Transparency Times Edition #10 february 2017

February 2017

This month’s contributors are: Andy Agathangelou Founding Chair, Transparency Task Force Page 4

Steve Conley

Managing Director, Workplace pensions Direct Page 26

Con Keating,

Head of Research, Brighton Rock Group Page 32

Patrick Connolly CFP, Head of Communications, Chase De Vere Page 36

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 | February 2017 | Edition #10

DON’T MISS YET ANOTHER VERY SPECIAL EVENT!

. ..on 17th May will be focused on a key question:

“What is the true purpose of the Pensions Industry?”

This event will be of enormous interest to those keen to ensure that pensions policy is optimised for the ‘greater good’.

Our keynote speaker is Richard Harrington MP, Pensions Minister.

Please get in touch if you woud like to: - Enquire about being a speaker or panelist - Enquire about reserving a place as an attendee

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Where & when?

- Enquire about sponsoring the event

Central London, precise venue to be advised.

- Enquire about providing a venue

Wednesday 17th May

andy.agathangelou@transparencytaskforce.org

9:30 to 17:00

This will be another not-to-be-missed event for which there is likely to be high demand.

Edition #10

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RESPONSE TO CONSULTATION PAPER

TRANSPARENCY TASK FORCE RESPONSE TO T FCA’S ASSET MANAGEMENT MARKET STUDY, IN

by Andy Agathangelou| Founding Chair, Transparency Tas MANY THANKS TO EVERYBODY INVOLVED IN PRODUCING OUR RESPONSE! 1. The purpose and status of this document This document has been put together by members of the Transparency Task Force (TTF) to provide input to the FCA’s Asset Management Market Study, Interim Report. Please note that whilst several members of our community have been involved in producing this submission it should not be assumed that the views given reflect those of all members of the TTF as not all members of the TTF have been involved in producing it and some may have contrarian views.

Of course, many of our members and the organisations they represent may feed in their thoughts to you independently of the TTF. 2. About the Transparency Task Force The Transparency Task Force is the collaborative, campaigning community

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dedicated to driving up the levels of transparency in financial services, right around the world. We believe that higher levels of transparency are a prerequisite for fairer, safer and more efficient markets that deliver better value for money and better outcomes to the consumer.

includes market participants, researchers, academics, those representing trade bodies and professional associations and legal professionals. As such we are well-placed to establish consensus that does not merely reflect the wishes of one particular “tribe” or another.

Furthermore, because of the correlation between transparency, truthfulness and trustworthiness, we expect our work will help to repair the self-inflicted reputational damage the Financial Services sector has suffered for decades. We seek to effect the change that the financial services sector needs and the consumer deserves.

Our approach is collaborative - we seek a win/win/win; whereby consumers, market participants and the efficacy of government policy can all benefit from the work we do.

Market reaction has been extremely responsive to our clarion call for collaboration for the benefit of the consumer and the benefit of the reputation of the sector; so much so that in just 22 months we have developed six teams of volunteers, each team focused on a set of transparency-related issues and desired outcomes:

The TTF is free to consider what is ultimately best for the consumer without commercial conflicts and we are perhaps unique in being made up of a truly pan-industry crosssection of individuals that

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THE NTERIM REPORT

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Force • The Market Integrity Team

participated in:

• The Foreign Exchange Team

• The FCA workshop held on 22nd April 2016

• The Banking Team

• The FCA workshop held on 16th May 2016

• The Costs & Charges Team • The Stewardship & Decision-Making Team • The International Best Practice Team 3. Previous involvement The Market Study has been of great interest to our community as it deals head-on with many issues that undermine the competitiveness of the asset management and investment industries in the UK; many of which have a lack of transparency at their heart.

• The well-attended Transparency Symposium that we ran on 14th December 2016 which was entirely dedicated to the Market Study. It was an event that was highly successful from our point of view as it gave us the opportunity to listen to explanatory presentations on the FCA’s Interim Report

from Becky Young, Robin Finer and Anthony Daughton; their presentations were very well received. Furthermore, we hope that the other speakers and resultant discussions held on the day will have provided the FCA with useful comment and feedback.

• The FCA workshops held on 23rd January 2017 We are very grateful for the highly inclusive and highly engaging manner in which the

This is the second submission we have made to the FCA on the Market Study, the first being our comments on its scope, submitted on 18th December 2015.

The high level of interest we have in the subjectmatter is further evidenced by the meetings we have Edition #10

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FCA has conducted its Market Study and we hope our input thus far has been of some value.

4. General comments on the Market Study We are extremely pleased that the FCA embarked on its Market Study and we are impressed by the highly detailed and forensic analysis that it has undertaken. In general terms we believe that the Study and the remedies proposed have the potential to significantly improve the workings of the market for the benefit of the consumer and the reputation of the sector.

We believe that the market as a whole has failed to work competitively for decades and we hope that the Market Study will provide the muchneeded impetus for change.

Whilst the Study is rightly highly critical of the way some parts of the market works, we hope that all the market participants that will need to make changes in light of the FCA’s findings and proposed remedies will be able to adjust their commercial objectives and modus operandi, to better align with providing optimised outcomes to the consumer.

Particularly in a post-Brexit world, our country and its citizens need an asset management and investment sector that is transparent, truthful and trustworthy. As such, the FCA’s Market Study needs to be seen as a big step in the right direction; with more work to be done.

We would request that the

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FCA, whilst continuing to maintain its independence, works collaboratively with The Pensions Regulator, The Prudential Regulatory Authority, HM Treasury, the Department for Work and Pensions, the Work and Pensions Committee, the Bank of England, The Government Actuarial Department, The Department for Business, Energy and Industrial Strategy and all other relevant Government Bodies to continue to build on the momentum that their Market Study has now created. In particular, we would hope that the FCA seeks to drive the cultural transformation that is so desperately needed in the sector.

For example, a subsequent piece of work by the FCA might look at the sector from the perspective of ‘valuesbased leadership’ because if we want a market that ‘has its heart in the right place’ the hearts that matter most are those in the leaders of all relevant market participants, trade bodies and professional associations; within which there appear to be conflicts between what is good for the commercial interests of their members; with what is good for the consumer and the long-term reputation of the sector.

An excellent point made by one of our members that is made later in this submission is so important it is also worth mentioning it here: “What has been the role of trade associations in fostering such an anti-competitive

environment so focused on asset manager enrichment at the expense of clients?’ …it may be wise for the FCA to give some serious thought to that excellent question.

5. The risk of relying on Trade Bodies regulating the market We urge the FCA to avoid at all costs being sold the idea of a ‘patchwork quilt of protocols’ on vital issues such as costs disclosure; whereby different parts of the industry introduce ‘codes of conduct’ designed to take care of just their part of the market.

An example would be the asset management industry’s trade body in the UK, the Investment Association, attempting to introduce a costs disclosure code for their own members to use. We believe this type of approach may result in inconsistency, confusion and even the potential for ‘gaming’; issues so serious that they have the potential to undermine the efficacy of a robust regulatory framework.

These concerns are particularly valid if: • There is no effective quality control over the cost data being gathered • There has not been any open scrutiny of the way in which the code is developed • The code is merely voluntary

• The terms used to describe costs do not have legallybinding definitions

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• The code is developed as a separate activity to the rest of the industry; with a different approach, language and philosophy behind it

• There has not been any real attempt to produce the code as part of an integrated, industry-wide effort • Steps are not taken to avoid ‘regulatory whack-a-mole’ whereby costs can be gamed from one part of the market to another.

Understandably, trade bodies have a primary duty to care for the commercial interests of their members; that in itself is absolutely fine, but given that reality, they are clearly too conflicted to be responsible for the development of a costs disclosure code; especially if they are unable to wholeheartedly support the idea of putting the investors’ interests first.

We believe that it is far better if the sector as a whole works together to produce a ‘blanket’ solution rather than a ‘patchwork quilt of protocols’ and for all that work to be properly led by the FCA; regulators are best placed to regulate.

The shocking findings of the FCA’s Asset Management Market Study is all the evidence that could ever be needed that entrusting the financial services sector to self-regulate has been wishful thinking to the point of naivety on the part of previous Regulators. Decades of pseudo self-regulation has Edition #10

failed to prevent the terrible miss-selling scandals that have caused extensive consumer detriment and sapped the public’s trust in the sector; therein is a systemic risk that needs to be mitigated, by the FCA. It is absolutely vital for the public to have confidence in the financial services sector and they are more likely to have confidence in the financial services sector if the sector’s Regulator leads regulatory activity and does not allow itself to be sold the idea that highly conflicted trade bodies might do the job for them.

6. Responses to questions for feedback We have selectively responded to some of the questions asked, leaving some unanswered on the basis that they are outside our area of interest and/or insight.

10.16 Questions: What is the likely effectiveness and proportionality of: The FCA setting out its expectations about how AFMs should demonstrate that they are acting in the best interests of unitholders - We believe this should have a positive impact on market behaviour and outcomes achieved; and given the importance of ensuring AFMs are operating in the interests of their unitholders this would be an appropriately proportionate step.

Governance reforms to help ensure firms comply with their responsibility to act in the best interests of unitholders - Again, we believe this should have a positive impact on market behaviour and outcomes achieved; and given the importance of ensuring AFMs are operating in the interests of their unitholders this would be an appropriately proportionate step.

The specific options (A-F) set out above - For the reasons explained later we do not believe a ‘single charge’ solution is the best approach to take.

However, of the Options A to D described we believe that Option D is the most suitable; it is an adequately robust approach, is relatively straightforward and is the least likely to be gamed.

