a result? It is often argued that net returns are what is important – for example, a 5% gross return with 1% expenses is as good as 4.5% return with

0.5% expenses. This is perhaps reasonable for small differences but neglects the fundamental asymmetry between returns and costs – one is certain, the other is less so; and the beneficiary generally bears all the risk … a single instance of an expost outcome should not drive a sensible investment choice. There is much work for managers to do here in providing sufficient data to improve the quality of decision making. It is perhaps unlikely that a fully transparent manager would be appointed purely on the merits of information disclosure but one seen as unwilling to cooperate might one day be excluded for reasons of our lack of confidence in their proposition. The challenge of multiple agents: one of the defining characteristics of much of the DC world is the investment platform – where the assets in which the beneficiary has an interest lie in the form of an insurance policy backed by underlying assets managed by a secondary manager. This layering has beneficial consequences: it permits a wider range of investment choices and facilitates switching from one choice to the other. However, this does cause issues with investment cost transparency. The new DC Chair Statement mandates disclosure of charges and any transaction costs for the default fund and the range of these metrics for other funds in the range of choices. The sensible place to start is with the platform manager company who really ought to be able to provide sufficient

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information for the Trustee to be compliant. Unfortunately, the tripartite nature of the arrangement means that no one entity is able to report any additional or more detailed information through to the asset owner – the Total Expense Ratio is fine, but information outside that required for the Statement remains difficult to obtain and it is not immediately clear who is best placed to provide it. Perhaps the managers and platform providers who are making progress should be publicly praised? Transparency can help reduce costs and improve outcomes. It can also improve governance by providing asset owners with a better understanding of the processes underlying their management of assets and it should also reduce the potential for unpleasant surprises, particularly under stressed or unusual market conditions.

to drive out waste and unnecessary and costly legacy practices. However, an over-reliance on naive service level arrangements may focus attention on managing the workflow to the statistics at the expense of the overall beneficiary experience. At the extreme, might we run the risk of driving out initiative, creativity and the potential for improvement in focusing on what is measured rather than what is important? Finally, transparency can generate a firehose jet of data that needs to be translated into comprehensible information. How do we analyse this in a way so that we can give it appropriate consideration? Also, we ourselves have a responsibility for openness and transparency with our beneficiaries; so how best to discharge this? How do we present an honest and representative picture of our activities without burying the

reader in incomprehensible and unnecessary detail? The move to transparency is a process and we should not be discouraged if progress is initially slow. Change can be effected on an incremental and gradual basis and a policy of continual engagement with the aim of renewing the intellectual landscape may be just as effective. Rome may not have been built in a day but that is no reason to delay laying the foundations. Persistence and working together will be key.

However, transparency does have financial and other consequences. Additional reporting has a cost of production, albeit one borne - in the first instance - by the service provider. There is a need to be serious and thoughtful regarding what information is requested and what use it will be put to – there is no room for requiring the onerous reporting of data that is not, in turn, the subject of serious analysis and potential executive action. Transparency can cast a valuable spotlight on operating practices and can help Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: OREN KAPLAN

SO, WHO’S THE ALPHA ASSET ALLOCATOR?

FUND SELECTORS’ ASSET ALLOCATION COMPETITIO

By Oren Kaplan, Co-Founder, | SharingAlpha

What if there was an internet site where fund selectors, investment advisors and end investors could share their opinions and insights regarding funds? What if that platform was open and free to use? Well, there is no need to use your imagination since such a tool already exists and it’s called SharingAlpha. SharingAlpha is a user generated fund ratings and model portfolios platform that has become the world’s largest fund rating agency in terms of the number of Fund Analysts contributing to its ratings. SharingAlpha rates funds based on the average rating provided by Fund Selectors worldwide. Apart from being able to create a better fund rating, SharingAlpha is also able to rank the individual raters in terms of their talent in selecting funds. Their fund selection track record enables the raters to test their analysis, and if they choose the raters are able to present their proven track record to existing and potential clients. Based on the above, Sharin-

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gAlpha is able to publish a list of both top rated funds and top ranked Fund Selectors. An additional feature enables Investment Advisors to build virtual Fund of Funds and in turn SharingAlpha ranks them based on their performance not only as Fund Selectors but also as Asset Allocators. The use of the website is totally free and covers over 100k funds listed in 110 countries. Our vision is to offer the investment community a better way to select winning funds and at the same time to offer Fund Selectors and Investment Advisors the option of building their own proven long term track record. It’s about time that funds are rated on the basis of parameters that have been proven to work and Fund Selectors and Investment Advisors will be

judged according to their ability to add value to investors. To sum up, here are 2 ways in which SharingAlpha is improving transparency in this much closed industry: · Funds: Fund providers who are trying to sell their product give you plenty of publicly accessible information but that is marketing material and definitely not neutral. Standard rating agencies give us a more neutral view of funds but with such a large number of funds most of their information is quantitative. Only on SharingAlpha can you find information that is qualitative taking into account parameters such as the latest impression a Fund Selector has on the Fund Managers motivation, or in other words, whether the Fund Manager is truly dedicated to achieving Alpha or are there any issues that

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ON WILL BOOST TRANSPARENCY.

are interfering in achieving that goal. This insight that is received through a wide network of market participants places more information at investor’s fingertips. · Advisors: All Fund Selectors and Investment Advisors claim that they have a way of helping investors either with selecting winning funds or with deciding on the best mix between them, however none of them are able to prove that it’s worthwhile listening to them. SharingAlpha allows these market professionals to present a clear and measurable track record turning the task of selecting an Advisor to a much more transparent and clear process.

fund selector’s asset allocation competition. The competition is open to all investment professionals globally. Competitors will use their skill to construct a virtual fund of funds, starting February 1st 2017, and will be ranked based on their performance till November 31st 2017 (assessed as portfolio total return, minus maximum portfolio drawdown during the period). The CAIA Association will offer scholarship awards of over US$5,000 to the podium winners, including a full scholarship to the CAIA Charter programme for the winner. Sign up on www.SharingAlpha.com by 31st January 2017.

