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January 2017

This month’s contributors include: Julius Pursaill

Philip Miller

Abraham Okusanya

JB Beckett

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Page 20

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Pension & Investment Governance Page 34

Derek Scott

James Redgrave

Alan Salamon

Andy Agathangelou

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Founder, Pensions Focus

Professional Trustee

Director, FinalytiQ Ltd

Financial Journalist

UK Lead, APFI

Principal, Corpias

Founding Chair, Transparency Task Force Page 4

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 | January 2017 | Edition #9


DON’T MISS ANOTHER VERY SPECIAL EVENT!

...on 8th February features: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money. We saw at our last Transparency Symposium just how strong the views are on this issue so I’m as sure as I can be that this will be another event to remember. We have a superb line-up of speakers and debaters: Jeremy Fawcett, Head of Direct, Platforum

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Con Keating, Head of Research, Brighton Rock Group Wolfram Klingler, Co-Founder & Managing Partner, XTP AG Implementation Solutions Alexander Adamou, Fellow, London Mathematical Laboratory William L. Lipsey, President, PZena Investment Management

Where & when?

Richard Harrington MP, Pensions Minister Tim Brown, VP, Head of UK Inst. and EMEA Consultant Relations, Dimensional “The Massive Active/Passive Debate” featuring: - Daniel Godfrey, Co-Founder, The People’s Trust  - David Pitt-Watson, Executive Fellow, London Business School

Dimensional, 20 Triton Street, Regent’s Place, London. Wednesday 8th February 9:30 to 17:00

- Campbell Edgar, Head of Financial Planning at the CISI  - JB Beckett, UK Lead, Association of Professional Fund Investors - Kay Ingram, Director of Financial Planning, LEBC  - Rick Eling, Head of Investment, Old Mutual Wealth Private Client Advisers  - Mike Barrett, Consulting Director, The Lang Cat  - Dan Brocklebank, Head of UK, ORBIS Investments

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

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE

Edition #9

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

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RESPONSE TO CONSULTATION PAPER

TRANSPARENCY TASK FORCE RESPONSE TO TH DISCLOSURE IN WORKPLACE PENSIONS, CONS

by Andy Agathangelou| Founding Chair, Transparency Tas This artice reproduces for you the Transparency Task Forces’ response to the Financial Conduct Authority’s Transaction Costs Disclosure in Workplace Pensions, Consultation Paper 16/30 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 Transaction Cost Disclosure in Workplace Pensions Consultation Paper 16/30.

Whilst several members of our Costs & Charges Team have been involved in producing this document 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 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 that is dedicated to

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The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


HE FCA’S TRANSACTION COSTS SULTATION PAPER 16/30

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Force 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. 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. 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 members, trade bodies and professional associations. As such we are well-placed to establish consensus that does not merely reflect the wishes of one particular “tribe” or another. Our approach is collaborative Edition #9

- 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 positive and supportive; so much so that in just 20 months we have developed six teams of volunteers, each team focused on a set of transparency-related issues and desired outcomes: · The Market Integrity Team · The Foreign Exchange Team · The Banking Team · The Costs & Charges Team · The Stewardship & Decision-Making Team · The International Best Practice Team The topic of ‘Transaction Costs in Workplace Pensions’ is of great interest and relevance to our Costs & Charges Team. 3. About the focus of our response As the Transparency Task Force is the collaborative, campaigning community dedicated to driving up the levels of transparency in financial services, right

around the world, we are in general terms extremely pleased with the thrust of CP 16/30 and believe that it represents a tremendous opportunity for the market to embrace much-needed enhanced costs disclosure. “Our over-riding view is that we wish to encourage the FCA to utilise CP 16/30 to be a catalyst for consistent reporting and disclosure to areas beyond workplace pensions and beyond just asset management transaction costs; costs occur throughout the value chain.” The ultimate objective must surely be to provide fully comprehensive cost disclosure with consistent and ‘un-gameable’ reporting, throughout the ‘value chain’; with information being provided in a clear and intelligible manner. Only once this has been achieved will the market operate efficiently and the consumer be able to maximise value-for-money. As discussed at our meeting with the FCA on

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8th December, there is much that we like in CP 16/30. However, the focus of our response is on what improvements we think can be made and as such we list many areas where further consideration ought to be given. As requested we set these out in response to the specific questions that have been asked:

the approach set out for calculating transaction costs? If not, what alternative(s) would you propose?

4. Response to Questions 1 to 7

· We consider that further consumer detriment and loss of trust in the system will be the end-result of the slippage cost proposal.

Q1: Do you agree that our proposed rules will enable information on transaction costs to reach governance bodies? If not, what alternative(s) would you propose? · The lack of consistency and detail in the proposed rules will likely not result in governance bodies getting relevant information and comparable data on which they can take relevant actions. · We propose that a standardised approach would include: o Standardised reporting periods, say calendar months; and o Standardised reporting templates, as called for in MS15/2.2, based on standardised definitions. · The approach proposed in CP16/30 risks some service providers ‘gaming the system’, given the lack of consistency/standardisation, ultimately eroding trust in the financial sector. Q2: Do you agree with

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· The approach is inconsistent across asset classes, as discussed in greater detail in our response to Q3 below. It is also open to manipulation by those providing the data.

· The slippage cost proposal is open to being gamed, more specifically: 1. The mid-market price is not necessarily the price at which an asset is valued immediately before an order is placed into the market. a. The bid and offer prices quoted in a market are often not true indications of where the parties are willing to trade but merely a means of discovering where others hitting the bid/offer are willing to trade; b. Paragraph 3.23 notes that “if we cannot define in a clear and robust way what constitutes spread, there is likely to be a high degree of inconsistency in the market about how spread is calculated”. If the spread cannot be calculated in an indisputable way, how can the mid-market/arrival price be calculated? 2. Another form of inconsistent treatment arises

where previous closing prices are used to determine the arrival price. If, for example, a market gaps down between the previous close and the point of trade, a negative slippage cost would be returned as the execution cost would be below the arrival price. This loophole might encourage managers to trade in order to reduce a fund’s reported slippage cost over the period even if there is no fundamental benefit to the client. 3. Paragraph 3.19 states “the market has developed in a heterogeneous manner and there is no single standardised way in which transaction costs are analysed”. We suggest that this lack of standardisation is a reflection of the impossibility of trying to calculate implicit costs. · We propose an approach based on the following guiding principles: o Consistency across all assets; o Simplicity of implementation; and o Ease of communication. We suggest excluding implicit transaction costs entirely while creating a distinct boundary between the principals (i.e. buyer and seller) and agents (who levy transaction costs) to eliminate conflict of interests. The resulting proposal is as follows:

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


1. The transaction price represents the payment by the buyer to the seller for the ownership of the asset exclusively. No other payments would be permitted to be bundled into the transaction price. The seller would have to be unrelated to any agent involved in the transaction in order to avoid the potential for embedding cross-subsidies in the transaction price; and 2. All other costs, charges and taxes would need to be explicitly levied. Ideally, the FCA would specify the types of costs and charges permitted (and required at a minimum) to be levied. Such specification would create the basis for consistent reporting of costs and charges. The minimum requirement would cover those services, and related costs, common to all transaction types (e.g. brokerage, transfer agency and custody etc.) in order to avoid these costs being hidden in the price. We are aware that some markets do not currently disclose transaction prices that exclusively represent payment for the ownership of the asset. In many cases, transaction costs are bundled into the disclosed transaction price. Changes are required to conduct in these markets to deliver the proposed boundary. Other points: · Use the most accurate approach per asset class/ instrument and not just Slippage Cost as the core Edition #9

methodology. · The likes of illiquid asset classes (such as private market assets – which range from real estate, infrastructure to private equity investments in companies) need to be addressed within the framework. These are increasingly be utilized by long-term investors. In particular, structures such as Private Equity (PE) cannot be out of scope for transaction costs reporting. PE funds are now actively part of asset management solutions in the DC pensions’ space with PE pooled funds being used by Diversified Growth Funds. · Specific areas not consistently captured for PE in terms of transaction costs covers those transaction costs for completed deals and broken deals (where the deal does not complete but transaction costs are incurred. Broken deal transaction costs may include the costs of the deal (i.e. professional fees, travel, out of pocket and other expenses). Q3: Do you agree with the proposals in this chapter? If not, what alternative(s) would you propose? · The proposals in this chapter illustrate the inherent flaws of the slippage cost approach, as set out in our response to Q2. The raft of asset class-specific proposals highlights the issue that consistent implementation is not possible. This inconsistency will result in distorted reporting and manipulation, undermining

the proposed rules and likely resulting in consumer detriment. Other points: · Some transaction types may have been missed in the report. For example, trade-based rebates are common in the US currently as fierce competition between exchanges has led to rebates being increased. Rebates are payable from the exchange to the originating broker. Asset managers are trying to claim these rebates from the brokers but are all rebates finding their way back from the asset manager to the investor who originated the transaction? Q4: Do you agree that our proposed rules will enable pension arrangements and funds that invest in other funds to amalgamate the total transaction costs from underlying funds? · The proposed rules, requiring look-through to the underlying vehicles, are likely to be supportive of amalgamation of total transaction costs. · Consistency of what is disclosed and timing of disclosure are two other necessary conditions to enable amalgamation. Other points: · As mentioned earlier, the FCA is proposing that asset management firms can use an “open format” to report transaction costs. The use of

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open formats will mean that transaction cost information may be reported differently across asset management groups. Should this happen, how will investors be able to compare similar investment products? · In addition, many DC investment solutions offered by asset managers may use a multi-level fund structure with a multi-manager component underneath. Should each asset manager in such a structure be allowed to use a different reporting format, then when transaction costs are further consolidated into one number or one set of numbers (by the asset manager of the overall fund), how will the investor know what they have received and will it make sense if decomposed? Q5: Do you agree that transaction costs should be amalgamated on the assumption that underlying funds incur them evenly over a reporting period? If not, what alternative solution(s) would you propose? · Transaction costs will likely not be evenly incurred over a reporting period. · A balance needs to be found between frequency of reporting and the value of such additional reporting. · We propose monthly reporting periods but with a measurement frequency that is, ideally, aligned with the frequency at which the underlying funds are traded.