Do you have views on how firms should demonstrate that they have acted in the best interests of investors?

- There is a general lack of transparency in the market. By firms providing full transparency on their decisions and actions, interested parties can then scrutinise what has happened and decide for themselves whether firms have acted in the best interests of investors.

The information provided would comprehensively cover objectives, costs, performance achieved, and risks taken.

Do you have views on how

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governance should work to ensure firms act in the best interests of investors?

- Again, there is a general lack of transparency. Full transparency on decisions and actions will improve governance as it opens up scrutiny and accountability.

Governance frameworks should be constructed that have very high levels of transparency ‘hard-wired’ into them. If politicians can be made to be happy with the level of scrutiny they are under (in the House and when involved with Select Committee Meetings, for example) why not those responsible for other people’s money?

- On that basis it is worth noting that there is growing interest in the USA in the meetings of Pension Boards and so on being video’d, recognising how powerful a driver transparency can be for achieving god governance.

Such an approach would surely also have a positive impact on the levels of engagement.

Are there any logistical challenges and unintended consequences that should be taken into account? If so, how could these unintended consequences be overcome?

- There are likely to be numerous challenges and potential unintended consequences. We suggest a small pilot be considered to iron these out ahead of a wider roll-out, with say one or more progressive pension schemes volunteering to

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operate in a highly modern and highly transparent way.

If videoing meetings was thought to be impractical then at least full minutes should be taken and published online; with scope for commercially sensitive points being redacted. Either way, there needs to be much greater transparency on decisions being made and actions taken.

Are there advantages to the FCA recommending the government introduce a fiduciary duty by statute which could not be achieved through regulatory reforms?

- Yes, a fiduciary duty through statute would be a powerful driver for correcting imperfections in market behaviour and it would help to eradicate many of the conflicts of interest that exist.

Providers should be explicitly required to act in the best interests of their clients.

In the main, asset owner driven solutions have not worked - as would be fully expected given the severe and extensive information asymmetries between client and fund manager.

Are there better alternative supply side remedies that would encourage asset managers to demonstrate that they are providing value for money?

An area of particular concern relates to how Non-disclosure (ND) and most favoured nation (MFN) (clauses) are used.

The comments below are

from an individual within the TTF community who has valuable expertise and experience in relation to these areas; that individual would be happy to elaborate on these very important points with the FCA if required: “I have been on both sides of these issues; so, poacher and gamekeeper. My experience is limited to segregated mandates. The pooled funds we ran had fixed schedules and there was no negotiation at all.

MFNs: The first thing to understand is that little if any of this gets included in the investment management agreement (IMA). It is in this sense unverifiable and not auditable. I have though used it as a reason cited for stopping fee negotiations with trustees. Only once in about fifty such presentations and mandate gains was I ever asked to document my words. I did this by way of a side-letter, a comfort letter, of dubious legal standing.

I did try to do some analysis a few years back and asked some 50 schemes about this. About one third claimed this was part of their understanding with the fund manager, but none had documentary evidence.

I am told that written MFN clauses are seen with local government schemes, but again these are usually in ancillary documents, but local government schemes did not figure in the sample of schemes that I polled. I did have a few responses which had common fund managers,

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in active UK equity. When I looked at the fees paid I found two clear indications that others had better terms than them notwithstanding the fact that they thought they were getting best terms.

Looking at it overall I came to the conclusion that most were simply being quoted from a standard fee schedule, with only occasional variations above or below that schedule.

NDs: These are documented.

Part of the issue, in my research attempt, with some, was that their IMAs prohibited disclosure of the terms of management - in some cases even to beneficiaries of the fund. It was not uncommon for the IMA to limit disclosure even of performance figures.

Our model IMA restricted disclosure to the scheme and members – no third parties.

Our stated rationale was to ensure that any information in the public domain, for example with investment consultants was accurate.

The truth is that we were keen to avoid disclosing the fact that broadly similar mandates could have starkly different results.

There was a lot of cherry picking going on all over the place in advertising and marketing documents - and that led us to the original GIPs [Global Investment Performance] standards.

They eliminate some, but far from all of those practices. One of the oldest was reporting the average return on a mandate class – we could tinker with the membership; we could report average by number; we could Edition #10

report average by value. We always reported numbers in terms of the most recent year, the average over two years, the average over three/ five and so on – this appears to be open but it confuses what you achieved in any one year or sequence. This is still standard today. I made this point to [the name of a friend] – he owns a [name of an Asset Manager] fund that has just had a stellar year, and was two or three in the two and three year averages among eight funds. When you look at how they did in each year, going backwards in time they were 1, 7, 8, which is far from as impressive.

The real abuse from a transparency standpoint concerns complaints and legal actions. There is usually some publicity at the start of the process but that is where it ends. Settlements are invariably subject to a non-disclosure of terms clause; most settle on the steps of the court. I have tried asking fund managers how many such complaints and settlements they have had, and got nowhere. We should be pressing for full disclosure as part of the marketing materials. I have even come across what I refer to as super NDs. Here the terms of the settlement denied the parties disclosure even of the fact that a complaint had existed and been settled.

The investment consultants are frankly [not very good] in this; they simply take the numbers fed to them by the asset managers and regurgitate them. I have seen

one instance where there was a maximum loss limit – 2% and then there were three consecutive months in which losses exceeded this, but the fund manager had reinterpreted this as a “value at risk” limit, was reporting compliance and the investment consultant accepted this. The terms of investment consultancy agreements usually make it impossible to take action against them, and it is not uncommon for these to include non-disclosure of the advice they have offered”.

We believe that the FCA ought to propose remedies that deal with the adverse impact that Non-Disclosure and Most Favoured Nation clauses are having on the workings of the market generally and the achievement of value for money specifically.

10.21 Questions We would welcome views on: The likely effectiveness and proportionality of the: Single charge remedy to incentivise asset managers to control the charges taken from funds - We don’t think a single charge will adequately incentivise asset managers to control the charges taken.

- Substantive and transparent disclosure is likely to be more effective so that asset owners, and their representatives, can see where the money is being spent and how much

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in each area rather than using universal figures that incentivise cross-subsidy.

- If asset managers are required to set a budget, this will likely be set so as not to compromise the manager’s profitability and would thereby be to the detriment of the consumer.

- If a single charge were introduced whilst also introducing mandatory comprehensive costs disclosure them many of the unintended consequences of the ‘single charge’ approach would not apply.

- A – partially effective. It provides more certainty than is currently the case but many charges are not covered by the OCF so there is still an unacceptably high level of uncertainty.

- B – ineffective and potentially harmful. An estimate is likely to be wrong and misleading as no-one can predict how much they are going to trade (not even Tracker Funds) Consumer detriment likely.

disputed.

- D – The charge will be set to protect the Asset Manager.

It is likely to result in very expensive funds, sub-optimal management or financially weak managers.

How we can overcome any of these unintended consequences - Don’t impose any of the four proposed measures.

- The decision of ‘single charge’ and ‘comprehensive costs disclosure’ should not be seen as an either/ or decision; we can have both, and as such would have ‘the best of both worlds’ This combination may be the best overall solution to motivating asset managers to manage cost properly on one hand whilst also providing asset owners with a means by which they can properly scrutinise costs, compare options in the market and seek value for money.

- D – ineffective and potentially harmful.

- Impose a legal duty on managers to act in the interests of their clients, including the duty to not incur unnecessary and/or inflated costs when acting on clients’ behalf.

Any unintended consequences of:

- Define the costs that can be incurred on savers’ behalf.

Single charge remedy to incentivise asset managers to control the charges taken from funds

- Establish templates for the reporting of these costs such that there is consistency of disclosure across the entire market; beyond just the Asset Management sector.

The specific options (A, B, C, D) set out above

- A – Charges likely to go up somewhat as managers protect themselves from having to give a firm price.

- The OCF regulations: https://www.esma.europa. eu/sites/default/files/ library/2015/11/10_674.pdf

- C – ineffective. The option for overspend renders any control meaningless.

- The nature of the remedy will dictate the unintended consequences (see below).

The specific options (A, B, C, D) set out above

- B – Charges likely to go up somewhat as managers protect themselves from having to give a firm price.

- C – Charges are likely to increase materially. Conflicts are likely when overspend is exercised and explanation

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- Mandate regular disclosure of the costs incurred in monetary terms as well as percentage terms.

Do you think that the scope of this remedy should be limited to retail investors or should it be extended to other types of investors?

- All investors should be treated in the same way as far as the regulations are concerned.

-This approach creates economies of scale for providers.

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- This approach creates a single set of outputs for users, whether they’re wearing a retail or institutional hat; and they are often the same people Whether there are better alternative remedies or pricing models that would encourage asset managers to control the charges taken from funds?

- Please see ‘overcoming the unintended consequences’ above - Publish the results for all funds annually in a searchable and rank-able form - Require compliance for any fund sold to any UK investor Do you agree that risk-free box profits should be used solely for the benefit of the fund and not be permitted to accrue to the asset manager?

- Yes, indeed. It is impossible to understand how the retention of box profits can be seen to be in any way consistent with Treating Customers Effectively, Outcome 1 (fair treatment).

- If it does breach Treating Customers Effectively, Outcome 1 (fair treatment) what has been/will be done to penalise accordingly? 1 10.28 Questions: We would welcome feedback on the following questions:

Would it be proportionate and effective to require fund managers to be more specific with investors by clarifying an upfront objective and tracking performance against that objective over an appropriate time period?