SharingAlpha is an Israeli based FinTech company founded by two brothers. Oren Kaplan has over 20 years of experience in the Financial Industry and he covers the ‘Fin’ part. Yuval Kaplan, now aged 46, has been writing code since the age of 13 and complements the ‘Tech’ part. Oren is also a member of the TTF’s International Best Practice Team

In order to encourage new members to join SharingAlpha’s growing community, the CAIA Association and SharingAlpha are running a Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: ADAM FRENCH

BRITS DESERVE A BETTER DEAL ON THEIR INV

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

The long-awaited FCA report1 on assets managers gives a depressing state of an industry which is characterised by a lack of transparency, high fees and underperformance for the 11 million UK savers with investment products. In a world of persistently low interest rates, this report conveys a sense of urgency. It is vital that more Brits start investing to secure their future - but they are hitting a wall of complexity and opacity fueled by the investment industry. In spite of its claims, the industry doesn’t appear to be able to self-regulate. While the Investment Association claims that “providing value for money for the UK’s saving and investing public is the industry’s driving concern ”2, the evidence indicates the exact opposite.

● £109 billion - That’s the amount of money held in closet trackers. Investors are paying expensive active management fees for funds that do little more than mirror the index. ● 44% - The FCA estimates that a typical low-cost passive fund could earn 44.4% more off a £20,000 investment over 20 years than an actively managed one, once fees were taken into account.

It is a great news that the regulator has taken a significant step forward to tackle the shortcomings of the investment industry and to make fund managers accountable for how they deliver value for money to retail investors. I second the proposal of the FCA to introduce an all-in fee for investment funds to improve transparency and competition among asset managers.

Three figures highlighted by the FCA are particularly overwhelming: ● 36% - That’s the average profit margin of asset managers surveyed by the FCA, compared to the 16% average margin of a firm in the FTSE All Share.

https://www.fca.org.uk/publication/market-studies/ms15-2-2-interim-report.pdf https://www.politicshome.com/news/uk/economy/financial-sector/press-release/investment-association/80914/investment-association

1 2

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VESTMENTS

calable

Capital Ltd

Our generation can no longer afford to carry the burden of unnecessary costs and hidden fees, which are prevalent in the industry today.

The financial industry needs to change its current way of doing business. We need to scrap the old ways, eliminate bad practices and reinvent

investing with our clients’ best interests in mind.

Adam is Co-Founder and Managing Director of digital investment manager Scalable Capital. Prior to this, he spent the last 7 years working in London in the financial services industry at Goldman Sachs. As Executive Director of Commodities Trading, he was responsible for the commodity structured products franchise including risk management and developing client solutions. Prior to this, he worked in Derivatives Trading where he was responsible for electronic trading for private clients in fixed income, currency and commodity products. Adam studied Business Mathematics and Statistics at the London School of Economics.

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: HENRY TAPPER

ADVISERS TURN THE KEY TO THE FCA’S FUND by Henry Tapper, Founder | Pension PlayPen; Director

One of the recent themes of in my blogs has been the question: “What rights do we have over ‘our money’?” John Kay’s book – “other people’s money” argues that the money held on account by asset managers should always be considered as held in trust with the manager of the account of pooled fund “a fiduciary”. But in practice, the person for whom the money is managed is so distant from the fiduciary that neither side has any meaningful relationship. I have noticed this in other areas where assets are managed by third parties. In horse racing for instance, the owner of a horse and its trainer appear to have a direct relationship but increasingly owners are syndicates and it is syndicate managers and other intermediaries who act for those putting down the money. It is left to the owners to have a few minutes with the horse before and after the race. There was a famous debate between the man who ran an investment consultancy

and the man who ran a fiduciary management company which ended up as an argument about whether you should put your kids in boarding school. The debate focussed on whether you fully outsourced the management of your child to a third party or shared the management with the school. The debate ended up, as debates on equine stewardship do, with intermediaries squabbling between each other while the owner is excluded from the room. The FCA’s recent Asset

Management Study is very good on this question. It’s main suggestion is that the FCA places a duty on asset managers to act in customers’ best interests. While Authorised Fund Management (AFM) boards have duties to act independently and in the best interests of investors, they do not currently have an explicit and well defined obligation to seek value for money for them. We (the FCA) are considering: • Placing a duty on asset managers to demonstrate how their funds deliver value for money to investors • Reforming governance standards for UK authorised funds to ensure asset managers are held to account for how they deliver value for money. In doing so, we might draw on the US model for fund governance • Supervising and referring for

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GOVERNANCE CONUNDRUM | First Actuarial investigation issues related to any new duties and governance standards. My suspicion is that this reporting is not going to be directed at the consumer but at the intermediary. Funds are generally owned by insurance companies who re-sell the asset management to consumers from a platform. This primary relationship is like that of the trainer and the syndicate manager. Wholesale money As can be seen by my frustration at understanding what the hell is going on at People’s Pension (see recent

articles and blogs) there can be a range of intermediaries and governance structures between the member and his money. It is difficult – even for an expert – to know who to address the question to. In the case of People’s Pension, there is an insurance company (B&CE) insuring an insurance (pooled) fund, created by the insurance division of an asset manager (State Street Global Asset Managers). The Trustees of People’s Pension are themselves a long way from the managers of the money, the members of the People’s Pension are even further.

lines are going to make the FCA’s task (detailed above) all but impossible. The State Street AFM may disclose to the board of B&CE (who are Governed by the B&CE Independent Governance Committee) and B&CE may disclose to the Trustees of the People’s Pension Master Trust, but the member of People’s Pension will be dependent on three separate fiduciary mechanisms to be sure his or her interests are best served.