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Q6: Do you agree that the approach set out in this chapter is adequate to provide governance bodies with sufficient information to assess transaction costs? If not, what alternative(s) would you propose? · We do not consider that the proposed approach is adequate to provide governance bodies with sufficient information to assess transaction costs because of the absence of a standardised approach. · There seems to be an inconsistency in the approach proposed in CP16/30 with the thinking set out in in MS15/2.2 that called for standardised reporting templates. · We propose that standard reporting templates, based on uniform definitions, prescribed presentation of data (showing costs in absolute and percentage terms) and specified reporting periods (say monthly) be introduced. · Standardisation will ensure that governance bodies are able to easily and efficiently aggregate information from across all their service providers. Standardisation will also drive economies of scale and efficiencies for the providers of such information. · Please find attached the latest iteration of the TTF’s ‘6 x 6 Costs Matrix) and see rows 304 to 358 which relate to transaction costs, with rows 311 to 313 relating to implicit costs that cannot be

calculated. We are part way through an exercise to define the terms used. Definitions are extremely important; a point we shall return to later in this response. Other points: · Some transaction types may be missing from the FCA’s analysis. Certain transaction types may take place at the feeder fund level in a pooled fund. These transaction types need to be considered as they may interact with revenues taken from bid/offer or swing pricing on the pooled fund units or they may lead to portfolio turnover in the master fund. · When investors subscribe for pooled fund units, there can be a delay of a day or many days between the investor making payment and the fund administrator then paying those funds away to purchase the units. Any delays represent a transaction cost as interest is lost on the amount being paid. The same delays and transaction costs may apply when redeeming units too. Q7: Do you have any comments on our analysis of the costs and benefits of introducing rules on transaction cost disclosure? · We consider the estimate that the costs of calculating transaction costs using the ‘slippage cost’ method (a oneoff amount of £125,000 and an annual cost of £775,000) is a significant under-estimate. Other points:

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


· Most medium and large asset management groups use a data hub/ data repository to feed trading, accounting and other investment systems. Use of the data hub to drive transaction costs reporting will likely reduce transaction cost reporting development costs as reports may not have to be written in OMS/trading or accounting systems via dedicated reports developed by software vendors. It is likely that asset managers with data hubs may find it less expensive to develop these reports than the FCA believes. 5. Other matters We would like to offer input beyond the scope of the specific questions asked: 1. Definitions It is absolutely vital that all terms used are clearly defined. There is a myriad of other over-lapping regulatory and industry body initiatives that are underway. These initiatives include the new IA Disclosure Code, PRIIPS, FCA Asset Management Review, 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. CP16/30 should have a Glossary of terms used with each term being clearly defined. Clear definition of each term will ensure consistency across regulatory and industry body initiatives Edition #9

which will, in turn, lead to a strong set of regulations that reduces the risk of ambiguity and, therefore, the risk of the transaction cost regulations being gamed/undermined and consumer confidence being lost. The list of terms that require clear definition in the CP16/30 document are outlined below and are not in any particular order. Where a definition is applied differently, for example, by asset class then this should be clearly and completely stated. All terms should appear in a central Glossary so that they can be referenced with ease. ·Order ·Transaction ·Transaction Costs ·Implicit Transaction Costs ·Explicit Transaction Costs ·Enters the Market ·Arrival Price ·PRIIPS ·MiFID II ·Multi-asset Funds ·Default Arrangement ·Slippage Cost ·Delay Cost ·Opportunity Cost ·Negative Transaction Costs ·VWAP ·Market Impact ·Auction ·Price Transparency ·Linear Derivatives ·Non-linear Derivatives 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. 2. Swing Pricing In relation to the points made in 2.8 and 5.4 within CP 16/30, it is important to note that MIFID does not seem to consider swing pricing a transaction cost, so this could introduce difference in MIFID disclosure and disclosure under CP 16/30, and we would rather have consistency. In addition, as 5.4. of the CP states, this could result in a negative fee. However, we would have no objection to funds disclosing the maximum amount of any swing the fund price could incur. 3. Foreign Exchange We are pleased that the FCA highlighted the importance of execution method in determining costs. The execution method includes choice of broker, whether to use a fixing, which platform to select and so on. The FCA now requires that the whole of this method is measured, and we fully support this approach. We also broadly support the stipulation that costs be measured against consolidated prices. In our view, however, this does not go far enough as it would allow the user of a multicontributor platform to use the consolidated rate received through that platform as the reference rate to measure the quality of their transactions. This presents two issues.

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Firstly, the referencing is circular, and fails to measure the inherent cost of choosing that platform. Secondly, it is quite clear that underlying price providers are able to skew prices towards clients through aggregated platforms. The information asymmetry inherent in these platforms can only be measured by using a consolidated rate that includes prices from other platforms. We believe that investor protection would be enhanced if the FCA made this requirement explicit. Annex IV, article 17 of the PRIIPS regulations offers a good template to follow: “In calculating the costs associated with foreign exchange, the arrival price must reflect a reasonable estimate of the consolidated price, and must not simply be the price available from a single counterparty or foreign exchange platform, even if an agreement exists to undertake all foreign exchange transactions with a single counterparty”. 4. The Importance of Cohesion CP 16/30 has limited scope. There are many areas of the pensions and investment industry that give rise to costs to the investor that are not covered by CP16/30 or the Market Study. As such, the TTF consider that the drive towards transparency should be broader, with CP16/30 and the Market Study acting as a catalyst. The ultimate objective as

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we see it is to achieve what is really needed for the market to work efficiently and for the consumer’s interests to be best served i.e. fully comprehensive cost disclosure that takes into account all parts of supply chain. We see there is a risk of a fragmented approach being taken (for example there is inconsistency between CP 16/30 and the Market Study) and would welcome all relevant parts of the FCA, DWP and The Pensions Regulator working as cohesively as possible. 6. Final thoughts The Transparency Task Force is highly appreciative of the excellent work that the FCA has undertaken, as set out in CP16/30 and also in its Asset Management Market Study (Interim Report). We can see that there is an opportunity for significant progress being made on how costs are disclosed, and in particular we feel that the FCA’s intention to set standards to provide clarity around transaction costs is very important. Also, we wholeheartedly agree with the FCA’s objectives of creating a regime that achieves a high degree of consistency in how transaction costs are reported, and gives governance bodies confidence that the information presented to them contains a comprehensive assessment of the costs that are

incurred on their behalf by asset managers. We hope that our response to CP16/30 has provided worthwhile input that may assist the FCA in achieving those objectives. We are happy to have on-going dialogue on the matters raised, and if there are areas where the FCA is particularly keen to have examples we will seek to assist where we can. As mentioned earlier, our over-riding view is that we wish to encourage the FCA to utilise CP 16/30 to be a catalyst for consistent reporting and disclosure to areas beyond workplace pensions and beyond just asset management transaction costs; costs occur throughout the value chain. The ultimate objective must surely be to provide fully comprehensive cost disclosure with consistent and ‘un-gameable’ reporting, throughout the ‘value chain’; with information being provided in a clear and intelligible manner. Only once this has been achieved will the market operate efficiently and the consumer be able to maximise value-formoney. This is certainly the vision of the Transparency Task Force on this matter.

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


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 7th February, 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: 19:00 to 20:00; wherever you are in the world (we have members from every continent), if you want to help the nations around the world to learn more efficiently from each other, get involved - we’re working on a Global Transparency Index and it’s at a very exciting stage! If you care about the financial services sector and want it to do a better job of looking after the needs of its customers and clients please join the 150+ people that are operating as volunteers within the Transparency Task Force Teams. It doesn’t matter how experienced or how senior you are. It doesn’t matter if you’re an expert or not. All that matters is that you understand the potential power of transparency in helping to drive the changes that are needed, and that you’re comfortable working collaboratively with others - the Transparency Task Force is very much a ‘team sport.’ If you or anybody you know want to become ‘part of the solution’ by being involved with one or more of these TTF teams please make contact without delay through andy.agathangelou@transparencytaskforce.org THANK YOU VERY MUCH - YOU MIGHT MAKE THE DIFFERENCE THAT MAKE’S ALL THE DIFFERENCE! Edition #9

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

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

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ARTICLE: PHILIP MILLER

THE FINANCIAL CONDUCT AUTHORITY’S ASSET STUDY – IMPLICATIONS FOR UK INVESTMENT A

by Philip Miller | Founder | Pension Focus

The Financial Conduct Authority’s game-changing Asset Management Market Study, published in November, has provoked much discussion. Most of it has been about the serious implications for the UK investment management industry. The effects will be felt sooner by investment advisers, or at least those advisers who recommend high-cost active funds. To make one thing clear from the outset – I believe there is nothing inherently wrong with setting up an active fund that costs the investor 2.5% per year, or even more.

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There is nothing wrong with the fund manager saying he believes he can beat the market by more than 2.5% per year on a regular basis (although he is probably deluded). There is nothing

wrong with spending a fortune marketing that fund (although perhaps it should be marketed only to those who can afford to take a lot of risk and get lousy returns).

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T MANAGEMENT MARKET ADVISERS

There’s nothing wrong with an investor seeing an advert for the fund in a newspaper and deciding to put some money in it (that’s the principle of “caveat emptor” or “let the buyer beware”, a vital element of capitalism and the free market.) What there is something very wrong with, however, is when a professional investment adviser recommends that same fund to his client, despite the mountain of evidence which shows that to do so is negligent. This is a very important distinction. People with health concerns may be tempted to purchase homeopathic “remedies”. That’s a very different proposition to a medical professional prescribing them. Of the 3 major costs of investing – advice, administration and fund management – it is in funds where costs do (and have done) the most damage to the incomes of millions of past, present and future retirees in the UK.