- Yes Should we set out our expectations on using benchmarks, particularly when benchmarks are used to trigger performance fees?

- Yes Should managers be required to take action when funds are persistently underperforming and, if so, what form should this action take?

- Yes. The Asset manager should be mandated to communicate the persistent underperformance in a prescribed manner to investors, thereby alerting them to that underperformance.

Is there a role for the regulator in ‘shining a light’ on poorly performing funds and if so what form could this take?

- Yes. The Asset manager should be mandated to communicate the persistent underperformance in a prescribed manner to investors, thereby alerting them to that underperformance.

10.32 Questions

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Do you agree that the focus of any remedies in this area should be on investors in scenarios 2 and 4 outlined above?

- Yes 10.44 questions What is the likely effectiveness and proportionality of: Remedies which aim to introduce further cost transparency and aim to encourage retail investors and their advisers to become more price sensitive - The effectiveness and proportionality will be determined by the measures enacted - In general, steps to encourage transparency are likely to be beneficial.

Disclosure is likely to lead to managers not wanting to be ‘named and shamed’.

Greater information might well lead to better buying decisions - The key is to have consistent disclosure across managers/products so that users can gain familiarity and comparisons can be made on a level playing field The specific options (A, B, A+ and B+) set out above and alternative remedies that could be introduced - A (monetary fund charges, before investing) – Monetary amounts are helpful but the challenge is then to identify what amounts to illustrate. A balance needs to be struck

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between providing helpful illustration points and overloading users with too many data points. Disclosure at the point of sale might require projections, which need to be provided on a consistent basis in order to be meaningful.

- B (monetary total cost of distribution, before investing) – Total costs of distribution are likely to be helpful but require disclosure beyond that which the fund manager can provide. A mechanism needs to be created to incorporate the distribution costs easily.

Monetary amounts are helpful but the challenge is then to identify what amounts to illustrate. A balance needs to be struck between providing helpful illustration points and overloading users with too many data points. Disclosure at the point of sale might require projections, which need to be provided on a consistent basis in order to be meaningful.

- A+ (monetary fund charges, after investing) – Show the actual costs of investing incurred by the specific client.

- B+ (monetary total cost of distribution, after investing) – Show the actual costs of distribution incurred by the specific client.

- Educate savers that fees are being charged and that they should look to understand what the fees are. Fees cover (necessary?) services.

Having a consistent approach to disclosure, ideally through a template and an agreed list of legally defined costs

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and charges simplifies the education process and improves the efficacy of costs disclosure.

What would be the most effective format and mechanism to increase investor awareness of the impact of charges?

- Disclosing fees alongside related performance in consistent terms (whether % or £) will increase awareness of the impact of charges.

Would there be unintended consequences of:

well as comparison with others in the market - B (monetary total cost of distribution, before investing) – Unrealistic expectations of the cost of distribution.

Provide indicative ranges of realistic rates as well as comparison with others in the market.

- A+ (monetary fund charges, after investing) – If costs spike for legitimate reasons, investors might redeem.

Explain the reasons for the spikes and why it was in members’ interests

Remedies which aim to make investors more price sensitive and, if so, are there ways in which unintended consequences could be overcome?

- B+ (monetary total cost of distribution, after investing) – If costs spike for legitimate reasons, investors might redeem. Explain the reasons for the spikes and why it was in members’ interests.

- Might create a focus on cost rather than value. If possible, the FCA should give an indication of ‘reasonable’ cost for the service concerned.

Are there better alternative options that would encourage investors to become more price sensitive?

- The greater volume of data disclosed might overwhelm investors. If possible, tier disclosure so that those who want more detail can access it easily but are first shown summary information (e.g. total cost as a single number) The specific options (A, B, A+ and B+) above and ways in which we could overcome any unintended consequences?

- A (monetary fund charges, before investing) – Unrealistic expectations of the cost of investing. Provide indicative ranges of realistic rates as

- Disclosing fees alongside related performance will increase awareness of the impact of charges.

What funds should be in scope of any remedies which encourage greater focus on charges?

- All, because it is absolutely vital that a level playing field is created for comparison purposes. The failure to create a level playing field on cost disclosure would distort the market to the detriment of the consumer and would thereby undermine the very purpose of cost disclosure.

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Consistent comparability is key.

10.51 questions Whether institutional investors would benefit from standardised disclosure of asset management fees and charges?

- Yes, they most certainly would.

What fees and charges information should be included in a standardised disclosure framework?

- All costs deducted from the investors’ capital, particularly where these are paid by agents’ on the investors’ behalf. The disclosure framework should show aggregated information and allow drill-down, in stages, to more detailed information for those that want it - The Transparency Task Force has been developing an approach to comprehensive costs disclosure that has the potential to be detailed enough to be very difficult to game

investors as well as related service providers. The costs to provide disclosure should not be given as justification to not disclose; the ‘costs to disclose’ and the ‘administrative burden’ have been used as an excuse to help avoid disclosure for decades, from which the sector has profited (36%!), to the detriment of the consumer. This must now stop, please.

Would there be unintended consequences if trustees were required to publish costs and charges?

- There will be a much greater focus on costs and charges which in general terms is a very good thing, but it might lead some to make decisions purely on the basis of cost rather than value. There is an important education piece to be done on this point.

The scope of fund/products that this disclosure template should cover? Should it cover private equity strategies and

hedge funds as well?

- Most definitely, all types of investments should be included, especially Private Equity and Hedge Funds which tend to be expensive.

Excluding certain categories of investment encourages gaming of the system via reclassification to an excluded type; i.e. the FCA would inadvertently be encouraging yet more ‘Regulatory Whack-a Mole’.

10.66 Questions: We would like your comments on our provisional decision to make an MIR. Please see the publication which sits alongside this report and sets out our consultation questions and the period within which to respond.

- We believe that a Market Investigation Reference to the Competition & Markets Authority is a good idea; it will help to shine a light on the workings of the Investment Consultancy sector and it

- We believe that ALL the costs that adversely impact the investor need to be disclosed; not just those relating to asset management What would be the cost to asset managers of providing information?

- Not known, but the greater the standardisation, the lower the cost due to economies of scale within and across managers and Edition #10

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therefore has the potential identify and deal with issues that prohibit the efficient workings of the market, including conflicts of interest.

sector has not been regulated to date may explain many of the sub-optimal market practices that have been taking place.

- It will also provide and opportunity for investment consultancies to evidence if and how they add value.

7. Other areas for consideration

We would also like views on: Whether the FCA should recommend that HM Treasury brings the provision of advice provided by investment consultants to institutional investors within the regulatory perimeter - Yes, the FCA should do this; there is no basis for such an important part of the market operating in an unregulated way. The Market Study provides ample evidence that such a step is both necessary and proportional.

-The fact that the institutional investment consulting sector has not been regulated to date may explain many of the sub-optimal market practices that have been taking place Whether to bring the provision of advice provided by employee benefit consultants to employers and trustee boards within the regulatory perimeter - Yes, the FCA should do this; there is no basis for such an important part of the market operating in an unregulated way. The Market Study provides ample evidence that such a step is both necessary and proportional - Again, the fact that the EBC

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In this section we cover a range of points not directly included in the Market Study that still represents worthwhile input all the same: The Senior Manager and Approved Persons Controlled Functions Regime: We believe there is merit in the FCA looking into how the Senior Manager Regime and the Approved Persons Controlled Functions Regime might improve accountability and governance; and thereby outcomes achieved.

The ‘Sophisticated Investor’ status We believe there is merit in the FCA looking into what impact the ‘Sophisticated Investor Status’ is having.

We are concerned that it is inadvertently removing regulatory protections from those that need it. Are all individuals deemed to be sophisticated investors truly sophisticated investors?

Irregularities regarding fees and invoicing

errors on invoices – the vast majority of these errors have meant higher than expected fees - Invoice payment dates don’t match the IMA invoice payment date leading to invoice payment earlier than contractually stated, sometimes by up to 2 weeks each quarter. The loss of many days’ interest on high fee amounts, in some cases on hundreds of thousands of pounds, four times per year (if quarterly invoicing). A considerable issue.

- Many invoices seen were not even “legal invoices” – essential information missing (such as the name of the pension fund client, what the invoice is for, which period it covered, the payment date and what currency the invoice is in etc.)

- Some invoices seen for a contractual period (i.e. quarterly invoices for Q4) include a number of days for Q1 of the next year. Clearly this is a breach of contract and/or FCA rules. Again, a serious issue.

There are numerous issues regarding the charging of fees that we encourage the FCA to fully investigate and provide remedies to:

- Use of Performance Fee calculations that have clearly been modelled to give the asset manager the highest possible fee. A 13-step performance fee calculation has been seen that a pension fund had signed up to but could not replicate when checking the invoice. It was too complex and essential data was missing. Clearly, a problem

- There are far too many

- A general concern is that

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asset owners do not appear to scrutinise invoices properly; with material detriment to them/their scheme members.

- We would encourage asset owners to consider retrospectively scrutinizing all invoices paid and seek compensation if it transpires that they have been overcharged.

A reluctance for there being more regulation is unjustified There is sometimes criticism that increased regulatory requirements and their associated costs have led to little consumer benefit.

We believe this point alone should not discourage more regulation, but we seek to encourage the FCA to introduce regulations that are going to positively impact the market in as efficient a manner as possible.

