One of the key core values of the Millennial generation is Trust – a cornerstone of the financial services industry, naturally, yet something which has been severely damaged since the Financial Crisis.
Allied to this has been a growing demand for greater transparency across the industry. This has resulted in many people taking their pension in cash at retirement and transferring it into a bank account which is both risky (deposits are unsecured over £75,000) and inefficient as they have been earning negative returns in real terms (growth rates on investments have been lower than the increase in inflation/cost of living), meaning it is worth less over time.
If asset managers want to persuade Millennials to redirect the flow of this money (which would be a significant gain for them) once they come to retire, they will need to establish strong, trust-based relationships involving regular communication and valued decumulation products and services.
What other actions could asset managers take to support the push to encourage savers to engage more so they will entrust them with their money? One clear step would be to improve transparency of costs and charges; the forthcoming IDWG cost disclosure standards, backed by the FCA, give the sector a perfect opportunity to embrace a positive approach ensuring that schemes and savers are fully aware of the total costs they incur. Managers have a clear opportunity to embrace the new (voluntary) regime which would clearly demonstrate a new approach and place them in a more favourable light.
Trust is a function of engagement, so the more asset managers help to get people to think about their pensions and are written about in a positive light by the media, the more likely people are to take a more positive view of the industry and its services.
Ultimately, managers need to demonstrate value, a growing theme with the regulatory authorities who are demanding managers begin to publish a value assessment figure annually; while critics may argue publishing a single number may have limitations and I would agree, from the audience’s (e.g. savers) perspective, I still believe a single number is better than no number at all and, again, can be seen as a way to improve trust.
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Why Technology Matters
About Tom Hibbard
As Head of Business Development for ClaritEx, Tom’s focus is on understanding the industry's ever-changing challenges, and bringing relevant stakeholders together to establish how new technologies can make a real difference to reporting in the pensions industry. Tom will use his knowledge of emerging technologies to create and deliver the governance solutions that Simplitium will provide for the pensions market.
Formerly a Business Development Manager at KAS BANK, he has extensive knowledge of the global pensions industry landscape. During his time at the bank, Tom was instrumental in building the strategy and brand for the UK branch, playing a key role in establishing its position in the market and growing revenue.
ClaritEx is the next generation pension cost data monitoring solution for the pensions industry. Powered by Simplitium, the service helps both DB and DC pension schemes access the information needed to make better investment decisions and meet increased governance obligations. In response to the ever-growing demand for greater transparency across UK financial services, ClaritEx provides comprehensive transparency of costs to the UK pensions industry.
Cost transparency is achieved through a combination of innovative technology with a detailed and expert understanding of the investment value chain. By collecting consistent and comparable cost data from both schemes and their underlying service providers, ClaritEx delivers full assurance of costs to market participants in an industry which has, until now, struggled to achieve transparency. For further information, please visit www.simplitium.com/claritex.