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It’s worth remembering why funds exist in the first place. Everybody involved in investments should know the importance of diversifying sufficiently to reduce the risk of loss of capital. Funds allow ordinary savers to achieve that diversification, when investing in asset classes such as equities and bonds, without excessive costs. They do this by pooling lots of savers’ money together to take advantages of economies of scale. Both index funds and active funds achieve the diversification objective. Index funds do it with less risk, and far lower costs. The following fact is often overlooked, so it’s important to emphasise it - when all visible and hidden costs are counted (as, of course, they should be), the high-cost active funds favoured by most investment advisers typically cost around ten times (and often more) what a simple all-market index fund costs. It’s not as though one costs slightly more than the other. It’s not like paying an extra ten pence per litre for “super unleaded” petrol – which will cost you a lot of extra money over decades but

may (or may not!) have benefits for your engine’s longevity or performance. There is a huge cost difference between active funds and index funds. Over decades, the financial detriment caused by those extra costs can be staggering, and can ruin retirements. It’s also worth highlighting that the total visible and hidden costs of an activelymanaged fund, about 2.5% per year, typically represent 50% or more of the real annual returns of the asset class invested in, be it equities or bonds. The saver, who puts up all the money and takes all the risk, is left with 50% or less of the return. With a simple index fund, the total costs represent about 5% of the annual return and the investor is left with 95%. Finally, it’s worth highlighting that due to the way compounding works, over a multi-decade investment horizon (as is typical with a pension), the

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investor in high-cost funds can end up with much less than 50% of the real return of an index fund. In other industries (the motor industry, for example), when there is a product that costs ten times as much as an alternative, we expect the high-cost product to be clearly and obviously superior to the low-cost product. The performance and driving experience of a £100,000 Mercedes are expected to be better than those of a £10,000 Ford. Those who can afford the Mercedes would tell you that the extra cost, for them, is justified. With investment funds, the rational expectation with higher-cost funds is for lower returns. Much lower, in fact. The longer the investment period, the greater the gap becomes between the expectations for low-and highcost funds. The hurdles that active funds face in generating “alpha”, or returns in excess of their benchmark, are extremely high and very difficult to overcome. And of course, in

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aggregate, it is impossible for high-cost management to deliver higher returns than low-cost index funds. This is the inescapable, mathematical inevitability of the zero-sum game that is investing. 2 plus 2 equals 4. No matter how much some investment advisers may wish it were true, 2 plus 2 can never equal any more than 4. And if there was an extra “cost of addition” factored into that equation, we would have to subtract that cost and would end up with less than 4. As Eugene Fama tells us - after costs, investing becomes a negative-sum game (and it doesn’t require the IQ of a Nobel Prizewinner to reach that obvious conclusion!) None of this is new information. The first mutual fund was launched in 1924 in the US. The first UK unit trust was launched in 1931. So, the measurement of fund returns has been going on for over 9 decades. In that time, independent, peer-reviewed academic

studies have consistently shown that very few highcost funds outperform their benchmark, that outperformance very rarely persists more than a year or two, and that it’s extremely unlikely you will select a consistent outperformer in advance. What’s more, since the average “margin of defeat” is nearly twice as much as the average “margin of victory”, we know that the risk of selecting a poor performer far outweighs the potential benefit of selecting a good performer. To my knowledge, there isn’t a serious academic study, conducted over any meaningful time period, that demonstrates the superiority of active funds over index funds. Not one. As far back as 1949, Vanguard’s Jack Bogle wrote in his senior thesis at Princeton: “mutual funds may make no claim to superiority over the market averages”. This fact was the very reason that, inspired by Paul

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Samuelson (another Nobel Laureate), Bogle founded Vanguard in the 1970s. He set it up as a not-for-profit business to ensure that (1) costs could be kept to a minimum and (2) that there were no conflicts of interest between the saver and the fund manager. Investment advisers, be they retail or institutional, are classed as professionals and Edition #9

are therefore required to act with, at the very minimum, reasonable skill and care. It’s not a stretch to say that when one fund costs 50% of expected returns each year, and there is an alternative that costs only 5% of expected returns, it doesn’t even require reasonable skill and care to avoid the excess costs. It merely requires a knowledge of simple arithmetic and an absence of

recklessness. Standards are generally far higher in other professions. Can you imagine if a doctor prescribed an expensive drug which had to be paid for by the patient month after month, for years, when all the evidence showed that low-cost aspirin was more effective? What if that doctor was being paid commissions by the supplier of the high-

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cost drug? The commissions, while an explanation for the doctor’s behaviour, would certainly not be a justification. That doctor might say that “all the other doctors were doing it”. Again, an explanation, not a justification. What if an architect recommended the use of defective building materials, having received an inducement from the supplier? Or an accountant caused her client to pay ten times more tax than necessary? Any reasonable person would conclude that something was very wrong in these scenarios, yet this is exactly what has been going on in the investment advice industry – on an industrial scale. Again, I’m not saying there is no place for trying to beat the market (as represented by a low-cost index fund). But since most attempts to beat the market are likely to end in failure, particularly for those who invest in activelymanaged funds, it should be only for those who can afford the risks, and those risks should be made very clear. As Charles Schwab says, its human nature to want to select the right horse. But even Charles Schwab, with his net worth of over $6 billion, has only 25% of his fund investments in active funds. The other 75% is in index funds. His rationale – with index funds, you’re practically guaranteed to be in the 85% percentile of performance over 10 or 20 years. In his words: “Why

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would you screw that up?” Some might say that the sheer scale of potential excessive fee compensation for pension and investment compensation (£200 billion or more), and the implications for the financial services industry, may prevent the courts from doing the right thing, or may lead the government to attempt to intervene in some way. I think these things are very unlikely, for the following reasons: First, the courts look at the facts and evidence of individual cases, not the implications for entire industries. When the evidence clearly supports the plaintiff’s argument, the plaintiff usually wins (or the defendant settles out of court). For a useful parallel, consider asbestos claims. Litigation began in the first half of the 20th century. By 2001, 600,000 individuals had filed claims against over 6,000 defendants. In 2016, total compensation passed $100 billion. The insurance industry believes this total could eventually rise to over $250 billion. The idea that this issue might cause many large businesses and insurers to fail (it nearly brought down Lloyds of London) did not lead judges in the US and the UK to deny people the justice or compensation they deserved. Second, there’s far more to the UK financial services industry than investment management. Insurance and reinsurance, foreign exchange, lending and investment banking are all huge contributors. Contrary

to what some would have you believe, investment management does not prop up the City or the UK economy. Investment management adds nothing to UK gross national product. In fact, it detracts from it. It engages far too many people in the fruitless pursuit of rearranging who owns all the different portions of the pie. A lot of those people could instead be making the pie bigger, by doing productive work in other industries. Third, the flow of many billions of pounds back to millions of ordinary people will have a major macroeconomic stimulus effect, much like the £375 billion “Quantitative Easing” of 20092012. For those who like to believe in “trickle down” economics, it wouldn’t be trickle down - it would be “gusher down”. That huge (and necessary) redistribution of wealth would allow untold thousands, who currently have little or no spare money, to start spending more in the shops, or on meals in restaurants, or gifts to children and grandchildren, or whatever else. This should, in turn, help to kick-start the meaningful economic growth which is long overdue in this country. Any government, left- or rightleaning, should welcome these positive changes. Even if they didn’t - as Gina Miller et al have admirably shown in recent months, governments can’t just do whatever they like.

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In the future, there will inevitably be less investment advisers recommending active funds, more recommending passive funds… and more lawyers helping people get their money back! This is part of the creative destruction of capitalism. Ultimately, businesses that deserve to succeed, succeed, while businesses that deserve to fail, fail. A well-functioning competitive market, in tandem with the rule of law, ensures that this happens for the benefit of society. The Financial Ombudsman Service already upholds around 30% of all the pension and investment complaints it receives. This number is skewed downwards by a large number of complaints that never had merit in the first place. The proportion of complaints with genuine merit that are upheld may

well be over 50%. Whatever the exact number is, it is now sure to rise sharply. In decades to come, we will look at the recommendations of high-cost active funds by investment advisers like we now look at the endorsements of cigarettes by doctors (seriously – take a look on YouTube!). Cigarettes are bad for your health. Active funds and their associated costs are bad for your wealth. Sure enough, some people still buy cigarettes. Doctors would be struck off were they to recommend them. They would also be sued.

The conclusions concerning fund costs in the Financial Conduct Authority’s report have always been true. But the regulator publicly acknowledging those truths is something that hasn’t happened before, and it’s a very big deal. The report may well turn out to be the most powerful catalyst yet for

something that is badly needed and long overdue – for investment advisers to adopt low-cost index funds on a far more widespread basis. At the very least, they need to have an evidencebacked rationale on the occasions they do recommend a highercost alternative. If it wasn’t before, it should now be obvious. Exposing clients to huge excessive and unjustifiable costs, year after year, is a breach of the Financial Conduct Authority’s “client’s best interests” rules, it is a breach of a professional adviser’s duty of care under the law, and - most importantly - it is increasingly likely to result in a compensation payment.

Phil is the founder of Pension Focus, a compensation claims management business based in West Yorkshire. He has worked in financial services for 17 years, both as a retail adviser and in various compliance roles. Phil believes passionately in raising awareness about the effects of excessive and unjustified costs on pensions and long-term investments.; and is a member of the Transparency Task Force’s Costs & Charges Team. Edition #9

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ARTICLE: ABRAHAM OKUSANYA

A study on how asset managers stick tw by Abraham Okusanya | Director, FinalytiQ Ltd ‘You are having a wet dream Abraham. There is no way the FCA wrote this stuff.’ Those were my first thoughts as I read the FCA’s interim report on its asset management market study. If a wet dream isn’t your thing, don’t worry, the report will give you far more pleasure. Possibly. It’s not one of those regulatory reports that cure your insomnia. On the contrary, it’s full of stuff that should keep asset managers (and investment consultants, platforms, advice networks and fund research firms) awake at night. In this article, I want to pick on a few key points around performance, pricing and profitability. Keep your eyes peeled for my thoughts on the implications for platforms and advice firms. On Performance The FCA notes; “Overall, our evidence suggests that actively managed investments do not outperform their benchmark after costs. Funds which are available to retail investors underperform their benchmarks after costs –

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while products available to pension schemes and other institutional investors achieve returns that are not significantly above the benchmark. Investors may choose to invest in funds with higher charges in the expectation of achieving higher future returns. However, we find that there is no clear relationship between price and performance – the most expensive funds do not appear to perform better than other funds before or after cost”. OK, maybe I’m a bit daft but did the regulator just suggest active funds aren’t worth forking out for? The abysmal performance of active management has been widely researched and discussed but to have the regulator publicly acknowledge it is a bit like that moment your 5-year-old finds out that Santa isn’t real.