I fear that these long reporting

There may be investment

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consultants acting for the members (in the pay of employers) but – as my own experience highlights – even they may struggle to penetrate this miasma of governance arrangements and agreements. Retail Money The issue is exactly the same in the retail space where an investor relies on an adviser, a discretionary manager of funds, a platform manager as well as a fund manager (+ custodian) to deliver in his interest. Here the pot-pourri of governance structures might include a number of IGCs, and AFMs as well as

the terms and conditions of the advisory agreements. The complexity of these agreements makes what started transparent - opaque and what was meant to be clear, obscure. The problem with these retail chains is that there is no ultimate fiduciary and no look through to the next level of governance. While we might reasonably expect the trustees of the People’s Pension to escalate an issue (such as my questions about stock lending fees) through to source, the same cannot be done at a retail level. There simply is not the level of expertise working for the end

user. Comparative levels of care My worry about the FCA’s governance proposals rest with the complexity of the reporting chains, not with the reporting itself. If for instance the asset manager’s AFM reports accurately to an insurer, can we expect the insurer (and it’s IGC) to treat the next customer fairly? If that next customer is an adviser rather than the end user, can we expect the regulations around advisory behaviour to ensure that the relationship between

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

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the AFM and insurer/IGC is clean? Is the member getting value for money from all levels of the intermediary chain and who is there as the ultimate fiduciary? Although the problems are fewer in the institutional world (where there is greater economy of scale), the problems are the same. They are systemic – there is too much intermediation. A model for the future? I was speaking recently with someone hoping to offer next year a simple product which allows people to buy funds straight from the source (Vanguard, Fidelity and BlackRock). The idea was that for an all in fee of around 0.5%, an individual would get a solution to the problem “what do I do with my money?” The value of the proposition was not in what was in the product, but what wasn’t. The AFM statements of Vanguard, Fidelity and BlackRock would be the only statements you’d have to read. This simple way of managing affairs means that the specific duties that the FCA want to entrust to fund managers might be explicable from one end of the chain to the other. Among other factors they will be: - considering the reasonableness of the fund’s fees, including any performance fee - considering all direct and indirect expenses and charges met by the fund, including transaction costs

- considering whether it is in the interests of investors to institute tiered fee breakpoints at specified asset levels, or alternative fee arrangements, in order to share economies of scale with investors more effectively - considering whether there are practices happening in the fund which are not in the best interests of investors, such as the fund manager taking ‘risk-free box profits’ - performing an annual, arm’s length reassessment and, where appropriate, renegotiation of the investment management agreement (IMA) with the asset management company - making public an annual report detailing its activities in reassessing and renegotiating contracts and how it is ensuring value for money on behalf of the fund and its investors Who’s money is it anyway? The fundamental questions of ownership (addressed at the start of this piece) are critical to the FCA’s Asset Management Study. In my view, good governance need only be done once and if we are worrying about assets, it should only be done at the asset management level. The FCA’s proposals for asset managers are sensible and enforceable. But though they may bring value for money from the fund, they do not ensure value for money for the consumer. For that to happen the various agreements between funds-platforms-DFMs-cus-

todians – Advisers and clients have to all work. There are just too many agreements and too many governance bodies for regulators to properly regulate and consumers to be properly protected. The end result is the proliferation of fees that adds up to an amount so far north of 0.75% to make workplace pensions look- even in their most expensive form, a VFM haven. Adviser’s are the turn-key to the problem and its solution Ultimately there needs to be a sense check on the propositions being brought to market and here I see the Regulator having a crucial role. If advisers (whether wealth managers or investment consultants) are delivering solutions to client problems at a cost that renders those solutions patently unworkable, the Regulator needs to call those advisers to account. For that reason, I am ultimately a fan of the FCA’s approach. Advisers are the problem and the solution. The referral of the investment advisory community to the CMA is something that I wholly support. Advisers have the capacity to shorten or lengthen the intermediary process. They can ensure or destroy value for money, they can solve or create the problem. The obligation on advisers should be very simple; show us your value or get out of town.

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: ANDY WOOLMER

HIDDEN FUND COSTS: WHAT YOUR BENCHMAR by Andy Woolmer, CEO | New Change FX

The Investment Association has recently drawn attention to the question of implicit, or hidden fees in asset management. The IA’s report, Investment Costs and Performance: Empirical Evidence of UK Fund Industry Delivery was rather dismissive of hidden fees, suggesting that investors need not worry about them. The most indulgent reading of such a conclusion is that it is counter intuitive, but a more reasonable assessment would be that such a claim is wildly inappropriate. But if their conclusion is wrong, it is important to understand why it is wrong. The problem, as the authors

of the IA report acknowledge, is one of measurement. Implicit fees are hard to measure. Spreads are very rarely disclosed, if ever. Because of these difficulties, the IA report decided to ignore them all together, justifying their decision with the following reasoning: “If implicit costs were causing a significant drag on fund returns relative to the benchmark, we would expect that the realised outcome ought to be worse than the expected shortfall.” Implicit fees are

costs that are netted out. For instance, market makers typically charge no explicit fee to execute a trade. In lieu of an explicit fee they will charge a spread. This spread is simply a mark-up the dealer makes by obliging customers to pay the worse of bid or offer. This cost is not itemised. It simply shows up as a smaller asset value. Identifying whether implicit costs were a drag on performance cannot be identified by comparing to the benchmark. The benchmark does not include costs, and fund performance as we have seen, is reported net. Comparing two series, neither of which contain fees, is unlikely to shed much light on how much fees were impacting returns. Given that asset managers might not be measuring hid-

Andy Woolmer began his career in FX at Kleinwort Benson in 1994. After periods at Citibank and Prudential he worked at SEB as Portfolio Manager for the SEB Multi-Manager Currency Funds. In 2012, he founded the groundbreaking financial technology company New Change FX, which provides an independent live streaming mid-rate for foreign exchange. He is a leading expert in transaction cost analysis, and he has been a key advisor for various global regulatory bodies over the development of independent foreign exchange benchmarks. NCFX’s clients include some of the world’s largest pension funds, asset managers, and banks. Andy is also a Leader in the TTF’s Foreign Exchange Team.