Furthermore, we believe that principles-based regulation can be highly effective; for

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example, the creation of an explicit legal duty for all market participants to act in the interests of the client could cut through swathes of ‘red tape’. On that basis it is particularly disappointing that only a minority of the members of the trade body for the asset management industry, The Investment Association, found themselves able to sign up to a set of principles that included the idea of putting the interest of the client first. For those of us that have a pro-consumer outlook this was a very worrying development; and the fact that the Investment Association now seems to have dropped all efforts to encourage their members to accept the principle of putting the interests of the client first is disappointing to the extreme; so much so that it makes one question whether they are a suitable Trade Body for representing Asset Managers that are more enlightened; more progressive and more truly

client-centric.

As mentioned earlier it is certainly one very good reason why the FCA should not allow themselves to be sold the idea of a ‘patchwork quilt of protocols’ designed by conflicted Trade Bodies, whose priority is to care for their members’ commercial interests.

Also, it would seem that Regulators have sometimes failed to make full use of their powers in enforcing existing regulations; for example, one wonders whether the entire Treating Customers Fairly regime has been used as effectively as it could have been?

In a ‘perfect world’ a highly elegant regulatory regime based on a handful of key principles would be wonderful, but given where we are it would seem that a rulesbased approach is necessary; it shouldn’t be, but it is.

We would hope, however that the FCA gives a great deal of thought in ensuring that the potential for unintended consequences is minimised, and on that basis we suggest the FCA may want to liaise with a few key, highly knowledgeable individuals who might perform a very valuable sense-check for the FCA on potential unintended consequences before new rules are introduced. I am sure that there are several ideally-suited individuals within the TTF who would be ideal for such an exercise (and acknowledge of course that there are many others

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that are not involved with the TTF at all).

Given the wide-ranging nature of the Market Study we think it is absolutely essential that such a sense-check was completed.

The importance of definitions  It is vital that the terms used in regulations are properly defined in law, particularly when seeking to create a framework for the consistent disclosure of costs and charges incurred when investing. There is a myriad of over-lapping regulatory and industry body initiatives that are underway. These initiatives include the new Investment Association Disclosure Code, PRIIPS, the FCA’s Consultation Paper 16/30 on Transaction Costs in Workplace Pensions, MiFID II and others. Some of these initiatives clearly define the terms that they have used and certain terms may be defined in different ways.

Clear definition of each term will ensure consistency across regulatory and industry body initiatives which will, in turn, lead to a strong set of regulations that reduces the risk of ambiguity and, therefore, the risk of the regulations being gamed/undermined; and consumer confidence being lost. Â The Transparency Task Force is part way through a definitions exercise and would welcome specific dialogue with the FCA on this work; we believe that a centralised and systematic approach to establishing definitions is a worthwhile aim and we shall follow up with some ideas on this separately; we think it is vital that the FCA is directly involved in this work.

The impact of the media We would encourage the FCA and/or the Competition & Markets Authority to look into the role of the media within the asset management and investment sectors.

There are concerns that the business models of some publications may have become over-dependent on revenues from these sectors; so much so that it may be having an impact on what gets written about and how it is covered. If this is the case it is a significant problem that needs dealing with. The difference between editorial, advertorial and advertising can sometimes get blurred.

The impact of unregulated advertising by market participants There does not appear to be any regulation or policing of the advertising issued by some market participants in some parts of the market.

Perhaps this is due to the fact that not all parts of the market are properly regulated yet? We would like a regime in place that ensures that all advertising by all market participants adheres to a set of rules or codes; at the heart of which is the idea that no advertising should be misleading in any way and that all costs, risks and so on are properly disclosed; with any reference to investment performance claims being wholly justifiable and includes assessment over an appropriate period of time.

Litigation risks We are concerned that some existing market practices may lead to litigation against, for example, trustee boards who are shown to have not acted in the best interest of their scheme members, by, for example, not doing what they should do to optimize costs and

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charges.

Excessive costs and charges adversely impacts members in DB schemes indirectly and in DC schemes directly; either way they can lead to material detriment to investors; particularly in pension schemes where the corrosive effect of excessive fees has a substantial impact because of the ‘compounding’ effect over time.

This is more than just a theoretical possibility. The FCA might wish to look into the multi-million-dollar class actions won by pension scheme members in the USA that have been represented by the law firm Schlichter, Bogard & Denton (and others). Could similar cases be brought in the UK by disappointed pension scheme members in years to come?

The following text is from the website of Schlichter, Bogard & Denton: “In recent rankings of the most influential people in the 401(k) industry by 401kWire. com, Jerry has repeatedly ranked in the top 5. This is due to his handling of nationwide class actions on behalf of employees and retirees in large 401(k) plans alleging excessive fees and conflicts of interest that reduce employees’ and retirees’ retirement assets.

Throughout his career, he has also handled major precedent-setting class action and mass tort cases on behalf of individuals. He currently represents employees and retirees of large companies with claims of excessive fees in their retirement plans. He Edition #10

and the firm have obtained settlements in these 401(k) excessive fee cases of more than $300 million for employees and retirees, in addition to significant improvements in their 401(k) plans. He also was lead attorney for the firm in the first and only full trial of an excessive fee case in the country. This trial resulted in a substantial eight-figure verdict on behalf of employees and retirees in the ABB 401(k) plan.

Jerry has been featured in numerous national publications, including the New York Times, Reuters, Bloomberg, USA Today, and the Wall Street Journal, for his success in obtaining precedent-setting results involving claims of excessive fees against large employers, and for the reduction in fees his cases have caused throughout the 401(k) industry. According to a recent article published in Reuters, the CEO of Brightscope, an independent company which evaluates 401(k) plans, stated, speaking of Mr. Schlichter’s national impact on 401(k) plan fees, that “[h]is impact has been humongous.” The New York Times has referred to Jerry as “a Lone Ranger of the 401(k)’s,” and he has been referred to by Investment News as “public enemy no. 1 for 401(k) profiteers” and by Chief Investment Officer as “the industry’s most feared attorney.”

In 2014 and 2015, Mr. Schlichter’s firm obtained the two largest 401(k) excessive fee settlements in history.

The first was a settlement for

$62 million against Lockheed Martin on behalf of Lockheed Martin employees, which included significant changes to the Lockheed Martin 401(k) plan. The second was a settlement for $57 from Boeing, which likewise included significant nonmonetary relief.

Also in 2015, Mr. Schlichter won a unanimous 9-0 decision in the U.S. Supreme Court in Tibble v. Edison, the first U.S. Supreme Court case to consider fees in 401(k) plans.

In an order in the case of Nolte v. Cigna Corporation in 2013, the U.S. District Court judge stated: “ . . . Mr. Schlichter and the Schlichter, Bogard & Denton firm’s actions have led to dramatic changes in the 401(k) industry, which have benefited employees and retirees throughout the country by bringing sweeping changes to fiduciary practices.”

The U.S. District Court in Tussey v. ABB similarly found of “special importance . . . the significant, national contribution” made by the team led by Mr. Schlichter, which has “educated plan administrators, the Department of Labor, the courts and retirement plan participants” about the fiduciary obligations of 401(k) plan administrators.”

We believe there is a chance that similar litigation may happen in the UK and if so it would further undermine confidence in the system. The list below is not exhaustive but it may represent the sorts of areas in which litigation might occur:

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-Closet trackers - Stock lending - Soft commissions - Inappropriate benchmarks - Foreign Exchange - Invoicing - Unfair contract terms - Undeclared income - Unresolved conflicts of interest - Transaction costs generally; and Portfolio turnover specifically The challenge of sourcing accurate data The issue of sourcing accurate data from asset managers for the purposes of transparency on costs is a challenging area. Asset manager’s systems have a set of data – but they only “shadow” the Net Asset Value (NAV) to within a few basis points of the “official” Net Asset Value using investment ledger-based systems. DB Pension funds have a custodian that is paid to cut the official NAV of the segregated mandate(s) – custodians use general ledger-based systems which capture ALL relevant costs.

The custodian provides the monetary figures used by the pension fund in their annual report and accounts – not the asset manager. For pooled funds, the fund custodian also cuts the official NAV (some

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alternative funds have an administrator that performs this function). From the many comparisons one of our members has undertaken of asset manager valuations V custodian valuations, the asset manager valuation has always come out higher than the official “books and records” valuation of the custodian (due in the main to the use of different marks/prices that are higher than the custodian’s).

This valuation issue is exacerbated for assets that are illiquid or Over the Counter (OTC) in nature.

On that basis, where is the sense in asking an asset manager to provide figures on costs when their data is “shadow” NAV-based and is correct to within “X” basis points only? It is not the “books and records” data of the fund. Our member who has particular insight and expertise in this area has seen pension funds agree to using asset manager valuations for the purposes of AMC/performance fee calculation in their IMAs. No pension fund should ever be doing this as it leads to higher than expected fees and raises the issue of Fiduciary Duty – why have the trustees agreed to pay a fee based on a valuation that is not the official “books and records” of the fund?

All pension funds that use asset manager valuations for fee calculation purposes will be paying these invoices based on a “tolerance” (i.e. within 2% of the official valuation/fee amount) as the asset manager’s valuation and, therefore, the fees are higher than those produced by their own

custodian.

For pooled fund investments, no investor has any rights when it comes to requesting data from the pooled fund/ asset manager concerned – unless they have contractually agreed this at the time of investing. Coming back to the asset manager post the investment and asking for transparency on certain cost items will not generally work.