You are a little shocked but mostly relieved that you never have to lie to them on the issue again! “We considered share classes in the Morningstar dataset which had existed for all, or any part, of the period 2003-15. We calculated monthly net excess returns for each share class, and found the average of these on both a simple average and a money-weighted basis. We undertook this calculation for (i) all equity, fixed income (FI), multi-asset and alternative share classes and (ii) just for equity share classes.” We have found that on average, retail investors in both active funds and passive funds underperformed their benchmarks net of costs. Further, we have found that on average (on both a frequency and moneyweighted basis) active and passive funds achieved similar net returns over the

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wo fingers up at investors

2003-2015 period as shown in Figure 6.1.

The regulator concluded; “In order for an asset manager to perform better than a passive product in the same investment category, the active asset manager would need to exceed the benchmark by the additional amount charged for the active product. Based on historical data, on average, this means that the active asset manager would need to achieve a return more Edition #9

than 12.5% greater than the market (or an additional 81 basis points per year) in order to outperform against a comparable passive manager”. I know what you’re thinking.. ‘That’s the average. I’m not looking for the average. I can pick a good fund.’ The FCA has bad news for you. Investment consultants selected by institutional investors (who often have vast re-

sources, talent and expertise), the almighty Morningstar’s quantitative backward-looking and qualitative forward-looking rating, as well as Best Buy lists peddled by platforms fail miserably to demonstrate they are able to pick the best funds. “While investment consultants’ due diligence ensures that ‘rated’ asset managers meet minimum quality and operational standards,

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these ratings do not appear to help institutional investors identify better performing managers or funds. Many institutional investors struggle to monitor and assess the performance of the advice they receive and we also have concerns about whether the interests of investment consultants are in line with investors’ interests. We analysed whether platform best buy lists help investors identify funds that will outperform funds which are not on the best buy list and funds that will outperform their benchmark. Our analysis of the performance of share classes on best buy lists of D2C platforms shows that, across all categories taken together, they perform better than non-recommended products. This finding holds across different assumed holding periods. However, the average net excess returns of share classes on D2C platform best buy lists were not greater than their benchmarks. Share classes on these lists achieved a net performance with little or no significant excess

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return over benchmarks. Share classes awarded a 5-star rating by Morningstar do not significantly outperform their benchmarks net of charges; net-of-fees excess returns are statistically indistinguishable from zero. However, the difference in net excess returns between 5-star rated share classes and non-5-star rated share classes is positive and significant, meaning that 5-star share classes earned greater net excess returns than other share classes. This finding holds if we assume different holding periods of 3 and 5 years. Share classes awarded a Gold, Silver or Bronze (GSB) Morningstar Analyst rating do not significantly outperform their benchmarks net of charges; netof-fees excess returns are statistically indistinguishable from zero over various different holding periods. While we found that the difference in net excess returns between GSB Morningstar Analyst rated share classes and non-GSB rated share classes is positive and significant (meaning

that 5-star share classes earned greater net excess returns than other share classes), this finding does not hold when we examine 3 or 5 year holding periods.” But never mind, you totally can pick the best funds. You are better than those lot. On Pricing; The regulator finds that despite regulation (e.g RDR), increase in number of players in the marketplace, and generally rising AUM, price of active funds remain remarkably resilient. Contrast this to passive funds, where fund charges have fallen by nearly 50% in the last 3 years alone! In what parallel universe does an average active fund cost 7 times the average passive fund? The FCA notes; “…once assets under management are greater than around £100m prices do not change significantly based on the number of assets under management. This implies that any fund level economies of scale do

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not get passed on in lower charges to investors”. (See Figure 6.15) Clearly, this not only shows that competition is ineffective but the interest of asset managers and investors aren’t aligned. As AUM go up, the overall cost to client should come down. Except it doesn’t. Profitability So the FCA discovered that asset managers don’t pass on economies of scale to investors in form of lower fees. I wonder why? May be because ehrrr… ehrrr… asset managers keep all the benefits of scale to themselves!

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“We find that profit is also correlated with AUM, as shown in Figure 6.20. Larger firms’ revenue increases as AUM increases, consistent with the ad valorem pricing model (charges are a % of AUM). We also find that whilst costs increase with AUM they do so at a slower rate with larger firms typically making larger profits. We also find that larger firms can benefit from economies of scale with cost per £ AUM falling as AUM increases.”

between 34-39% over 2010 – 2015. Trends in operating margins are variable between firms. For about half of the firms in our sample operating margins are largely flat from 2010-2015. However, for most of the remaining firms, operating margins grew over the period. Typically we find that firms who reported margins below average in the 20102011 period had recovered to close to the industry average in the later periods of the sample”.

“We find that the operating margin earned by asset managers is significant. As shown in Figure 6.19 below, the money weighted average operating margin across our sample of 16 asset management firms is

So, while most people have to save more and many face prospects of lower income in retirement, the people charged with managing your money are sticking two fingers up at you and laughing all the way to the bank!

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ARTICLE: ABRAHAM OKUSANYA

FCA MARKET STUDY: GIVE CLOSET INDEXERS T by Abraham Okusanya | Director, FinalytiQ Ltd One clear indictment of asset managers in the FCA interim report is the regulator’s verdict on closet indexers. Closet indexers are funds charging active management fees for what amounts to a little more than merely tracking an index. The FCA’s term for this phenomenal rip-off is ‘partly active,’ which it defined as active funds with a tracking error of 1.5% or less. The regulator estimates that a whooping 42% (£142bn in assets ) of retail active equity funds are closet indexers, of which £109bn are considered expensive i.e. charging more than 0.50% for clean share class or 1% for bundled share class. The regulator concluded that: Expensive ‘partly active’ funds are unlikely to deliver value for money. Partly active products in general may be suitable for investors who wish to achieve returns similar to the market, but if they are priced at ‘active’ levels these products are unlikely to generate value for money for investors. Figure 6.5 shows that there are a significant number of partly active share classes with substantially higher charges than equivalent passive products. Investors in these relatively expensive

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partly active products would likely achieve better value for money from switching to a cheap passive fund in the same investment category. So What? Let’s be clear about what’s going on here; investors in these closet index funds paid the managers to achieve specific objectives, often expressed in terms of beating a benchmark. While there is of course no guarantee, the fund must be different than the benchmark to have any chance of meeting the objectives. It’s statistically impossible for a manager to beat a benchmark by merely tracking it. But these managers couldn’t

even be bother to get their fingers out. By charging active fees for what amounts to little more than merely tracking the benchmark, these managers hoped to achieve statistical impossibility. These closer indexers wilfully mislead investors. The managers charged investors exorbitant fees without even trying to deliver the outcome they promised. Imagine the kind of public outcry that will erupt if water companies charged us without having water pipes or any other means of getting the water to our homes. Or if mobile phone companies charged exorbitant fees without having any network coverage. Or train companies with no trains but sold us

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THE ‘PPI TREATMENT’

tickets. This is exactly what closet indexers do. They charge investors for service which they have no means or intention of delivering. By charging investors an arm and a leg for this statistical impossibility, closet indexers breached FCA’s first rule – integrity! They breached at least 4 of the 11 principles set by the FCA for the firms it regulates including on skill, care and diligence, customers’ interests and relationship of trust.

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and lost. They have since paid out well over £25bn in compensation. Recently, the FCA also directed annuities providers to review non-advised annuity sales and where appropriate, compensate thousands of people.

And what’s the regulator charged with a statutory duty of protecting consumers doing about? Nothing. Absolutely, nothing! Not only has the regulator done nothing to seek redress for investors who are being robbed by these closet indexers, its proposed remedies are highly unlikely to stop this epic scandal anytime soon. The FCA’s proposed remedies amount to nothing more than increased disclosure and self-regulation (through AFM boards who are employed by asset managers), both of which it acknowledges have never worked. Got a better idea Abraham? You bet.

So, there is clear precedent for this. Which begs the question, “why is the FCA letting asset managers off the hook on this epic scandal that costs investors an estimated £1billion a year?” My proposal is very simple: “Closet index managers who have persistently underperformed while charging active fees for merely tracking the benchmark should be made to refund any fees charged over and above index fund fees. This refund will cover every year since the inception of the fund, unless otherwise prevented by the statute of limitation.” Hmm? Yup, you read that right. PPI treatment for closet indexers!

Personally, I think the regulator’s inactivity is simply kicking the inevitable can down the road. There are already talks of class actions against closer indexers The FCA has done a great job identifying a major failing in the asset management sector in this interim report but that is only half the job. When it comes to addressing them, there’s a real danger the regulator is all hat and no cattle!

Years ago, when the banks sold millions of people a useless product called Payment Protection Insurance (PPI), the then regulator FSA directed banks to review all PPI cases and award redress to consumers. The banks challenged the regulator in court

Abraham is the principal at FinalytiQ, having started the business in the spare bedroom less than 3 years ago. What seemed like a terrible idea at the time is shaping up to be a force for good in financial services. A Chartered Financial Planner and CFP Professional with nearly a decade’s experience, Abraham holds a Master’s degree from Coventry University and more financial services qualifications that he or anyone else cares to remember.

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DON’T MISS ANOTHER VERY SPECIAL EVENT!

...on 8th February features: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money. We saw at our last Transparency Symposium just how strong the views are on this issue so I’m as sure as I can be that this will be another event to remember. We have a superb line-up of speakers and debaters: Jeremy Fawcett, Head of Direct, Platforum

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Con Keating, Head of Research, Brighton Rock Group Wolfram Klingler, Co-Founder & Managing Partner, XTP AG Implementation Solutions Alexander Adamou, Fellow, London Mathematical Laboratory William L. Lipsey, President, PZena Investment Management

Where & when?