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RK WON’T TELL YOU. den fees, perhaps the most important question is how large are these fees? Recent work to improve transparency in fees by the West Midlands Pension Fund (WMPF) and the British Rail pension scheme has resulted in significant increases in disclosed costs. By changing the cost-reporting framework, WMPF saw an increase in reported annual fees of 70 million pounds or around 60bps. Using a similar approach, RPMI saw management costs increase by GBP230 million or over 100bps per annum.

The COO of a very large UK asset manager recently told us that he didn’t want to independently measure his FX costs because he had no actual FX costs. After a little persuasion we established that his FX costs are actually higher than his Equity and Fixed Income brokerage bills combined! As long as he remained unaware of those costs, he was unable to reduce them – but now he’s saving millions of dollars a year, and can show clients the benefit.

Clearly costs matter. But the work being done by WMPF and RPMI is unlikely to lead to greater adoption by the fund management industry without the support of regulators. If costs are not a problem, let’s disclose them and let investors decide.

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: MIKE ELLSMORE

PRO-TRANSPARENCY PROGRESS BY THE LGPS SCHEME ADVISORY BOARD by Mike Ellsmore, Chair | CIPFA Pensions Panel

Three things stick out for me from the eighties. The first is starting a family, the second is losing out to an Austin Maxi after 21 miles of the Maidstone Marathon. I was having a good one at the time, moving through to fourth and just one minute down on the leading bunch. I spent an interesting four weeks in Maidstone General having a six inch plate and seven screws inserted to correct three compound fractures of the right leg. Strangely it happened the day before the start of the 1989 CIPFA Conference. Needless to say I didn’t make Eastbourne that year. The third event, with apologies to the second summer of love fans – I was too old in the eighties for that to be a seminal music moment, the first summer of love in ’67 did it for me – was being given the London Borough of Bexley’s pension fund to manage. I had been appointed Group Accountant, Technical to find that the job included the direct management of the Fund.

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Yes, not via fund managers, but dealing directly with brokers. My background was limited – I had my CIPFA accountancy qualification and an economics degree – and that was about it. We held our own share and stock certificates in the local Barclays Bank. Fortunately the governance of the Local Government Pension Scheme [LGPS] has moved on significantly. However the scheme often attracts a negative press in spite of the complex and sophisticated governance structure which surrounds the scheme. Above all else the scheme delivers results and compares favourably with the corporate sector. In the 20 years to the end of 2014/15 it returned an annual average of 7.8% compared to the corporate

sector’s return of 7.9%, and this despite the latter’s higher exposure to bonds which performed well over the period. Against inflation the figures are even more impressive with returns in excess of 5% over inflation. [source: State Street] Funding ratios continue to be a real challenge. The 2013 valuation produced an average funding ratio of 79%, or a deficit of £47bn. The 2016 results will be eagerly awaited by hard-pressed local government Directors of Finance and other employers who have the unenviable task of managing the pressure on contribution rates whilst trying to deliver a balanced budget during a period of prolonged austerity. Early indications are that funding levels have not deteriorated and may be showing a small improvement.

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S, CIPFA AND THE This would be a reasonable result given the continuing decline in discount rates.

of years trying to achieve greater transparency and consistency.

Unlike other public sector schemes which are funded on a pay as you go basis, the LGPS being asset-backed is in many ways more transparent.

The new asset pools where funds are merging their assets to achieve economies of scale in management fees will provide fresh challenges, particularly in the area of governance.

What of CIPFA’s role? The precise nature of the benefits offered by the scheme has to be a matter for the employers and their associations. CIPFA will continue to take a lead in its traditional areas of strength – namely governance; accounting; skills and knowledge; and cost comparison where there is still much work to be done. There is no doubt that the ball is rolling and there is real momentum behind the quest for greater transparency where investment management fees are concerned . The Scheme Advisory Board has launched its own project to capture fees costs and CIPFA has battled hard for a number

Employers and administering authorities will need to feel that they continue to have an influence on the pools and manager selection – after all the financial buck stops with the employer. It is they who are ultimately accountable to taxpayers, scheme members and the electorate. The move towards Academisation will produce another step change in the numbers of employers, all with their own contribution rates and local issues. Good communication between administering bodies and employers will be key. A word of support for pension administrators. The first 35 years of my career were

straightforward – a pension based on 1/80th of final earnings plus a lump sum of 3/80ths. By the time I retired I was effectively a member of three different schemes having moved to 1/60th and then onto career average. Our administrators have to grapple with this, plus a multitude of protections and an increasing number of data issues as the growth in employers causes added problems. Well, we have left the eighties behind and now we find ourselves heading towards the choppy waters of the 2020s. Still, it is reassuring to see vinyl making a comeback, like pension liabilities, those who threw their collection away may have been better advised to take a longer term view.