Securities Lending We believe that far greater emphasis and investigation into the practice of Securities Lending is required, for the following reasons: - Collateral management is one of the key pillars of mitigating counter-party risk, however the trading, settlement and margining practices haven’t changed in 40+ years - the current market structure is opaque and hasn’t changed since its evolution into today’s collateral markets as a fails activity designed to support settlements. The advent of derivatives and the globalisation of the financial markets has expanded the market place from $250mn in the late 1970’s to a value exceeding $4trn today and sustains an industry encompassing over 40,000 employees globally, across banks, brokers, consultants and technology providers - The current market pricing structure is opaque and restricts Managers from fully optimizing client assets

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- Managers are excluded from the process of full price discovery and price transparent price discovery in collateral transactions due to the vested interests of the Intermediaries involved in Securities Lending - There is a lack of price transparency in collateral lending transactions which gives rise to underperformance, and the subsequent regulatory and fiduciary implications for Managers in ensuring the best interests of their clients - The Retail Consumer is not allocated a fair share of revenues from stock lending in the current market structure - Many Managers are not even attempting to engage in Securities Lending as an activity to optimize their client’s assets. They do not provide any form of substantive information for their exclusion from this activity which further disadvantages the end investor

- These practices could be modernised without recourse to any changes to guidelines or legislation that the current FCA Code of Conduct and the Fiduciary obligations provide.

All that is required to effect immediate change is the promotion of best practice by the FCA. Discussions and interactions with Asset Managers regarding their participation or non-participation in Securities Lending has concluded with their universal acknowledgement that they are excluded from the price discovery process and are disadvantaged in the current market structure. They agree that they don’t have a fair “route to market” under the present process. This raises quite legitimate concerns about the nature and form of risk they may be exposing their clients to when the returns on offer are so small.

The lack of access to a transparent and fair market gives rise to many serious

questions about the nature of the collateral markets and the systemic risk they create in the financial markets.

The inability of Managers to readily access fair and open pricing whilst determining risk and returns leaves Managers open to a charge that they are in breach of their Fiduciary obligations and the FCA Code of Conduct guidelines. This has subsequent implications for the retail consumer who is dependent upon the protection of both their Asset Manager and the FCA as the prevailing regulatory authority.

Considering the many dimensions involved in the Asset Management market and that Securities Lending is one of many activities, we would suggest that the FCA resolve this issue quickly, given the existence of the necessary legal and regulatory framework.

Managers support the concept of better access and greater price and risk transparency but need a signal from the FCA that this issue is a priority. We believe that immediate direction from the FCA to the member firms in the form of a Guidance Note would allow member firms to act promptly and reflect the needs of the Retail clients in securing optimal returns whilst correctly measuring, reporting and managing risks.

We believe that the current Securities Lending market structure is opaque; and that it is broadly accepted throughout the Buy-side industry as no longer being fit for purpose in a modern global financial

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marketplace; whilst the current bi-lateral opaque practices continue to disadvantage Retail Consumer by restricting access to price and risk.

The overall effect has created a potential legacy issue over and beyond other well publicised industry issues such as Libor and PPI. This is a serious and systemic issue. Notwithstanding that Securities Lending is but one element of the overall Market Study, it has significant implications for the industry and where fair value and better protection of the end consumer is paramount and can be delivered immediately.

We therefore request the FCA thoroughly investigates these issues; alongside whether & how asset owners are appropriately rewarded by asset managers for their ‘involvement’ in Stock Lending.

8. Miscellaneous comments Some of our members provided comment through a survey we produced on the morning of the publication of the Interim Report:

What is your overall opinion of the FCA’s Interim Report?

- Very welcome and encouraging - APFI (Note, APFI is the Association of Professional Fund Investors; their UK Lead is also an Ambassador of the TTF) broadly welcomes the interim FCA proposals, which should engender greater

20

transparency of fund charges, assuming an even approach is applied to active and passive funds and captures the variation in share classes and fund charges at the fund level. These proposals should involve all impacted parties including professional fund managers, investors, consultants, consumer groups and rating agencies.

- Surprisingly good What, if anything, are you particularly pleased with?

- Both the requirement for independent oversight of investment funds to ensure value for money and the interim decision on investment consultants and EBCs where there are selfevident conflicts of interest - APFI support an open dialogue about the better integration of technology to improve investor outcomes.

This can include capturing Fund information, due diligence process, fund monitoring, attribution and selection tools.

- Highlighting weak competition and poor benchmark selection; and, as a bonus, inclusion within [regulatory] scope of investment consultants - Thorough analysis, recognition of importance of transparency, CMA review - The attitude of viewing things from the consumer’s perspective What, if anything, are you

particularly disappointed by?

- Omission of discussion of impact of anti-competitive market behaviours on ESG Research/Governance/Voting/ Stewardship role of fund managers - We challenge the FCA’s assertion that the UK fund market is not concentrated with over half of the market held by just 10 firms. The FCA should consider ring-fencing long term legacy assets from new business. We encourage the FCA to take a closer look at consolidation, smaller firm survivorship, M&A and the wider global trend. The FCA highlights investment consultants (Chapter 8), those who advise pension scheme trustees. Investment consultants do not represent the entire professional fund investor (‘PFI’) industry. Their proximity to the end customer will be different compared to a multi-manager, a platform or an adviser. We therefore encourage a broader study of fund selection and the sharing of best practice, not only among APFI members, but all areas of fund research including fund research agencies, insurers, local government, discretionary fund managers and multimanagers to address issues raised. Only through increasing professionalism can funds be selected effectively as innovation and tools available become ever more advanced.

If you could change just one thing what would it be?

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- Include discussion of impact of anti-competitive market behaviours on ESG Research/Governance/Voting/ Stewardship role of fund managers - The APFI calls on the FCA to consider whether business models should be reviewed, universal market standards implemented and certification be considered for professional fund investors.

Any other comments?

- What has been the role of trade associations in fostering such an anti-competitive environment so focused on asset manager enrichment at the expense of clients?

- The APFI asserts the need for a better appreciation for market standards and professionalism in fund selection/governance, such as due diligence. The value of quantitative v qualitative analysis is also an area the Association of Professional Fund Investors is committed to exploring with our members. Why consultation cannot be simply driven by fund manufacturers; while recognising that better U.K. and global standards may add value to customers. This may include certification and/or defined professional standards for fund research.

are quite obviously wrong in the Asset Management sector and related industries, many of which are rooted in conflicts of interest, opacity and incentives regimes that encourage the wrong sorts of behaviour.

We believe the FCA’s approach has been inclusive, engaging and highly analytical; an impressively professional job has been done by the FCA and we know the overall quality of the Market Study has been noticed around the world.

This is all very encouraging.

However, the industry that the FCA is looking to change is notoriously well resourced and has extensive lobbying capabilities and it would be reasonable to expect that it wants to hold on to its 36% profit margins if it can. We hope, therefore, that the FCA will be able to withstand the inevitable pressure it will be under to dilute its proposals as a consequence of the professional lobbying it will be subjected to.

- You would be undermining confidence in the sector - You would be attacking a vital part of our economy” and so...

We believe that these kind of arguments have been used for decades to defend the profitability of the sector and they must not be allowed to prevent the progress that can now be made.

We implore you to see through them.

The Transparency Task Force is built on the idea that “Sunlight is the best disinfectant” and the FCA’s Market Study, Interim Report is a glorious ray of sunshine.

More of the same please!

Finally, we hope that our input through this submission and our previous involvement has been helpful. If required, we would be happy to discuss our thoughts further.

We imagine the case to maintain the status quo will include arguments along the lines of:

All enquiries please to: Andy Agathangelou, Founding Chair, the Transparency Task Force

“If you carry out your proposed remedies then:

andy.agathangelou@ transparencytaskforce.org

- More of the same please, FCA.

- Jobs will be lost

+44 (0) 7501 460308

9. Final thoughts

- There will be a brain drain of talent to other countries

The FCA is to be applauded for its whole-hearted attempt to fix many of the things that

- The Treasury will lose valuable tax revenues

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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 6th March, 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 in 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: 22:00 to 23:00; 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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The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10

GENERAL INFORMATION:

Is brought to you FREE by: Dan Agathangelou

Events, Marketing and Production Manager Transparency Task Force

Susan Agathangelou

Assistant to The Events, Marketing and Production Manager; Cheeef Prooof Reeeder!

Transparency Task Force

Sam Agathangelou Head of Design Transparency Task Force

To submit an article, request an advertising rate card, provide feedback or for any general enquiry please get in touch through: andy.agathangelou@transparencytaskforce.org

+44 (0) 7501 460308 Andy Agathangelou Founding Chair, Transparency Task Force

Transparency Task Force Ltd, Registered in England, Company No. 09698368

If you want to download a PDF of the Transparency Times here’s what to do: 1. Click on the link to it, which will take you to a view of the front page 2. See the icon close to the top left of the front page that looks like this: 3. Click on that icon, and then select the Download option.

If you have any difficulties Email me at andy.agathangelou@transparencytaskforce.org

If you would like to have a transparency-related article pulished in the next edition we’ll need your copy (500 to 5,000 words) by March 13th plus your bio, photo and logo. Thank you!

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| February 2017 | www.transparencytaskforce.org | The Transparency Times

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DON’T MISS YET ANOTHER VERY SPECIAL EVENT!

. ..on 17th May will be focused on a key question:

“What is the true purpose of the Pensions Industry?”

This event will be of enormous interest to those keen to ensure that pensions policy is optimised for the ‘greater good’.

Our keynote speaker is Richard Harrington MP, Pensions Minister.

Please get in touch if you woud like to: - Enquire about being a speaker or panelist - Enquire about reserving a place as an attendee

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Where & when?