Richard Harrington MP, Pensions Minister Tim Brown, VP, Head of UK Inst. and EMEA Consultant Relations, Dimensional “The Massive Active/Passive Debate” featuring: - Daniel Godfrey, Co-Founder, The People’s Trust  - David Pitt-Watson, Executive Fellow, London Business School

Dimensional, 20 Triton Street, Regent’s Place, London. Wednesday 8th February 9:30 to 17:00

- Campbell Edgar, Head of Financial Planning at the CISI  - JB Beckett, UK Lead, Association of Professional Fund Investors - Kay Ingram, Director of Financial Planning, LEBC  - Rick Eling, Head of Investment, Old Mutual Wealth Private Client Advisers  - Mike Barrett, Consulting Director, The Lang Cat  - Dan Brocklebank, Head of UK, ORBIS Investments

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

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE

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ARTICLE: JB BECKETT

TAKING THE P? SENDING UP ‘PRICE’ IN FUND SE

by JB Beckett | UK Lead, Association of Profession

Taking the P was first published in Investment Quorum and will appeal to those particularly keen and informed upon investment matters. - See more at: http://investmentquorum.com/taking-p-sending-price-fund-selection/#sthash. mboLesZ3.dpuf Like Supersonic flight, the beginnings of fund selection can be traced back about 70 years. At the Association of Professional Fund Investors (APFI) we aim to represent the views of Professional Fund Investors (‘PFIs’), innovate and recognise best practice. Professional fund investing and research is a community, one I have been proudly part of for a little under two decades. However that pride has faced many tough lessons and challenges over the years. Today, as the industry digests the 200 pages that make up the FCA Interim Market Study Report (MS15/2.2, https://www.fca.org.uk/ publication/market-studies/ ms15-2-2-interim-report. pdf), questions as to the effectiveness of investment consulting; selecting active managers and negotiating costs have arisen. Buried deep in its report, in chapter 8 (from page 180), the FCA critiques the Multi-P (‘X-P’) approach used by many fund rating agencies and investment consultants. Why

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do fund buyers, consultants and agencies use a X-P approach and how does embedding Price into that process impact the findings of the FCA? - See more at: http://investmentquorum.com/ taking-p-sending-price-fundselection/#sthash.mboLesZ3. dpuf Origins of the X-P Consultant Model The X-P model began in the 1940s with 4-P: Product, Price, Promotion and Place. - See more at: http:// investmentquorum.com/ taking-p-sending-pricefund-selection/#sthash. mboLesZ3.dpuf According to Wiki (the de facto font of all information and disinformation) the origins of the four Ps can be traced back to Professor of Marketing at Harvard University, Prof. James Culliton. In 1948, Culliton published a paper ‘The Management of Marketing Costs’. Culliton described marketers as ‘mixers of ingredients’. Some years later, Culliton’s colleague, Professor Neil Borden,

published a retrospective article and credited himself as popularising the concept including his presidential address to the American Marketing Association in 1953. The 4-Ps, in today’s form, was first proposed in 1960 by E. Jerome McCarthy in his textbook, ‘Basic Marketing: A Managerial Approach’. McCarthy used the 4-Ps as a framework for the entire work with chapters devoted to each of the elements, dedicated to analysis, consumer behaviour, marketing research, market segmentation and planning to round out the managerial approach. Author Phillip Kotler likewise popularised the approach, and with it, spread the concept of the 4-Ps. As a generation of Regan and Thatcherite Ivy graduates, entered consultancy, the rapid adoption of 4-Ps accelerated through the 1980s, and the phenomenon of the ‘business consultant’ took hold. This popularised the

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ELECTION

nal Fund Investors concept into commerce and any new consultant or business at that time was expected to demonstrate awareness of latest management techniques. In 1981, Booms and Bitner proposed a model of 7-Ps, comprising the original 4-Ps plus process, people and physical evidence. Subsequently a number of different proposals for a service marketing mix (ranging 6-Ps, 7-Ps, 8-Ps, 9-Ps and more) have

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emerged through leading big management consultancies like McKinsey. Launching into this environment it comes as no surprise that the early progenitors of multi-manager and asset consultancy adopted a common language with, management consultants, whether that was the optimal approach or not. - See more at: http://investmentquorum. com/taking-p-sending-pricefund-selection/#sthash. mboLesZ3.dpuf The History of Consultants

and Ratings Agencies The rise of asset consultancies post ‘Big Bang’ in October 1986 and and the previous Employee Retirement Income Security Act ‘ERISA’ (1974 in US) led to the slow Americanisation and gradual deinstitutionalisation of the

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UK asset management market. An influx of not only large US banks but also consultants coincided with the gradual demise of U.K. insurance With Profits and Defined Benefit schemes. In the FCA report a shadow has been cast on the dominance of the big consultants, which now have a grip on many facets of our industry. Given the power of investment consultants, as gatekeepers, then the FCA was right in its report to question whether this not only impacts the returns for their clients but also impacts the wider market for the rest of us. “The point missing from these considerations is any strong emphasis on investment consultants’ performance. This may be because, as we found, there is limited information available to institutional investors on the quality or performance of advice when they are selecting a consultant.” Big consultants include; Russell Investments was founded in 1936, employs 1700 employees and manages $244bn assets under management, opening its first office in London in 1979, launching its multimanager service in 1980 and launching the now famous Russell indices in 1984. Russell has become synonymous with equity style and capitalisation investing and for building one of the first X-P models, which it

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has since evolved. Russell is credited for introducing the X-P model into fund research. Russell is generally regarded as one of the most thorough multi-managers, at least from the point of view of conducting due diligence on a fund manager.

had ventured abroad and offered benefit programs to corporations in the United Kingdom. By 1997 more than 100 large companies outsourced their benefit programs to Hewitt, covering about nine million worldwide employees.

Owned by Marsh & McLennan, Mercer was founded in 1945, headquartered in New York, employs over 20,000 employees in 40 countries, and serving over 130 countries. Originally called William M. Mercer after the Canadian firm was acquired by Marsh & McLennan. The history of Mercer has been one of acquisition. Mercer moved into DC investment consulting in the U.K. around 2005, starting with 60 different funds managed by over 20 investment managers. In 2012 Mercers moved into investment management in the U.K. Mercer’s global team numbers 1,200 professionals and 120 manager researchers, provides in-depth expertise in research, advice, and solutions. Mercer asserts their advantage based around their Global Investment Manager Database (‘GIMD’) which uses data capture, analyst inputs and big data to support more conventional fund research.

Morningstar influences/ manages over $200bn assets under management in 27 different countries and is the quoted largest fund ratings platform with around 180 fund analysts worldwide. Launching into the UK with its innocuous website service the business has grown exponentially through its fund analysis and reporting software ‘Direct’ and asset tool ‘Encore’. Morningstar, Inc. has been providing qualitative analyst research on funds since the 1980s. Morningstar has been one of the leading X-P rating agencies, which is a 6 factor approach (originally 5-P) that includes Price. It remains easily the largest agency in the UK retail market but also competes in the Institutional market. It is worth recognising that Morningstar’s model differs to that of investment consultancies albeit does supply consultancy and investment management, thus blurring lines. Others include JLT, Willis Towers Watson, Capita, Hymans Robertson, Fitch, Punter Southall. - See more at: http:// investmentquorum.com/ taking-p-sending-price-fundselection/#sthash.mboLesZ3. dpuf

Aon Hewitt was founded in 1940 in Illinois, as Hewitt Associates, has approximately 29,000 employees worldwide, operating in 500 offices in 120 countries. By the beginning of the 1990s Hewitt

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The Impact of Embedding Price into X-P Selection The FCA, in its report, identified the typical X-P model as; embedding Price into an overall fund rating. I have traditionally approached investment selection and fees separately. I developed a 6-P model but did not embed Price. We did consider but chose against, why? Colleagues have mistakingly misconstrued this to mean that I don’t look at costs. Actually quite the opposite is true and today I can (and do) spend more time on negotiating and monitoring fees, as conducting due diligence on the fund. Price and the other P-factors are not exclusive from each other but, by setting fee hurdles separately, I will not inadvertently buy into funds at any cost (no matter how good I think the manager is). I call this avoiding the ‘value proposition trap’. It means I am left agnostic and bi-partisan between

active and index-based funds; on cost at least, albeit I admit to some active bias in terms of my investment philosophy. Conversely many consultants and agencies capture the concept of ‘value for money’ as Price in their multi factor (X-P) model. The danger of doing this is it can create remoteness and aggregates the outcome, it can lead to selection falling into that trap. This can be both mitigated by or compounded by committee structures, which prevail in the larger firms. The FCA report reported median fees that would indicate that large consultancies have confused cost with value. Aggregating Price as a P-factor may have thus missed a point. Let’s take a simple working example ; - See more at: http:// investmentquorum.com/ taking-p-sending-price-fundselection/#sthash.mboLesZ3. dpuf

Let’s assume that a fund below a score of 50 = Red (SELL), up to 70 = Amber (HOLD), above 70 = Green (Good/BUY) or above 80 = Green (Strong/BUY). In effect the consultant rates the fund manager based on a combination of tangible and intangible factors. By scoring the manager highly on qualitative P factors (People, Process, Portfolio) they can override the poor rating on Price and average rating on Performance. Here aggregation obfuscates the impact of Price on the fund rating. The danger for larger consultants and research firms is not seeing the wood from the trees. This can be exacerbated by a remoteness to end investors and trustees’ inability to monitor consultants effectively due to an information disadvantage and lack of investment expertise generally on boards (but a low propensity to admit this).

Fig. Consultant rating – aggregating Price into a X-P rating. Fund Manager A Type Weighting People Qualitative 20% Process Qualitative 20% Portfolio Qualitative 20% Performance Quantitative 20% Price Quantitative 20% Total Blended 100%

Score (0-100) 80 (16) = Strong/Green 70 (14) = Good/Green 60 (12) = Fair/Amber 60 (12) = Fair/Amber 40 (8) = Poor/Red 72/100 = Good/Green

- See more at: http://investmentquorum.com/taking-p-sending-price-fund-selection/#sthash. mboLesZ3.dpuf

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Also the analyst is often unable to modify the ratings doctrine or override hierarchical decisions by committees. Before we can consider the behavioural biases like anchoring, confirmation bias and star manager culture; many consultants are more simply incentivised to put more time into the client relationship and communication than the belying research. When they do engage in research then there is also a danger of putting funds under an increasing microscope in some areas but failing to step back to get the basics right like Price. Only after addressing this can a balanced assessment of employing active and index funds be achieved. Here then (at least based on the inference of the FCA paper) big consultants can become very skilled at convincing clients into mediocre choices. This is compounded by a lack of retrospective on the outcomes they produce, until now. Indeed the FCA noted; “Overall, we found that there is not a strong emphasis on fees in the consultants’ rating process.