Until his retirement in September 2014 Mike was Director of Finance and Resources at London Borough of Bexley, where he had spent most of his career. In addition to the usual Director’s duties, he had responsibility for the Council’s £600m pension fund. Since retiring Mike has been appointed as independent chair of the Local Pension Boards at the London Boroughs of Croydon, Southwark and Sutton. He has also recently taken on the role of Chair of CIPFA’S Pensions Panel. Outside of work he is a keen runner having achieved a personal best of 2 hours 30minutes in the London Marathon – although some years ago! Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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VERY IMPORTANT: ABOUT HOW YOU CAN BECOME ‘PART OF THE SOLUTION’ If you’re completely new to our community and want to know ‘what it’s all about’ here are the basics: The Transparency Task Force is the collaborative, campaigning community dedicated to driving up greater levels of 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 to deliver better outcomes and better value for money to the consumer. Furthermore, because of the correlation bet ween transparency, truthfulness and trust worthiness, we hope and expect that our work will help to repair the self-inflicted reputational damage the sector has suffered for decades. We operate through volunteer-led Teams. All the Transparency Task Force Teams have a conference call on the first Tuesday of the month, so the next “Team Calls” are on Tuesday 3rd January, at the following UK times: NEW TEAM: Market Integrity Team: 9:00 to 10:00; get involved with this team if you want to help shine a light on the importance of ethical behaviour in the financial services sector and want more of it! NEW TEAM: Foreign Exchange Team: 10:30 to 11:30; for people that understand the opacity that exists in FX and want to put right what is very, very wrong un that market! NEW TEAM: Banking Team: 12:00 to 13:00; for those that want to drive up the professionalism in banking and in particular, want to help business account holders get treated more fairly by High Street Banks Costs & Charges Team: 13:30 to 14:30; for those that want to help all types of investors get better value for money from all types if investments; by helping to shine a light on all costs in all their forms Stewardship & Decision-Making Team: 15:00 to 16:00; if you understand the ‘a symmetry of information’ problem that the financial services sector is dogged by and how it can lead to poor stewardship and decision-making, please help us illiminate the opacity and obfuscation that is getting in the way of optimal outcomes International Best Practice Team: 19:00 to 20:00; wherever you are in the world (we have members from every continent), if you want to help the nations around the world to learn more efficiently from each other, get involved - we’re working on a Global Transparency Index and it’s at a very exciting stage! If you care about the financial services sector and want it to do a better job of looking after the needs of its customers and clients please join the 150+ people that are operating as volunteers within the Transparency Task Force Teams. It doesn’t matter how experienced or how senior you are. It doesn’t matter if you’re an expert or not. All that matters is that you understand the potential power of transparency in helping to drive the changes that are needed, and that you’re comfortable working collaboratively with others - the Transparency Task Force is very much a ‘team sport.’ If you or anybody you know want to become ‘part of the solution’ by being involved with one or more of these TTF teams please make contact without delay through andy.agathangelou@transparencytaskforce.org THANK YOU VERY MUCH - YOU MIGHT MAKE THE DIFFERENCE THAT MAKE’S ALL THE DIFFERENCE!

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DON’T MISS ANOTHER VERY SPECIAL EVENT!

OUR FIRST CONFIRMED SPEAKER IS RICHARD HARRINGTON MP, PENSIONS MINSITER The February 8th event will feature: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money, after all costs have been taken into account. We saw at our last Transparency Symposium just how strong the views are on this issue and I am very keen that this special event is used constructively to inform, educate and share insights on all the important factors around this incredibly interesting but often very divisive subject. There will be talks, debates and panel sessions and I’m as sure as I can be that it will be an event to remember. The Financial Conduct Authority won’t be speaking but they will be in attendance; observing the proceedings with great interest, I’m sure.  This very special Transparency Symposium will be considering issues such as:- Is it as simple as “Passive = Good, Active = Bad?” - What do we expect to happen to the market share moving forwards? - What part will technology play in all this? - What are the potential litigation risks for trustees? - Is it true that “You can’t scale skill?” - How will the momentum towards greater transparency on costs effect the market dynamic? - Is Active the only effective option if an investor has strong ESG preferences? - Is the FCA’s Asset Management Market Study Active Management’s saviour or has it thrown it into crisis? - Is all the regulatory activity now taking place the wake-up call the Active Sector has needed to force long-overdue change? - What potential impact might the ‘Market Investigation Reference’ about the Investment Consulting Sector by the FCA to the Competition & Markets Authority have on investment Where & when? solution decisions moving forward?

Aberdeen Asset Management, Bow Bells House, 1 Bread Street, London EC4M 9HH

Without any doubt whatsoever the Active/Passive issue is at the epicentre of significant changes taking14th placeDecember, in the way the market as a whole is going to function in the future and Wednesday 9:30 to 16:30 as such this event is an excellent opportunity to increase your understanding of the many complex issues the FCA have raised in their Market Study. This is an absolutely not-to-be-missed event for which there is likely to be high demand, so to avoid disappointment please crack on and book your place - you can use the link below:

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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SOME PICS FROM OUR 14TH DECEMBER TRANSPARENCY SYM

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MPOSIUM:

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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 6 teams, with each team having a particular area of focus. All Teams seek to utilise the power of transparency to help bring about the change that is needed. All Teams ‘meet’ by way of a conference call, always on the first Tuesday of the month. The six Teams are below, with the times of their calls (UK times): - Market Integrity Team; 9:00 - Foreign Exchange Team; 10:30 - Banking Team; 12:00 - Costs & Charges; 13:30 - Stewardship & Decision-Making; 15:00 - International Best Practice; 19:00 We are always seeking new Team members - please enquire through andy.agathangelou@transparencytaskforce.org The following tables show the make-up of the teams; those in bold are Team Leaders:

MARKET INTEGRITY TEAM First Name

Last Name

Job Title

Organisation

Country

David Gill

Stripp Cardy

Founder Insight Consultant (Wealth Management)

David Stripp Consulting Defaqto

UK UK

Lesley

Hankin

Director & Lead Financial Adviser

Simplified Money Ltd

UK

Stephen

Conley

Managing Director

Workplace Pensions Direct

UK

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First Name Xavier Andrew

First Name Heather

FOREIGN EXCHANGE TEAM Last Name Porterfield Woolmer

Last Name Buchanan

Job Title Head of Research CEO

Organisation New Change FX New Change FX

BANKING TEAM Job Title Director of Policy & Strategy

Organisation APPG on Fair Business Banking

Country France UK

Country UK

COSTS & CHARGES TEAM

First Name Adam

Last Name French

Job Title Co-founder & Managing Director

Alan Andrew Andy

Browne CEO Evans Chief Executive Officer Agathangelou Founding Chair

Andy

Tarrant

Head of Policy & Government Relations

Angie

Kirkwood

Anna

Organisation Country Scalable Capital Limited UK MyFutureNow Smart Pension Transparency Task Force B&CE The People's Pension

Ireland UK UK

Senior Manager - Industry Development

Scottish Widows

UK

Tilba

Lecturer in Strategy & Corporate Governance

Newcastle University Business School

UK

Brendan Callum Chris

Mulkern Mayor Barrow

Consultant Consultant Head of Business Development

Pen Partnership Pen Partnership Scorpeo UK Ltd.