- Enquire about sponsoring the event

Central London, precise venue to be advised.

- Enquire about providing a venue

Wednesday 17th May

andy.agathangelou@transparencytaskforce.org

9:30 to 17:00

This will be another not-to-be-missed event for which there is likely to be high demand.

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The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10

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ARTICLE: Steve Conley

THE LOST BILLIONS - SCAMS, FINES AND ILLICI

by Steve Conley | Managing Director | Workplace Pen

Market integrity is the fair and safe operation of global financial markets so that investors can have confidence and be sufficiently protected.

Preserving market integrity is one of the global financial industry’s top priorities, and one only has to look at the many high-profile scandals of the past few years to see what inadequate integrity management systems can do to a firm and the confidence of its investors. The massive fines and reputational damage associated with these incidents alone is potentially crippling for them, and therefore the industry has a personal stake in maintaining market integrity in an environment which is growing more complex by the day.

A Transnational Perspective Financial market integrity matters. Countries’ financial systems must be transparent, inclusive, and function with integrity to ensure economic development and promote good governance.

Transnational organized criminal activity, corruption, the illegal trade in natural resources and the laundering of the proceeds of crime generate illicit flows that undermine good governance, financial sector stability, and economic development.

The cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion are estimated at over £1 trillion per year, with roughly half of that sum

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coming from developing economies. Those assets – if recovered - would make a huge difference for developing countries.

The United Nations is calling on market participants to comply with regulations and assist with asset recovery; this requires market integrity.

Integrity management systems in place There are a broad range of protections already in place aimed at preserving market integrity.

For example, the FCA’s stated purpose is to protect and enhance market integrity. They do this by aiming to promote markets that are efficient and transparent, where firms can thrive and consumers can

place their trust in transparent and open markets. The rules they produce aim to restore market confidence and drive up standards.However,boundaries exist, beyond which activities become unauthorised and consumers remain unprotected.

Let us not forget the £1.2 billion lost to investment scams in the UK every year, largely through unregulated investments.

Legislation aims to strengthen the market, improve investor protection and bolster financial stability. It takes into account the lessons of the past, including advances in technology and gaps in transparency. However, it remains hard to look forward and legislate for tomorrow’s issues.

Industry led bodies aim

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IT FLOWS

nsions

Direct

to develop standards and guidelines, and promote best practice. However, how do they police it, when whistleblowers have little protection?

Individual firms have already carried out a significant amount of work.

However, there’s a long way to go before investors can feel that their advisers and managers truly have their best interests at heart.

Financial services still rank in the bottom tier of trust versus other industries.

The 2016 Edelman Trust Barometer — the 16th annual global survey of general population conducted 13 October–16 November 2015 — found that just 41% of the UK respondents believe the financial services industry can be trusted to do the right thing; For those on low income the UK figure is 33%; The UK response for trust in financial service CEO’s was just 31%.

market behaviour such as: manipulation, insider dealing, FX failings and benchmark (i.e. Libor) manipulation.

(Source: City law firm RPC analysis of FCA data)

In 2014, Market integrity was the second most cited offence among fines filed by the FCA against either firms or individuals, totaling 10 for the year, behind customer protection, which accounted for 16 fines. However, despite fewer actions being taken against market integrity breaches, this classification nevertheless accounted for 84% of the sum of fines for violation during that period. In total the FCA handed down fines of £91.6m for customer protection.

Fraud/deliberate misconduct

accounted for seven of the fines amounting to £1.59 million and compliance failure accounted for seven fines amounting to £149.1 million in penalties.

So what needs to happen?

Governments and regulators have quickly taken the view that “something had to be done”.

Since Libor, further scandals and further investigations have served only to enhance that perception. Everything has become subject to review, with new sectors coming under the spotlight all the time.

Governments across the world have become

When integrity management systems fail In 2014, the FCA fined firms and individuals a total of £1.23 billion for market integrity related breaches, which included abusive Edition #10

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empowered to push for financial reforms designed to provide greater transparency of transactions and reduce risk to make financial systems more stable and better regulated, and to make markets safer.

o Market conduct; and

We see this, for example, in the EU Market Abuse Regulation (MAR), which introduces a category of market manipulation comprising transmitting false or misleading information or inputs to a benchmark where a person knew or ought to have known that it was false or misleading, or engaging in any other behaviour which manipulates the calculation of a benchmark. We also see it in the creation of a specific new criminal offence of benchmark manipulation in the UK under the Financial Services Act 2012.

o Administration.

A State of Flux

On the market conduct side, the message is relatively clear. The question of whether or not market abuse legislation already covers issues is to be put beyond doubt by the inclusion of express prohibitions in new and proposed laws.

There is an unparalleled level of regulatory reform being drawn up and rolled out globally across financial services to strengthen market integrity.

For example in the UK we have:

The response from governments and regulators has manifested itself (broadly) in the following ways: • Increased use of existing investigatory and enforcement powers; and • By making new rules on:

European Markets and Infrastructure Regulation

(EMIR), Alternative Investment Fund Managers Directive (AIFMD),UCITSV,MarketAbuse Directive (MAD), Markets in Financial Instruments Directive (MiFID II), the Central Securities DepositariesRegulation(CSDR), OECD’s Common Reporting Standard for the Automatic Exchange of Financial Information (CRS), and the UK Crown Dependencies and Overseas Territories (UKCD and OT) Regulations, Capital Requirements Directive (CRD) IV implements Basel III requirements, Financial Action Task Force on Money Laundering (FATF) Recommendations, the United Nations Convention against Corruption (COSP-CAC), etc.

This is all happening, simultaneously, and without much in the way of coordination, at national, EU and global levels, giving rise to a series of potentially confused and overlapping regulatory proposals. Reforms are complex and in many cases, overlap products and regional jurisdictions.

Market Integrity and Transparency Policy makers treat “market integrity” and “transparency” as twin cornerstones of markets policy. Some measures which provide transparency in markets are now perceived to lack integrity; some may do, but all of them now are under review. The challenge for the various reviews is to provide adequate regulation to dispel that perception, without running the risk of regulating too many measures out of existence altogether. By striving

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too hard for integrity, regulators can threaten transparency.

FCA on Market Integrity In September 2016, the FCA published their aim to support and empower a healthy and successful financial system, where firms can thrive and consumers can place their trust in transparent and open markets.

The FCA seeks to ensure that: • Senior management are accountable for their capital markets activities, including principal and agency responsibilities • There is a positive culture of proactively identifying and managing conflicts of interest • There is orderly resolution and return of client assets • Firms’ business models, activities, controls and behaviour maintain trust in the integrity of markets and do not create or allow market abuse, systemic risk or financial crime

The FCA also has a duty to promote effective competition when addressing the market integrity objective.

Specifically, FSMA provides that the FCA must, so far as is compatible with acting in a way which advances the market integrity objective, discharge their general functions in a way which promotes effective competition in the interests of consumers. “…effective regulation is not a zero sum game: the equivalent of a cricket or tennis match, where for one side to win, the other has to lose. Improved conduct, stability, better consumer outcomes, trust, confidence: I’d argue these are strong indicators of a non-zero sum game, where all participants are victorious – like a good marriage or partnership.”

Martin Wheatley, CEO, the FCA June 2014

“Regulators are particularly focused on cases of market integrity and consumer protection, as they face continued pressure from politicians to demonstrate to the public that the industry is moving in the right direction. The large fines imposed in these areas of enforcement act as a valuable tool for deterrence. Firms’ investment in controls must increasingly reflect this and they should have a robust central monitoring function and compliance system in place to ensure that both the firm and its employees are operating with integrity.”

Monique Melis, Managing Director and Global Head of Regulatory Consulting at Kinetic Partners

“The best way firms can protect themselves

• Market efficiency, cleanliness and resilience is delivered through transparency, surveillance, and the supervision of infrastructures, as well as their principal users • Firms, acting as agents on behalf of their clients, put clients’ best interests at the heart of their businesses • The FCA intervenes early in wholesale markets to mitigate the risk of harm being transmitted to retail consumers Edition #10

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the debate to date has been politicised.

In addition, MIT are to flag market integrity issues that are currently outside of the regulatory spotlight and bring them to the attention of TTF.

against enforcement, other than through prevention techniques, is to identify abuse and report the suspicion before it comes to the regulator’s attention.

The public expects fair and orderly markets and level playing fields; they expect those operating in the markets and employed by regulated firms to act with integrity and in the consumers’ best interests.

This means, it is the obligation and burden of those firms and employees to maintain market confidence.”

Simon Appleton, Director of Regulatory Consulting at Kinetic Partners

The Market Integrity Team (MIT) - Our Key Responsibilities The Market Integrity Team (MIT) has been established as part of the Transparency Task Force (TTF) to capture the broad range of issues and engage with regulators and lawmakers to influence the debate. The key responsibilities of MIT are as follows:

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• Identify, monitor and provide views on key regulatory and best practice developments on market integrity • Investigate and assess developments related to market integrity and determine whether MIT should undertake any necessary action • Engage market participants on matters relating to market integrity to develop the TTF position • Draft responses, position papers and other materials covering market integrity • Provide input to other TTF teams.

To help take stock of this fluid and evolving landscape, MIT will take a snapshot of the various reviews, and set them out in summary. Much of this will relate to proposed laws still under consideration – particularly at an EU level - and participants will monitor developments on them carefully, as highly contentious issues are in play, and

Transparency is making the invisible, visible. In the invisible realm, we may witness perfidious behaviour in firms, with belief that ‘sailing close to the wind’ pays. As market prices are not informative, the layers of cost and non-value-adding activities in the invisible do not materialise in the sight of the investor, or shareholder.