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For example, one consultant explained that fees only made up 5% of the final score. When discussing the rating process, only one consultant acknowledged upfront that in some asset classes actively managed funds do not, after fees and in aggregate, add value for investors and keeping costs to a minimum is important to increasing their clients’ chances of outperforming the index.” In January 2016 legend Chuck Yeager celebrated the 70th anniversary of pioneering supersonic flight in the X-1 jet (1946). Like flight, innovation is much needed in Fund Selection. The issues facing investment consulting can be addressed by examining the capability and motivations of investment consultants and fund rating agencies, and challenging the efficacy of quantitative and qualitative aspects of the X-P model. Taking a fresh look at Price in context to fund ratings is necessary, one solution may be separation. This may also create an opportunity for innovative smaller firms and agencies, as pension schemes are rightly encouraged to rethink and look further afield

to find value, rather than use the same small group of big consultants. More governance is needed and broader best practice needs to be shared including but not limited to the big consultants. However unlike the sweeping assumption by the FCA, the automatic answer does not necessarily have to be ‘more passive’. By joining the Association of Professional Fund Investors you can join others in exploring this issue further. Take off! See more at: http://investmentquorum.com/taking-p-sending-price-fund-selection/#sthash.mboLesZ3.dpuf

JB has been a fund selector for over 16 years, is a FTSE100 Professional Fund Investor, UK Lead for the Association of Professional Fund Investors, Author and Senior Reviewer for the Chartered Institute for Securities and Investments (CISI.org) and Author of ‘#NewFundOrder’. He is also an Ambassador of the Transparency Task Force.

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


DON’T MISS ANOTHER VERY SPECIAL EVENT!

...on 8th February features: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money. We saw at our last Transparency Symposium just how strong the views are on this issue so I’m as sure as I can be that this will be another event to remember. We have a superb line-up of speakers and debaters: Jeremy Fawcett, Head of Direct, Platforum

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Con Keating, Head of Research, Brighton Rock Group Wolfram Klingler, Co-Founder & Managing Partner, XTP AG Implementation Solutions Alexander Adamou, Fellow, London Mathematical Laboratory William L. Lipsey, President, PZena Investment Management

Where & when?

Richard Harrington MP, Pensions Minister Tim Brown, VP, Head of UK Inst. and EMEA Consultant Relations, Dimensional “The Massive Active/Passive Debate” featuring: - Daniel Godfrey, Co-Founder, The People’s Trust  - David Pitt-Watson, Executive Fellow, London Business School

Dimensional, 20 Triton Street, Regent’s Place, London. Wednesday 8th February 9:30 to 17:00

- Campbell Edgar, Head of Financial Planning at the CISI  - JB Beckett, UK Lead, Association of Professional Fund Investors - Kay Ingram, Director of Financial Planning, LEBC  - Rick Eling, Head of Investment, Old Mutual Wealth Private Client Advisers  - Mike Barrett, Consulting Director, The Lang Cat  - Dan Brocklebank, Head of UK, ORBIS Investments

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

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE

Edition #9

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

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ARTICLE: JULIUS PURSAILL

THE ROLE OF BELIEFS IN GOOD INVESTMENT G

by Julius Pursaill | Independent Pension and Inves

There are a number of important components of effective governance that have been extensively discussed, documented and agreed upon; independence, effective conflict identification and management, the importance of strategy setting and constructive challenge. In this article I identify and argue for a core component of effective investment governance that, in my experience, has been less widely discussed or agreed upon: The explicit articulation of investment beliefs and assumptions and the regular testing of these against empirical evidence. Investment beliefs are called beliefs (and are important) precisely because, notwithstanding very extensive research and analysis, there is no single universally agreed account of how markets and asset classes behave. Indeed, some would argue that any such attempt to codify market behaviour is doomed to failure. Nonetheless, it’s impossible to design a DC default strategy or agree changes to the

Strategic Asset Allocation (SAA) of a with profits fund without relying on a series of interconnected assumptions about asset class returns, their stability over time, correlation, diversification and risk.

unless we are clear that the assumptions underpinning it still remain valid.

All too often these assumptions are implicit or at least partially implicit, rather than explicit. This matters, because those of us charged with investment governance can’t be confident our approach remains fit for purpose in a changing world,

What assumptions have been made about the stability or otherwise of asset class returns and volatility?

Where have any existing assumptions about future asset class returns and correlations come from?

What empirical evidence exists to test those assumptions? There is, for example, a great deal of empirical evidence available about long term asset class returns and correlations. There is less empirical evidence available about how we might progress from current extreme interest rates toward more normal levels, or even what a new

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GOVERNANCE.

stment Governance Consultant normal might look like. We may be relying on some sort of model to derive expected future returns and it will be of crucial importance to understand the assumptions in the model about the strength and timing of reversion of returns to longer term averages (mean reversion).

between the lucky and the unlucky or even the median and the unlucky. This set of decisions might be thought of in terms of equity between customer cohorts and under the National Audit Office definition of value, could be considered an important component of “value for money”.

How we react to current ultra low interest rates presents us with some particularly challenging decisions, but ones we surely cannot avoid addressing.

As to the “how?” – often this is done by reference to asset classes, but there is clear and convincing empirical evidence about the merits of implementing diversification based on an understanding of return drivers and risk factors, rather than thinking about diversification solely in terms of asset classes.

Our ideas about diversification will also influence our SAA – the “why?” and the “how?”. Generally diversification is designed to manage risk - if we are interested in mitigating shorter term volatility (the bumpiness of the ride), then we may simply have chosen a particular portfolio on the efficient frontier. If we are also or more interested in the potential distribution of long term returns between different cohorts of customers (lucky, median and unlucky cohorts) we will want to look at stochastic projections and consider making trade offs Edition #9

The way we think about and measure risk is also an important contributor to SAA decisions.

Volatility is a typical starting point as a risk measure, but it has some important limitations. It assumes risks are symmetric; but we see fat tails in the distribution of returns on the downside. It assumes customers react the same way to surprises on the upside and the downside. Most seriously, volatility doesn’t react to the order in which things happen. It has been observed that volatility is a fine measure of risk if you think that being poor and then rich is the same thing as being rich and then poor. It turns out that when we are dealing with flows of assets rather than stocks,

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

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the order in which things happen can be very important indeed. It’s increasingly well understood that in decumulation, the order in which things happen can make the difference between financial independence and financial catastrophe. We may want to consider additional measures of risk to supplement volatility VaR, CVaR or perhaps more straightforward, maximum drawdown (both historic and forward looking via scenario analysis) and review our SAA accordingly.

benchmark (and which benchmark?) in the medium term? Why? Do we believe we can identify them in advance and change them when required? We may well believe different things about different markets. We may for example conclude that tracking a market cap benchmark in credit is not sensible. A discussion about market cap weighted benchmarks and return drivers can lead into a discussion about the merits of alternative beta and the rebalancing premium.

Successful active managers typically have clearly expressed views about the way markets or asset classes behave and their strategy for exploiting these behaviours. In awarding an active mandate it’s important for the asset owner to understand the asset manager’s sources of alpha and the beliefs that underpin them – without which it becomes increasingly difficult to conclude whether or not the manager is doing the job they were hired to do.

How important to us are costs and charges? In a DC default fund, there is a charge cap to be negotiated – how does one most effectively allocate a limited budget across different mandates? Is there a belief that costs and charges should be minimised and what does this mean in practice? There is empirical evidence from US mutual funds that funds (with similar investment mandates) that have lower costs consistently outperform those that have higher costs. In an era of lower real returns, this might increasingly be the case. On the other hand, one might believe that in times of higher volatility and lower returns, it is more important to pay a premium for active management. How do we propose to make value for money assessments over transaction costs?

Do we believe managers can add value against a

What beliefs do we hold about the impact of ESG factors

Once we have settled on an appropriate SAA then some asset level mandates can follow. At this point (if not before, as our decisions about SAA will always be “active” decisions)), we need to consider what we believe about active management.

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on risk and return? There is convincing evidence that suggests that incorporating ESG factors can reduce risk (intuitively plausible, providing one can identify them in advance) and some that it can improve returns. What steps can one take to give effect to these beliefs? What about the customer? Although I haven’t mentioned the customer so far, I do believe we need to establish as much as we possibly can about customer need and use these insights to inform our answers to all the above questions. At the same time, we need to be aware that there are a series of well documented cognitive biases that can sometimes get between what customers need and what they say they want. Customer risk capacity and risk appetite should both have a bearing on the conclusions we reach and we will want to be clear about the emphasis we place on each. Getting an investment governance board to articulate their beliefs can be challenging and time consuming (exposing assumptions can be easier), but once articulated they serve as a powerful reference point when making difficult decisions and facilitate evaluation of those decisions after the event. No two sets of beliefs will be (or need to be) the same – different groups will find different explanations, evidence and theory more or less convincing - that’s

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


fine. Indeed it’s one example of the richness that can flow from principle based regulation, over process based regulation. But the belief-sets at least need to be internally consistent, with any trade offs between beliefs having been carefully considered and documented. If all we achieve is to identify a key hidden assumption (for example, an assumption about strong mean reversion in interest rates), this will have significant benefits. We can then test the consequences of that assumption being invalid and decide whether we are comfortable that risk. We can also be more confident about the impact of other decisions – we can more easily check whether we are doubling up exposure to a particular assumption or risk factor, or alternatively cancelling it out. And finally, if we have high conviction, are we positioned to exploit the belief or assumption to fullest effect? In response to current ultra low interest rates I have been party to a number of SAA benchmark changes - shortening of duration in bond benchmarks (changes in beliefs about the balance of risk and return around interest rates), the partial replacement of index linked gilts by commodities (a belief in commodities as a source of non correlated returns and as

a hedge against unexpected inflation), the introduction of absolute return bond funds as a replacement for gilts (an active hedge against rising rates) and the diversification of equity portfolios into more and different emerging markets (reflecting ongoing confidence in the equity risk premium and the increasing divergence of correlations within emerging markets). In summary, all those charged with investment governance, be they pension fund trustees, with profit committee or IGC members, or other NED’s with investment governance responsibilities, should consider articulating a series of investment beliefs and exposing the assumptions underpinning existing approaches. This will provide a framework within which investment decisions can be made and tested. There are risks - we may wish to avoid an overly rigid belief set, as market behaviour can be fluid and there is a risk that beliefs can become an obstacle to flexible and pragmatic decision making.

much has been written down and much more typically, too little. We should also remind ourselves of the risk of confirmation bias (for which there is ample empirical evidence) when considering evidence that may challenge heartfelt beliefs. With these provisos, when applied to the SAA of an organisation’s largest asset pools, this approach should deliver value because, notwithstanding the investment of resource required, it helps to achieve better governance and as a consequence, (I believe!) better long term outcomes for our customers.