UK UK UK

Christopher Con Craig

Squirrel Keating Rimmer

Founder and CEO Head of Research Policy and Technical Specialist

Sciurus Analytics BrightonRock Group Pensions Advisory Service

UK UK UK

Daniel

Godfrey

Non-Executive Director

Big Issue Invest Fund Management

UK

Edward Elizabeth

Bushnell Campbell-Warner

Compliance Director Managing Director

Cavendish Medical Gabriel Research & Management

UK UK

Gayle Gerry

Schumacher Wright

Retired Partner

Former MD, Coutts Smith & Williamson Investment Management LLP

UK UK

UK

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Graham Henrik

Cook Pedersen

Portfolio Solutions Managing Partner, Co-Founder

Macquarie Securities Clerus LLP

UK UK

Henry Iain

Tapper Cowell

Founder Head of Investment Solutions, UK & Ireland

Pension PlayPen Allianz Global Investors

UK UK

Imran

Razvi

Public Policy Advisor

The Investment Association

UK

James

Monk

Aon Employee Benefits

UK

James John John Julius

Singer Simmonds Serocold Pursaill

Head of DC Investments Senior Associate Principal Principal Independent Pension and Investment Governance Consultant

P-Solve CEM Benchmarking Inc Studio Serocold

UK UK UK UK

Lucy Malcolm

Forgie Small

Policy Adviser Managing Director

ABI Lynecombe Consultancy Ltd

UK UK

Margaret

Snowdon

Chairman

Pensions Administration Standards Association

UK

Mark Markus

Proffitt Krebsz

Scorpeo UK Ltd UNECE GRM

UK UK

Martin

Palmer

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

Zurich Financial Services

UK

Michelle

Baddeley

Professor of Economics and Finance

University College London

UK

Mike Natalie

Webb Winterfrost

Consultant Chair/Client Director

City Noble CFA Society, UK/Aberdeen Asset Management

UK UK

Niall Nick

Ferguson Fleming

Principal Consultant Market Development Manager

Engaging Reward British Standards Institute

UK UK

Peter Philip Richard Robin

Eggleston Miller Metcalfe Powell

Founder   Editor

BestX Pensions Focus The Evidence-Based Investor

UK UK UK UK

Ronnie

Morgan

Strategic Insight Manager

Royal London

UK

Sam Saul

Lusty Djanogly

CEO CEO

UK UK

Shaul

David

Fin Tech Sector Specialist

Byhiras Best Interest Consultants UKTI Financial Services Organisation

Shyam

Moorjani

Partner, Financial Services Consulting

RSM Tenon

UK

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UK

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Stephen

Bowles

Head of Institutional Defined Contributions

Schroders

UK

Stephen Terence Tim

Budge Prideaux Sharp

Principal  Economic and Social Affairs Department

Mercer  TUC

UK UK UK

Tim

Walton

Manager, Data Research and Analysis

Morningstar

UK

Tim

Brown

Head of Consultant Relations

Dimensional Fund Advisors

UK

William

Jenkins

Director, Co-Head Operational Due Diligence

Amundi

UK

Chris

Connelly

Lead Business Solutions Architect

Equiniti

UK

David

Rich

CEO

UK

Iain

Clacher

Jon

Parker

Associate Professor in Accounting & Finance Director

Accurate Data WServices Leeds University Business School Jonathan Parker Consulting Ltd

UK

Ralph Stewart

Frank Bevan

CEO DC (UK) Product Manager Benchmarking

Cardano KAS BANK

UK UK

Sunil JB

Chadda Beckett

Managing Director Consulting Chief Investment Officer and Author

Cairn Consulting Ltd New Fund Order Consulting

UK UK

UK

STEWARDSHIP & DECISION-MAKING TEAM

First Name Adrian

Last Name Jackson

Andy

Job Title Director of Business Development Agathangelou Founding Chair

Organisation Pzena Investment Management Ltd Transparency Task Force Newcastle University Business School

Country UK

Anna

Tilba

Lecturer in Strategy & Corporate Governance

Anna

Walton

Principal Consultant

Energised Environments Limited

UK

Con Henry Iain

Keating Tapper Clacher

Head of Research Founder Associate Professor in Accounting & Finance

BrightonRock Group Pension PlayPen Leeds University Business School

UK UK UK

Iuliia

Shpak

PhD Researcher in Finance/ Systematic Strategies

University of East London/Sarasin & Partners

UK

UK UK

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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Jackie

Beard

Director of Manager Re- Morningstar Europe Ltd search Services EMEA

UK

James

Meenan

CEO

JNM Investment Governance

Ireland

John Joshua Judith Julia

Belgrove Card Donnelly Dreblow

Senior Partner Chief Executive Officer Partner Founder

Aon Hewitt Kukua Squire Patton Boggs sriServices and Fund EcoMarket

UK UK UK UK

Luke

Hildyard

Policy Lead - Stewardship and Corporate Governance

PLSA

UK

Markus

Krebsz

UNECE GRM

UK

Megan Michael

Clay Kemp

Interim Chief Risk Officer Pensions Lawyer Senior Pensions Technician

ClientEarth Pinsent Masons LLP

UK UK

Neil Nick

Latham Fleming

Consultant Market Development Manager

Independent British Standards Institute

UK UK

Paul

Lee

Head of Corporate Governance

Aberdeen Asset Management

UK

Paul Philip Rob

Marsland Brown Lake

Deputy Director Head of Policy Responsible Investment Advisor

High Pay Centre LV Rob Lake Advisors

UK UK UK

Sarah Saul

Hutchinson Djanogly

Consultant CEO

UK UK

Sebastian Steve Terry Tessa Tim

Reger Cave Ritchie Page Middleton

Partner Associate Director Development Director FIA, Principal Technical Consultant