Principle based regulation and coercion can only go so far, trust is also required.

Perfidious behavior may have paid the Execs, without reproach. It hasn’t paid customers. And it hasn’t paid institution shareholders - funding FCA fines, redress and rectification costs has largely proved a zero sum game in the wealth space for banks, for example.

It is the task of MIT to make the invisible, visible; not just for customers but also for shareholders.

There is also another dimension at play here: remoteness and apathy. Large institutions are often too far removed to spot the impropriety, it creates obfuscation especially if Minutes are not publicly shared. Execs and trustees are relying on MI (often performance data) that frankly has no chance of identifying issues, so aptly brought to

The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10

fore by Madoff and Arch Cru. In this sense, I suspect large pension schemes, banks and insurers are not so different.

These boards rarely get access to the subject matter experts dealing with issues on the frontline. Fund Mandate frameworks is a great example of a placebo that can allow all sorts of poor practice to exist so long as it doesn’t lead to a notifiable breach.

Potential areas identified for attention by MIT cover all market participants, and are as follows: Corporate Governance: • Senior management awareness and accountability under the statutory duty on all (including the supply chain of market participant) directors to act in the way he/she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (s172 Companies Act 2016) • Encouraging more whistleblowing • Ensuring adherence to professional body code of ethics and professional conduct • Maintaining independence, objectivity, and impartiality and avoiding conflicts of interest • Abiding by rules, laws, regulations, and the spirit behind them, e.g., dispel the “no flag, no foul” obsession, and “box ticking”, e.g., contingent adviser charges Edition #10

• Adherence to principles of responsible investment • Ethical stewardship and stakeholder engagement, dealing fairly, objectively, and impartially with all stakeholders • Financial reporting, transparency and disclosure • Voting responsibly • Executive remuneration and incentives distorting market behaviours Fiduciary Duties: • Acting in good faith and best interest of customer, e.g., putting clients first • Confusing fee structures, fair value, ongoing services delivery and fee decency • Loyalty, prudence, care • Identifying the root cause of miss-selling Financial reporting: • Misleading, dubious, opportunistic financial reporting • Lack of standardisation Market structure: • Deficiencies in investor protection • Classification of retail investors • Clarity of the aims of a product • Level playing fields to promote effective competition in markets e.g., vertically integrated firms or use of government loans

• Regulatory fault lines leaving investors unprotected or exposed e.g., scams •Regulator’s enforcement capabilities

• Maintaining confidentiality and data integrity Systemic risks: • Liquidity mismatch – investments vs. redemption terms • Leverage within funds • Operational risks in stressed conditions • Security lending Code of Conduct Audit The MIT will also connect with relevant trade bodies and professional associations.The type of organisations we will seek to liaise with include: ABI, IA, PMI, CFA, PLSA, CISI, PFAand so on.

We will establish what these organisations have in place covering market integrity/code of conduct/business ethics and so on. This work could lead to a code of conduct ‘audit’ of some kind, whereby we can consider questions such as: • What protocols and codes they have in place to encourage good market behavior?

• How do they police their code of conduct?

• What is not covered, and how can it be managed properly?

• How robustly do they deal with breaches?

| February 2017 | www.transparencytaskforce.org | The Transparency Times

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ARTICLE: CON KEATING

THE COMPARISON OF RETURNS SERIES

by Con Keating, Head of Research | Brighton Rock Gr

The comparison of returns series, or equivalently their representations as distributions, is a recurrent need in investment management. This article proposes and illustrates a new method, which, by construction, enables the separation of deterministic and probabilistic elements in these distributions. These elements may, in turn, be considered as skill and luck respectively.

We show first (Figure 1) the two distributions of returns we wish to compare; we label these as Portfolio and Benchmark. The analysis will proceed expressing the Portfolio in terms of the Benchmark.

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There are some profound differences between these two distributions. The correlation of these returns is 0.66. The Portfolio is significantly more volatile than the Benchmark, 1.63 times. It is also notable

that by the median return, the Benchmark is superior to the Portfolio (9.22% vs 8.97%), while by mean, the Portfolio is far superior to the Benchmark (9.81% vs 8.12%).

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roup

The comparison uses a two-step process; an affine transformation of Portfolio.

It involves the rescaling and translation of the Portfolio.

Translation meaning simply the movement of the Portfolio distribution as a rigid object on the returns axis, a change of the location of that distribution.

The first step is to rescale Portfolio so that it has the same range of support as Benchmark. The range (of support) of a distribution is simply the difference between the maximum and minimum values of that distribution.

The range of support of Portfolio is 70.24% (from -33.29% to +36.94%) while the range of support of Benchmark is 44.38% (from -18.65% to 26.73%). Accordingly, the rescaling factor, the ratio of these two ranges, is 1.583.

Portfolio is rescaled by this amount as is shown in figure

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2 below.

This rescaled Portfolio is next translated, or moved rigidly along the returns axis; this may be thought of as adding (or subtracting) the same amount to all Portfolio returns. Figure 3 shows the Rescaled Portfolio together with the rescaled and translated Portfolio. The lower and upper end points of the translated and rescaled Portfolio are now coincident with those of the Benchmark. The translation required was +2.39%.

The final step, when the translated and rescaled portfolio shares a common support with the Benchmark is to integrate (sum) the differences between them. The translated and rescaled Portfolio is shown together with the Benchmark in figure 4. Note that there is no visually clear overall range of probability where Benchmark or Portfolio dominate. In technical terms,

no clear stochastic dominance.

The average difference between these is 0.46%.

We may now describe the Portfolio value added relative to the Benchmark. It is: Portfolio = -2.39% + 1.583 *(0.46%) = -1.66% The first term, the translation, is the amount by which it was necessary to move the Portfolio in order that it should coincide, or be co-located with the Benchmark. This first term, the translation amount necessary, is deterministic; there is no uncertainty associated with, meaning that it may be interpreted as

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Examination of the difference dataset, shows that the 0.46% outperformance is entirely accounted for by one return, the highest. This is just 2% of the data. In fact, if the two highest returns are removed, the positive value added turns negative, to -51 basis points. This reinforces the conclusion that this average outperformance is due to luck rather than skill.

This analysis contrasts sharply with the traditional CAPM practice of regressing the Portfolio on the Benchmark, is illustrated below.

being due to the skill of the manager. In this regard, it is directly comparable with Alpha in the capital asset pricing model.

In this case as it is negative, the manager lacks skill.

The rescaling factor (1.583) is directly interpretable as a leverage factor. It may be considered as the manager’s chosen risk-preference. It is analogous to Beta in the capital asset pricing model.

Benchmark dataset, it might be possible to extract additional value by skill.

The interpretation of this decomposition is that the Portfolio does not add overall value relative to the Benchmark.

Indeed the leverage evident

This traditional analysis suggests that the Portfolio adds value, alpha, of 1.056% and that the Portfolio is of similar riskiness as the Benchmark, Beta, 1.076. Given the stark contrast in volatility between the two series, higher than the 95% upper bound of the Beta, this is surprising and deeply suspect. The ratio of the two standard deviations is 1.63.

The affine comparison that is advocated separates the deterministic and the proba-

The final term, the average difference between the returns of the Portfolio and the Benchmark, is the return associated with the risk or uncertainty of the Portfolio relative to the Benchmark. This is the return associated with risk; it may have been achieved by chance or by skill. However, if the Benchmark returns are randomly distributed, and these appear to be so, then outperformance or underperformance is due to chance or luck. If on the other hand, there is structure in the

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bilistic elements of the series, by construction. This is not possible with traditional methods, since the mean and standard deviation overlap, since standard deviation is measured around the mean.

The analysis shows that the Portfolio has not delivered value for the risk it has assumed. If we were to leverage the Benchmark to a similar extent, we would obtain superior returns. A further attraction of the proposed method is that it is simply a mathematical operation; there are no economic or other assumptions It is as well to remember that the opportunity set offered by the Benchmark is not time invariant and indeed that skill also need not be; even the most skilful may suffer from lapses of concentration, or accidents.

In a career spanning more than forty years, Con has worked as an infrastructure project financier, corporate advisor, investment manager and research analyst in Europe, Asia and the United States. Con’s career commenced as a graduate trainee with Hambros Bank in 1969 and included periods with Kleinwort Benson, First Boston, Banque Paribas and CIGNA, and was characterised by specialisation in quantitative modelling and analysis. This has varied from the financial modelling of infrastructure projects, to credit, insurance and securities pricing and encompassed pension projection and valuation.

He has served on the boards of a number of educational and charitable foundations and as a trustee of several pension schemes. He is currently Head of Research for the nascent BrightonRock Group. Con has been a a member of the steering committee of the financial econometrics research centre at the University of Warwick and of the Societe Universitaire Europeene de Recherche en Finance. As a research fellow of the Finance Development Centre he published widely on the regulation of financial institutions and pension systems, and also developed new statistical tools for the analysis of financial data, such as Omega functions and metrics. From 1994 to 2001, Con was chairman of the committee on methods and measures of the European Federation of Financial Analysts Societies and currently is a member of their Market Structure Commission. Con has also served as an advisor and consultant to the OECDs private pensions committee and a number of other international institutions.

Much further analysis may be undertaken, including the production of diagnostic / confidence statistics, but they must wait for another article.