In my experience however, it is rarely the case that too

Julius Pursaill provides independent governance services to a number of pension funds and insurance companies. He is currently responsible for investment governance over £150billion of assets, on behalf of clients that include Prudential, RBS and Royal London. He is also a non executive director of Byhiras Trust and is a member of the Transparecy Task Force’s Costs & Charges Team.

Edition #9

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

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ARTICLE: DEREK SCOTT

ACTIVE V PASSIVE, OR SOMETHING COMPLETE

by Derek Scott | Professional Pension Trustee

I’ve been a professional DB trustee for 30 years. What have I learned about investing for DB pensions in that time? I’ve learned that so-called active, market relative returns aren’t sufficient to fund pensions as they fall due. Neither are passive, market index returns. In the early years of a DB scheme, perhaps the first two decades or more, the contributions exceed the pensioner payroll and trustees have net capital to invest in most years, in most months. While there’s an argument for investing that capital in ways that chase “market returns”, the opportunity is being missed even then to develop a

coherent approach to investing for funding which can also be applied in the mid-life and later years of the same DB scheme. Certainly, trustees in the early years can allow their investment managers to retain the income from their investments, and/or to invest in development assets which may take a

few years to become valued and realisable as developed assets, by which I mean private partnerships in equity, infrastructure, other property, etc. But surely, it’s good discipline (and better governance) to monitor the underlying cash flows from the very beginning, and to identify whether income is being generated and grown over time as part of the underlying investment valuation process? Another reason for monitoring the monthly cash flows is to derive money-weighted rates of return, rather than the time-weighted rates of return favoured by so many of the investment managers and consultants. I hear the excuse that money-weighted rates of return reflect the trustees’ decisions to allocate capital and cash flows, whereas the time-weighted rates of return are to be a better measure

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ELY DIFFERENT?

of investment managers’ performance as they are not sensitive to the timing of new contributions and withdrawals. But trustees should wonder about the scale of investment managers’ capital inflows and distinguish between high returns in the early years of a fund, when capital employed may be relatively low, and perhaps much lower returns in the later years of a fund when capital employed has become bloated by inflows recommended to their clients by consultants. Focus on cash flows prompts trustees to break down actual returns between income and market re-rating. Some would even argue that income is the main component of total returns over time, although I have learned to retain an open mind on this, even although the evidence does seem to support this for many bond, equity and property investments.

easier to monitor a portfolio of twenty listed securities or properties than one containing hundreds. And if another of the investment aims is to engage with the issuers or executive and non-executive agents over their corporate ethics, it’s far easier to do this with a more concentrated portfolio than with a more (or over-) diversified one. As for measuring the performance of investments, my lessons learned have found little use for market

index comparisons and attribution analysis based on variances between index components and the portfolios held. Someone once said you can’t eat a relative performance sandwich, or something similar. I agree. In the mid-life of a DB scheme, pensioner payroll increases and eventually exceeds the monthly contributions, particularly if the scheme closes early to new members or to future accrual altogether. The first step to address that will be to draw down income

Another lesson learned concerns diversification v concentration, or rather the disappointments from overdiversifying. It’s frankly Edition #9

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

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a test of buy disciplines. What characterises good investments from ones to avoid? In my years as a trustee I haven’t yet found a better definition than Ben Graham’s (in one of my undergraduate texts, Graham & Dodd’s “Security Analysis”): “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” Even after thirty years, I’m still learning. from investment managers and later to plan marginal divestments by giving notice to the investment managers of required capital calls.

flows against expected cash flows. I’d also monitor investment managers’ buy/ avoid and hold/sell/reinvest decisions.

This investment process continues into the late stages of a DB scheme. Many trustees don’t seem to realise that after buying/ adding investments for so many years, it’s inevitable that selling becomes the norm. If a DB scheme buyout is being targeted in the medium- to short-term, then the asset mix probably needs to be varied away from higher income generating assets in favour of matching gilts.

How?

And if it’s absolute returns which pay pensions as they fall due, don’t make the mistake of comparing investment performance with abstract (or abstruse) benchmarks like RPI or CPI or LIBOR. Instead I’d urge trustees and their advisers to monitor actual cash

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What do others think?

By keeping score based on comparing original costs with market values, by comparing this year’s trailing income with last year’s, by questioning unrealised capital gains as a test of sell disciplines and unrealised capital losses as Derek Scott is a 63-year-old Scottish chartered accountant. He has been a professional trustee for 30 years and currently chairs the Stagecoach Group Pension Scheme (with estimated liabilities of around £1.4 billion) and The Institute of Chartered Accountants of Scotland Retirement Benefits Scheme (with estimated liabilities of around £30 million). He is a former chairman of the UK Railways Pension Scheme (with estimated liabilities of around £30 billion) and a former Government appointed trustee of the Mineworkers’ Pension Scheme (with estimated liabilities of around £12 billion). Derek was a member of the NAPF’s Investment Council between 1998 and 2006.

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


DON’T MISS ANOTHER VERY SPECIAL EVENT!

...on 8th February features: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money. We saw at our last Transparency Symposium just how strong the views are on this issue so I’m as sure as I can be that this will be another event to remember. We have a superb line-up of speakers and debaters: Jeremy Fawcett, Head of Direct, Platforum

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Con Keating, Head of Research, Brighton Rock Group Wolfram Klingler, Co-Founder & Managing Partner, XTP AG Implementation Solutions Alexander Adamou, Fellow, London Mathematical Laboratory William L. Lipsey, President, PZena Investment Management

Where & when?

Richard Harrington MP, Pensions Minister Tim Brown, VP, Head of UK Inst. and EMEA Consultant Relations, Dimensional “The Massive Active/Passive Debate” featuring: - Daniel Godfrey, Co-Founder, The People’s Trust  - David Pitt-Watson, Executive Fellow, London Business School

Dimensional, 20 Triton Street, Regent’s Place, London. Wednesday 8th February 9:30 to 17:00

- Campbell Edgar, Head of Financial Planning at the CISI  - JB Beckett, UK Lead, Association of Professional Fund Investors - Kay Ingram, Director of Financial Planning, LEBC  - Rick Eling, Head of Investment, Old Mutual Wealth Private Client Advisers  - Mike Barrett, Consulting Director, The Lang Cat  - Dan Brocklebank, Head of UK, ORBIS Investments

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

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE

Edition #9

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

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ARTICLE: JAMES REDGRAVE

THE CASE FOR GRADGRIND: FACTS AND THE S AND ITS SOURCES…

by James Redgrave | Financial Journalist

“Is this dog a mother?” “Yes.” “And is it your dog?” “Yes.” “Then it is your mother, and its puppies are therefore your brothers and sisters!” -Socrates, Plato’s Euthydemus, describing an argument between a Sophist and a farmer One of the things that made 2016 a more than usually unsatisfactory year for so many people was a seeming cross fertilisation of different types of information. Every year bequeaths the popular vocabulary a handful of new words and

phrases and ‘post-truth’ has become hard to avoid in the past six months. The notion, it seems to me, is born of an increasing acceptance that everything is not just subjective but that everything that is subjective equally so: that an informed opinion is the

same as an uninformed one; that picking one informed opinion over another, when ascertaining what to believe, is an equivalent process to picking a football team to support, or a shirt to wear in the morning; that facts are right or wrong, depending on how they correspond with opinions, rather than vice versa. The ancient Greek philosophical school of Sophistry was originally a kind of knowing, deliberate selectivity of facts and elevation of rhetorical devices to quasi-factual status, in order to give discipline to the methodology of argument, rather than reveal literal truth (as in the quotation above). But we seem to fear

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STANDARDISATION OF DATA

that we have entered an age of reflexive, internalised sophistry, where we fight thoughtlessly for positions we want to be true, whether or not we can martial real arguments in their favour. This, of course, has the effect of diminishing or destroying our abilities to argue as a means to coming to reasonable conclusions and consensus. Post truth has become a stick with which people on opposite sides of debates too publicly well-worn to need specifying here have taken to beating one another, and it is not my intention now to declare

Edition #9

a position in any of those arguments or criticise anyone else’s standpoint. But the uneasiness betrayed by the sudden appearance of the phrase is evidence that we see our definition of truth – and its relationship with facts and evidence and rational interpretation – as essential and in need of protecting from the threat (real, imagined or exaggerated) of redefinition. And this uneasiness is what gives impetus to the ideas behind the Transparency Task Force and all movements to improve the availability of information about financial services, both to consumers

and between professionals in different parts of manufacture and distribution chain. The obvious counter to fears of wrong conclusions being drawn from bad evidence, is to assert the primacy of good evidence and clear explanation of rationale. There will remain debate and dispute about techniques and practices: active vs passive; top down vs bottom up security selection; providers’ default

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

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options vs ‘shopping around’. But these will be in cases where there are good cases for and against. What is important is that these cases are made unambiguously and understandably. Meanwhile, the bedrock of evidence and argument is, and should always be, objective fact. Core among the Transparency Task Force’s driving principles is increased information about the cost of financial products/services and their various components. This is a good (but by no means the only) example of an area clouded by the spectre of complication. The work of participants

in this debate (including, it’s fair to say, a growing number of influential representatives of the product providing and selling sides of the industry) has effectively countered the (bad) argument that clarity here serves somehow to obscure and that the truth (in this case numbers ultimately debited from clients’ accounts) is somehow unknowable. Once facts have been identified, it is equally important that they be provided in ways those receiving them will understand and be able to apply to their own financial circumstances, and this is where the collaboration

of the industry is most important. Projects which ensure standardised information is available in comparable formats across financial services – from the proliferation of price comparison websites, to the nascent Pensions Dashboard, to the growing consensus around more extensive, and standardised, publication of fund pricing information – are all valuable by and large because they involve disparate and competitive elements of the market agreeing to common practice, ensuring the facts available to their professional clients and lay consumers are the same facts those recipients would get when researching any comparable product or marketplace.

Events have forced us to confront the importance of transparency in the sphere of political information and decision making. The lessons of 2016 are no less salutary for financial services.

Experienced provider of distribution-focused research and market intelligence consultancy services to Europe’s largest institutional asset managers. Financial journalist, having covered institutional investment and retail financial services for specialist financial publishers, including the Financial Times Group.

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The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


DON’T MISS ANOTHER VERY SPECIAL EVENT!