SJ Hutchinson Ltd Best Interest Consultants Sackers Smith & Williamson Trustee Solutions Ltd Mercer Pensions Management Institute

Valborg Alan Barry David

Lie Salamon Mack Weeks

Director Managing Director Client Director Co-Chair

Borg Consulting Corpias Muse Advisory Association of Member Nominated Trustees (AMNT)

UK UK UK UK

Emma Henrik

Craig Pedersen

Marketing Specialist Managing Partner, Co-Founder

KAS BANK N.V. Clerus LLP

UK UK

Janice Mark

Lambert Miller

Pensions Consultant Employee Benefit Consultant

Independent Barclays Corporate & Employer Solutions

UK UK

Olivia

Seddon -Daines

Senior Research Analyst

ET Index

UK

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UK UK UK UK UK

The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


Paul

Hewitt

Senior Development Manager

Vigeo Eiris

UK

Rachel Sarah

Haworth Wilson

Policy Officer Chief Executive

ShareAction Manifest

UK UK

INTERNATIONAL BEST PRACTICE TEAM

First Name Aaron Alan Alex Andy

Last Name Bernstein Browne Mazer Agathangelou

Job Title Editor CEO Founding Partner Founding Chair

Organisation Global Proxywatch MyFutureNow Common Wealth Transparency Task Force

Country USA Ireland Canada UK

Anna

Tilba

Lecturer in Strategy & Corporate Governance

Newcastle University Business School

UK

Chris

Tobe

Investment Consultant

USA

Con Dana

Keating Muir

Head of Research Professor

David Drago Elias

Knox Indjic Westerdahl

Senior Partner Sustainable Business Analyst

Stable Value Consultants BrightonRock Group University of Michigan's Ross School of Business Mercer The Centre for Synchronous Leadership

Eric Eric Erik Francisco

Plunkett Veldpaus Conley Gomes

Owner Strategy Director Founder Professor of Finance

Frits

Meerdink

Manager Fund Management

Graham

Wrightson

Partner

Stephenson Harwood LLP

UK

Heinz-Dietrich

Steinmeyer

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

University of Muenster

Germany

Henk Henrik

Lindner Wolff-Petersen

Policy Advisor Director and Co-Founder

Pensioen Federatie PandaConnect

Holland Denmark

James

Meenan

CEO

JNM Investment Governance

Ireland

Janice Jerry

Lambert Moriarty

Pensions Consultant CEO

Independent Irish Association of Pension Funds

UK Ireland

Johan John Jon

Hellman Belgrove Lukomnik

Chief Operating Officer Senior Partner Executive Director

ETFmatic Aon Hewitt IRCC Institute

UK UK USA

Redbrucke Novarca Group ZenInvestor London Business School PGGM Investments

UK USA Australia UK UK Holland USA UK Holland

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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Jonathan

Hall

Head of Financial Services

Aquila

UK

Juan

Zuluaga

USA/Columbia

Kara

Tan Bhala

President and Founder

Seven Pillars Institute for Global Finance and Ethics

USA

Karen

Volpato

Senior Policy Advisor

Australia

Marcus Mikael Natalie Nicholas

Orione Nyman Smith Morris

Editor in Chief Pensions Lawyer Visiting Fellow

Australian Institute of Superannuation Trustees Exakt Media ClientEarth The Martin School, Oxford

Nicolas

Firzli

Director-General

Nikki

Food and Health Research Manager

Oren Pablo

Gwilliam-Beeharee Kaplan Arellano Ortiz

Preston

World Pensions Council Vigeo

Brazil Sweden UK Australia France France

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

SharingAlpha Pontificia Universidad Católica de Valparaí so

Israel Chile

McSwain

Managing Partner & Founder

Fiduciary Wealth Partners

USA

Richard

Field

Director

Institute for Financial Transparency

USA

Roland

Meerdter

Board Member

Association of Professional Fund Investors

USA

Rosalie

Degabriele

Academic Finance Superannuation & Banking

University of Technology

Australia

Sam Stefanie Stephen

Instone zu Dohna Davis

Chief Executive Officer Client Support Officer Associate Director and Senior Fellow

AES International Dubai ETFmatic UK USA Harvard Law School Programs on Corporate Governance and Institutional Investors

Steve

Kenzie

Executive Director

UN Global Compact Network UK

UK

Steve Suzanne SV Tomas

Cronin Shatto Rangan Wijffels

Founder Retail Investor Senior Executive Policy Advisor

Wise AIG Federation of Dutch Pension Schemes

Dubai USA UK Holland

Will

Price

Senior Finance Sector Specialist, Finance & Markets Global Practice

The World Bank

USA

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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

OUR FIRST CONFIRMED SPEAKER IS RICHARD HARRINGTON MP, PENSIONS MINISTER The February 8th event will feature: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money, after all costs have been taken into account. We saw at our last Transparency Symposium just how strong the views are on this issue and I am very keen that this special event is used constructively to inform, educate and share insights on all the important factors around this incredibly interesting but often very divisive subject. There will be talks, debates and panel sessions and I’m as sure as I can be that it will be an event to remember. The Financial Conduct Authority won’t be speaking but they will be in attendance; observing the proceedings with great interest, I’m sure.  Without any doubt whatsoever the Active/Passive issue is at the epicentre of significant changes taking place in the way the market as a whole is going to function in the future and as such this event is an excellent opportunity to increase your understanding of the many complex issues the FCA have raised in their Market Study. This is an absolutely not-to-be-missed event for which there is likely to be high demand, so to avoid disappointment please crack on and book your place - you can use the link below:

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

41


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 andy.agathangelou@transparencytaskforce.org

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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

Ambassador?