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ARTICLE: PATRICK CONNOLLY

RESEARCH SHOWS THAT TRACKER FUNDS GIV THIRD QUARTILE PERFORMANCE

by Patrick Connolly CFP, Head of Communications | Ch

We are witnessing an ongoing industry debate about the merits of active versus passive investments, one in which passive funds, with their lower and more transparent charges, appear to hold the moral high ground. There is little doubt that passive funds are becoming ever more popular as more investors begrudge paying higher active management charges and not being rewarded with better performance.

According to figures produced regularly by The Investment Association, we are seeing continual inflows into passive funds and their overall share of industry funds under management, which is currently over 13%, rises every month.

The difference in charges is evident. Investors may typically expect to pay around 0.2% per annum or less to invest in a tracker fund, not including platform or advice charges, where as actively managed funds are likely to charge 0.75% or more. Active funds have also faced criticism, with some justification, over the disclosure and transparency of their charges meaning that investors probably struggle to understand the total extent of the charges they are paying. While some steps have been taken to improve this, there is clearly more that active managers need to do.

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Against this backdrop there is a view that, with the perception that most active fund managers struggle to out-perform and because they impose higher charges, the comparative performance of passive funds should be very strong over the longer term.

Our research We analysed the performance of equity tracker funds, from recognised mainstream providers, over the past decade and compared this with the performance of their relevant investment sectors as a whole.

We looked specifically at tracker funds from BlackRock, Fidelity, HSBC and Legal & General, all of whom are experienced passive managers with competitive charges. We didn’t include funds from Vanguard as they haven’t yet been running in the UK for 10 years.

In terms of investment sectors, based on The Investment Association criteria, we consid-

ered UK All Companies, Europe ex UK, North America, Asia ex Japan and Japan. There are not yet any mainstream tracker funds which have been running in the Emerging Markets for 10 years.

While most of the sectors only have two or three mainstream tracker funds, which have been running for 10 years or more, such is the similarity in their performance that these figures should provide a reliable indicator for tracker funds in general.

What we found was that, over the past decade, tracker funds have consistently produced third quartile performance. This research is supportive of active management proponents who argue that despite significantly higher charges, an active management approach is still able to out-perform.

The only region where a passive approach clearly produced above average performance over 10 years was in North America. This is perhaps the most efficient market in the

The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10

VE CONSISTENT

hase

De Vere world and a region where active managers have notoriously found it difficult to out-perform.

The reason why active funds in general have out-performed passive funds over the longer-term is probably because they are likely to have a higher weighting in mid and small cap stocks. These should out-perform larger companies, which will be more heavily represented in trackers, over the longer-term.

However, it isn’t as simple as

then saying that investors should select active rather than passive funds. It is all well and good understanding that active funds may have a good opportunity to out-perform, but the challenge is in finding the ones that will. There is no secret recipe for doing this and so there remains a strong case for including low cost passive funds, particularly those investing in the US, within an investment portfolio.

Patrick Connolly is Head of Communications at Chase de Vere, the Independent Financial Advisers.

He is qualified as a Certified Financial Planner and Chartered MSCI through the Chartered Institute for Securities & Investment.

He was named as the Financial Adviser of the Year, Investment Adviser of the Year, At Retirement Adviser of the Year and Value of Advice Ambassador at the Unbiased Media Awards 2017.

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SOME PICS FROM OUR 8th FEBRUARY TRANSPARENCY SYM

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MPOSIUM:

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| February 2017 | www.transparencytaskforce.org | The Transparency Times

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AND SOME MORE PICS FROM OUR 8th FEBRUARY TRANSPARE

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ENCY SYMPOSIUM:

Edition #10

| February 2017 | www.transparencytaskforce.org | The Transparency Times

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AND EVEN MORE PICS FROM OUR 8th FEBRUARY TRANSPAREN

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NCY SYMPOSIUM:

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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

JB

Beckett

UK Lead

Association of Professsional Fund Investors

UK

Lesley

James

Director & Lead Financial Adviser

Simplified Money Ltd

UK

Stephen

Conley

Managing Director

Workplace Pensions Direct

UK

First Name Peter Xavier Andrew

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FOREIGN EXCHANGE TEAM Last Name Egglestone Porterfield Woolmer

Job Title Director Head of Research CEO

Organisation BestX New Change FX New Change FX

Country UK France UK

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First Name Steve

Last Name Conley

Markus

BANKING TEAM Job Title Managing Director

Organisation Workplace Pensions Direct

Country UK

Krebsz

Interim Chief Risk Officer

UNECE GRM

UK

Alex

Letts

Founder

U

UK

Samuel

Ghann

CEO

Greater London Mutual

UK

Heather

Buchanan

Director of Policy & Strategy

APPG on Fair Business Banking

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

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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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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

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

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

Country UK

UK UK

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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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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

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Redbrucke Novarca Group ZenInvestor London Business School PGGM Investments

UK USA Australia

UK UK Holland USA UK Holland

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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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Ian Paul

Fryer Secunda

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

Chant West Marquette University Law School

Australia USA

CALL TO ACTION PLEASE! We are seeking new members in all of our teams.

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

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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

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London Business School Morningstar Europe Ltd

New Fund Order Consulting

The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10

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

Here Is a great example...

Tom Tugendhat | “I believe there ought to be higher levels of transparency in finanMember of Parliament for cial services because it is the only way that markets can function Tonbridge and Malling without distortion to the benefit of the true customer, the individual.”

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

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Helena Morrissey Chair | The Investment Association

“I believe there ought to be higher levels of transparency in financial services because it’s the very starting point for establishing trust.’

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 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.”

Arno Kitts Founder & Chief Investment Officer | Perspective Investments

“I believe there ought to be higher levels of transparency in financial services because transparency supports trust, and trust is essential”.

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

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“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”.

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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 John Greenwood Editor | Corporate Adviser

“I believe there ought to be higher levels of transparency in financial services because transparency is a prerequisite to building trust and trust is essential to the development of a healthy, sustainable financial services industry and the consumers it serves” “I believe there ought to be higher levels of transparency in financial services because opacity is to journalists what a red rag is to a bull. As long as things are hidden, trust in the industry will remain low.”

Martin Palmer Head of Corporate Funds Proposition | Zurich

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

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

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

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

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

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

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.”

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

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

Ralph Frank CEO - DC (UK) | Cardano

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

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

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

“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”.

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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”.

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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

“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” Margaret Snowdon OBE “I believe there ought to be higher levels of transparency in Chairman, Pensions financial services because it is the best way we can restore public Administration Standards trust in pensions” Association Lesley James Director | Simplified Money

"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?”

Robin O’Grady Head of Business Development | Hawksmoor Investment Management Mike Stafford CFP Director | Stafford Wealth Management

“I believe there ought to be higher levels of transparency in financial services because consumers & their advisers need to regain trust in a hugely competitive market and be certain of all the facts before being able to make informed choices.”

Edition #10

“I believe there ought to be higher levels of transparency in financial services because the more informed the client is the better decisions he/she can make. So for our part we are happy to display our charges on our website for both lifestyle financial planning and for regulated investment services.”

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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

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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 Edition #10

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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

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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

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

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

Is this also the right classification for you?

Is this also the right classification for you?

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

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

Is this also the right classification for you?

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

INVESTMENT GOVERNANCE CONSULTANTS:

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.

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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 MANAGEMENT:

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Robin O’Grady | Head of Business Development | Hawksmoor Investment Management E-mail: robin.ogrady@hawksmoorim.co.uk Website: www.hawksmoorim.co.uk Telephone: 01392 410180 Mobile: 07468 697900

Hawksmoor specialises in providing high quality discretionary investment management services for private clients including trusts, pension schemes and charities. We are a privately owned business with no ties to a bank or any other financial institution. Our experienced and well qualified team of investment professionals is focused solely on providing clients with the best service and consistently good performance.

NOT FOR PROFIT: Dr. Kara Tan Bhala | President & founder | Seven Pillars Institute for Global Finance and Ethics E-mail: kara@sevenpillarsinstitute.org Website: sevenpillarsinstitute.org Telephone: +1(785)865-8824 (mobile)

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Seven Pillars Institute (SPI) for Global Finance and Ethics is an independent, nonprofit 501(c)(3), nonpartisan, organization whose mission is to highlight and analyze issues of moral philosophy in global financial markets with a view to enhancing ethical practice and policy.

WEALTH MANAGEMENT:

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Arno Kitts | Founder & Chief Investment Officer | Perspective Investments E-mail: Arno.Kitts@PerspectiveInvestments.com Website: www.PerspectiveInvestments.com Telephone: +44 20 3290 6486

Perspective Investments is a multi-asset multi-strategy investment manager. We invest on behalf of our clients, including our founder family. Our commitment to our clients is to help them achieve their financial objectives. We do this by aiming to deliver higher returns with lower volatility and better capital preservation than conventional equity portfolios. Of course, while our investment performance track record is consistent with this aim, past investment performance is not necessarily predictive of future results.

Mike Stafford CFP | Director | Stafford Wealth Management E-mail: mas@staffordwealth.co.uk Website: www.staffordwealth.co.uk Telephone: 01992 501601

Stafford Wealth Management was formed in 1986 to provide bespoke lifestyle financial planning and investment services to private clients.

It is one of a small number of elite firms in the UK that is accredited by the Chartered Institute for Securities and Investment..

Stafford Wealth Management is authorised and regulated by the Financial Conduct Authority for investment business.

The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10

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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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: Edition #10

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Right for you?

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| February 2017 | 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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The Transparency Times | www.transparencytaskforce.org | February 2017 | Edition #10