...on 8th February features: “The Massive Active/Passive Debate” and is dedicated to an issue that the FCA’s Asset Management Market Study has shone a very bright light on; the relative merits of Active Investment Management and Passive Investment Management when it comes to providing investors with value for money. We saw at our last Transparency Symposium just how strong the views are on this issue so I’m as sure as I can be that this will be another event to remember. We have a superb line-up of speakers and debaters: Jeremy Fawcett, Head of Direct, Platforum

Richard Harrington MP, Pensions Minister is our Keynote Speaker

Con Keating, Head of Research, Brighton Rock Group Wolfram Klingler, Co-Founder & Managing Partner, XTP AG Implementation Solutions Alexander Adamou, Fellow, London Mathematical Laboratory William L. Lipsey, President, PZena Investment Management

Where & when?

Richard Harrington MP, Pensions Minister Tim Brown, VP, Head of UK Inst. and EMEA Consultant Relations, Dimensional “The Massive Active/Passive Debate” featuring: - Daniel Godfrey, Co-Founder, The People’s Trust  - David Pitt-Watson, Executive Fellow, London Business School

Dimensional, 20 Triton Street, Regent’s Place, London. Wednesday 8th February 9:30 to 17:00

- Campbell Edgar, Head of Financial Planning at the CISI  - JB Beckett, UK Lead, Association of Professional Fund Investors - Kay Ingram, Director of Financial Planning, LEBC  - Rick Eling, Head of Investment, Old Mutual Wealth Private Client Advisers  - Mike Barrett, Consulting Director, The Lang Cat  - Dan Brocklebank, Head of UK, ORBIS Investments

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

CLICK HERE FOR FULL DETAILS AND TO BOOK YOUR PLACE

Edition #9

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

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SPECIAL ANNOUNCEMENT: ALAN SALAMON

THE TRANSPARENCY Q&A PENSION GOVERNAN by Alan Salamon| Principal | Corpias | Over the past months, discussions in the meetings and conference calls of the Stewardship & Decision-Making Team have crystallised in an initiative to create a transparency inspired questions and answer bank for pension scheme stewards such as trustees, governance committees and other interested parties. The purpose of the guide is to focus on questions that are already asked, or should be asked, at pension governance meetings and to 1) Improve the quality of answers received from investment and pension professionals and 2) Allow the pension scheme stewards to gain better information, transparency and understanding from their various service providers. The timing of this initiative seems ideal. The FCA Asset Management Market Study awaits a final response and decisions from the regulator. News interest for these matters is shining the spotlight on our industry. See, for instance, Josephine Cumbo’s January 13 article in the FT, reporting that Frank Field, chair of the work and pensions select committee will be reviewing TTF’s petition that parliament consider the costs of the entire pension value chain not just the asset management costs. The proposed Transparency Questions and Answers Pension Governance Guide is likely to develop a high

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profile.

along those lines.

By and large, pension scheme stewards and fiduciaries ask the right questions at their governance meetings (although not necessarily all of them) but they are not always given the best answers and are not necessarily prepared for the subsequent question(s) in response to the provider’s first answer.

Q&A Governance Bank:

The Q and A Pension Governance Guide intends to set out the question, the most usual suboptimal answer(s), an explanation of what a more useful answer could be or should cover, and the subsequent question(s) to attempt to achieve an answer

Question and answer format; 1) Initial question by pension scheme steward to service provider. 2) Usual and/or likely sub optimal answer(s) from service provider. 3) Explanation of what information should have been covered in the answer if transparency and accuracy were paramount. 4) The subsequent question suggestion(s) so the pension scheme steward can ask the provider a follow up question

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


NCE GUIDE

to assist the service provider in answering more fully. In the early discussions about the guide many categories of questions have been suggested. To keep the work manageable and deliverable in the reasonably short term, we will focus on ‘in-flight’ governance and advice meetings rather than pre mandate or beauty parade meetings, and cover the following categories…. • Investment Performance • Asset Allocation • Cost and charges • Ethical, social and governance criteria These four categories can cover a huge number of issues and I think most questions that we want pension stewards to ask of their investment service providers, whether that be advisers or money managers, should fit into one or more of these categories.

participating, to contact me. We can then discuss a ‘question’, or two or three, from these subject categories that you would like to provide. Following is an example of one particular question illustrating the format for that topic. The numbers 1 to 4 relate to those set out in the table. Benchmark integrity / R-squared 1) Our fund has performed particularly well/badly against its benchmark. Why is this the benchmark and how appropriate is it for the particular fund and active

management or passive management mandate? 2) This benchmark is a) typical for the type of fund b) is approved by our compliance people. c) is the standard index for the region / asset allocation of the fund 3) The appropriateness of a benchmark is determined by a measure which shows how close it is to the fund it’s measuring. For a passive management fund the benchmark should be very close in characteristics to the fund. For an actively managed fund the benchmark

As this is an entirely voluntary endeavour we rely on interested TTF members to contribute to this work. Therefore may I ask you, if you are interested in Edition #9

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

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should have some quite different characteristics to the fund although still be appropriate enough. The range of difference between the active fund and its benchmark depends on how much risk is to be taken. The statistic to measure this is the ‘R-squared’ or R2. R-squared is a statistical measure that represents the percentage of a funds movements that can be explained by movements in the benchmark. Values range from 0 to 1 and are often described as percentages from 0 to 100%. An R-squared of 1 or 100% means all fund movements can be explained by changes in the benchmark or index. An R-squared between 80% and 100% indicates the fund’s performance pattern has been reasonably similar to the benchmark. You would expect this value for R-squared for

a passive fund. A fund with an R-squared at 70% or less indicates the fund would not act much like the benchmark, that is, more risk is taken relative to the index or benchmark. You would expect this value of R-squared for an actively managed fund. The lower the value the more risk is being taken. A pension fund paying fees for active management would not expect to find their fund’s R-squared is in the passive range. 4) Please tell me how we can verify or measure the appropriateness of the benchmark for the fund in question. If R2 is discussed, a further question could be, why is this not added to the fund fact sheets? The answer may be that ‘it’s a historic measure and tells you nothing about the future’. This is no excuse

as the fact sheet shows past performance so why not the relevance of the benchmark used. (end of questions example) If you want to participate in this initiative by providing questions and answers that will be featured in the Guide please contact Alan at asalamon@corpias.co.uk Your help is requested and will be greatly appreciated.

Alan Salamon is a company pension and investment specialist with experience of working on all sides of the pension proposition, buy, sell and customer. He works as a contractor, consultant and executive interim for any company that needs expert and enthusiastic resource to accomplish their company pension challenge. He is also a leader in the Transparency Task Force’s Stewardship & Decision-Making Team

CALL TO ACTION! IF YOU HAVE PENSIONS GOVERNANCE EXERIENCE AND WANT TO BE INCLUDED IN THIS IMPORTANT PROJECT PLEASE BE SURE TO CONTACT ALAN SOON. THANK YOU! 48

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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 7th February, 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: 19:00 to 20:00; wherever you are in the world (we have members from every continent), if you want to help the nations around the world to learn more efficiently from each other, get involved - we’re working on a Global Transparency Index and it’s at a very exciting stage! If you care about the financial services sector and want it to do a better job of looking after the needs of its customers and clients please join the 150+ people that are operating as volunteers within the Transparency Task Force Teams. It doesn’t matter how experienced or how senior you are. It doesn’t matter if you’re an expert or not. All that matters is that you understand the potential power of transparency in helping to drive the changes that are needed, and that you’re comfortable working collaboratively with others - the Transparency Task Force is very much a ‘team sport.’ If you or anybody you know want to become ‘part of the solution’ by being involved with one or more of these TTF teams please make contact without delay through andy.agathangelou@transparencytaskforce.org THANK YOU VERY MUCH - YOU MIGHT MAKE THE DIFFERENCE THAT MAKE’S ALL THE DIFFERENCE! Edition #9

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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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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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UK UK UK UK 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

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ABOUT TRANSPARENCY STATEMENTS Transparency Statements are a great way to show your support for our international campaign and to align your organisation with our intention to encourage greater transparency in financial services, right around the world. We believe that higher levels of transparency are a pre-requisite for fairer, safer and more efficient markets that deliver better value for money and better outcomes for consumers. Furthermore, because of the correlation between transparency and trustworthiness we believe our work will also have a positive impact on the reputation of the financial services market as a whole.

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

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

and email it to

To provide your transparency statement please complete the sentence:

Thank you very much indeed

andy.agathangelou@ transparencytaskforce.org

CALL TO ACTION! PLEASE BE SURE TO PROVIDE YOUR TRANSPARENCY STATEMENT AS SOON AS POSSIBLE. WEBSITE COMING SOON! Edition #9

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

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

Tom Tugendhat “I believe there ought to be higher levels of transparency in finan| Member of Parliament cial services because it is the only way that markets can function for Tonbridge and Malling without distortion to the benefit of the true customer, the individual.” Angela Rayner | Former Shadow Pensions Minister, now Shadow Secretary of State for Education and Shadow Minister for Women and Equalities Frank Whiffen Head of Strategic Business Development | Ferrier Pearce

“I believe there ought to be higher levels of transparency in financial services because pension funds should be run with a constant eye on efficiency – every penny should be accounted for therefore costs must be transparent and easy to understand – they must be explainable without jargon. The duty is to pay pensions and ensure that the sponsoring employers enjoy the benefits of reduced costs, we must avoid funds entering the Pension Protection Fund, it should be the last option”. “I believe there ought to be higher levels of transparency in financial services because this will enable better decision making. In turn, this should be communicated in an engaging way so that sensible and informal decisions can be made.”

Phil Ninness Business Development Manager | Accurate Data Services

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

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

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

Martin Campbell Director | Beacon Strategic  

Steve Conley Business Development Director | Workplace Pensions Direct

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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”.

The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


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

Edition #9

"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?”

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

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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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The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


“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 #9

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

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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 Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


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.

Edition #9

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

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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 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: 70

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The Transparency Times | www.transparencytaskforce.org | January 2017 | Edition #9


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:

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DATA SERVICES:

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BUILDING SOCIETIES:

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COMMUNICATION CONSULTANCIES:

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Edition #9

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

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Transparency Times Edition #9 January 2017  

The Transparency Times is the official publication of the Transparency Task Force, the collaborative, campaigning community dedicated to dri...