Anna

Tilba

Lecturer in Strategy & Corporate Governance

Newcastle University Business School

UK

Yes

Catherine Con

Howarth Keating

UK UK

Yes Yes

Daniel

Godfrey

UK

Yes

David

Pitt-Watson

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

Consultant

UK

Yes

Jackie

Beard

Director of Manager Research Services EMEA

UK

Yes

JB

Beckett

Consulting Chief Investment Officer and Author

UK

Yes

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

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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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

andy.agathangelou@ transparencytaskforce.org

CALL TO ACTION! PLEASE BE SURE TO PROVIDE YOUR TRANSPARENCY STATEMENT AS SOON AS POSSIBLE. WEBSITE COMING SOON!

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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”.

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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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”

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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.” Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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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.”

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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”.

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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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

50

“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?”

The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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

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

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

“Swimming with Sharks: My Journey into the World of the Bankers” Joris Luyendijk, an investigative journalist, knew as much about banking as the average person: almost nothing. Bankers, he thought, were ruthless, competitive, bonus-obsessed sharks, irrelevant to his life. And then he was assigned to investigate the financial sector. Joris immersed himself in the City for a few years, speaking to over 200 people - from the competitive investment bankers and elite hedge-fund managers to downtrodden back-office staff, reviled HR managers and those made redundant in the regular ‘culls’. Breaking the strictly imposed code of secrecy and silence, these insiders talked to Joris about what they actually do all day, how they see themselves and what makes them tick. They opened up about the toxic hiring and firing culture. They confessed to being overwhelmed by technological and mathematical opacity. They admitted that when Lehman Brothers went down in 2008 they hoarded food, put their money in gold and prepared to evacuate their children to the countryside. They agreed that nothing has changed since the crash. Joris had a chilling realisation. What if the bankers themselves aren’t the real enemy? What if the truth about global finance is more sinister than that?

By Joris Luyendijk. To find out more, visit: https://www.amazon.co.uk/Swimming-Sharks-Journey-World-Bankers/dp/1783350644?ie=UTF8&*Version*=1&*entries*=0 Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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“Capital Failure: Rebuilding Trust in Financial Services” Adam Smith’s ‘invisible hand’ relied on the self-interest of individuals to produce good outcomes. Economists’ belief in efficient markets took this idea further by assuming that all individuals are selfish. This belief underpinned financial deregulation, and the theories on incentives and performance which supported it. However, although Adam Smith argued that although individuals may be self-interested, he argued that they also have otherregarding motivations, including a desire for the approbation of others. This book argues that the trust-intensive nature of financial services makes it essential to cultivate such other-regarding motivations, and it provides proposals on how this might be done.

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

“#New Fund Order - A Digital Death For Fund Selection?” Safe within its bubble, the City’s asset management industry has existed largely unchanged for over 20 years but no longer. A new digital threat lurks in the shadows. Target assigned, Jon Beckett (‘JB’) hunts down the value chain between fund buyers and fund managers and tackles the difficult issues head-on. Get inside the head of one of the UK’s most controversial investment gatekeepers. Think differently about buying funds, multi-manager and the way the industry works. A digital survival guide (of sorts) for anyone working in the fund and wealth industry. Wet work, it’s a dirty business!

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

“Towards a New Pension Settlement” This volume presents the recent experiences of pension reform in seven countries: Australia, Canada, Germany, Netherlands, Poland, Sweden and the United Kingdom. Faced with common problems of ageing societies and constraints on taxation levels, all are increasingly passing responsibility for saving for retirement to citizens. However, there is enormous variety between countries in the degree to which the state intervenes to mitigate the risks which the individual can face in saving for a pension.

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

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

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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: https://www.amazon.com/Transparency-Games-bankers-world-finance/dp/0990396819

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: https://www.amazon.co.uk/International-Investment-Management-Theory-practice-ebook/dp/ 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: https://www.amazon.co.uk/Kentucky-Fried-Pensions-Worse-Detroit-ebook/dp/B00GCTHPFG/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1474870687&sr=1-1&keywords=kentucky+fried+pensions

Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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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, andy.agathangelou@transparencytaskforce.org +44 (0) 7501 460308

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

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

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

Is this also the right classification for you? 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.

INVESTMENT GOVERNANCE CONSULTANTS:

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Also right for you?

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

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

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

JNM Investment Governance gives trustees independent coaching and support to develop strategies and techniques to stem the overwhelming resource handicap they face in discussions with investment professionals. JNM’s objective is to facilitate a constructive two way dialogue with attendant benefits for all parties.

The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7


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

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

INVESTMENT CONSULTANTS:

FINANCIAL PLANNERS:

WEALTH MANAGERS:

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ACTUARIES:

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PENSION SCHEME PROVIDERS:

PENSION SCHEME SELECTION EXPERTS:

ASSET MANAGERS:

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PENSION SCHEME CONSULTANTS

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RESEARCH ORGANISATIONS:

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INSURANCE COMPANIES:

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BANKS:

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REGULATORS AND GOVERNMENT DEPARTMENTS:

TRADE UNIONS:

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TRADE BODIES:

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CAMPAIGN GROUPS:

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PENSION SCHEME COST REDUCTION CONULTANTS

CONSULTING ACTUARIES:

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Is this the right classification for you? Right for you?

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Edition #7 | November 2016 | www.transparencytaskforce.org | The Transparency Times

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ANALYTICS ORGANISATIONS:

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PR FIRMS:

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EMPLOYEE BENEFIT CONSULTANTS:

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BENCHMARKING CONSULTANTS:

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INDEX PROVIDERS:

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HEDGE FUNDS:

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PRIVATE EQUITY:

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PUBLISHERS AND PUBLICATIONS:

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INDEPENDENT TRUSTEES:

EMPLOYER COVENANT CONSULTANTS:

POLITICAL PARTIES:

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DATA SERVICES:

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BUILDING SOCIETIES:

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COMMUNICATION CONSULTANCIES:

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CUSTODIANS:

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LAWYERS:

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GOVERNANCE CONSULTANTS:

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The Transparency Times | www.transparencytaskforce.org | November 2016 | Edition #7

The Transparency Times Edition #8 December 2016  

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