Jonathan Stapleton attended the second Transparency Symposium, held in London last week, to hear about the steps being taken to improve trust
The Transparency Task Force was set up last year to campaign for greater transparency in financial services and is initially focused on workplace pensions.
The group's second symposium – held at the London campus of Newcastle University last week – assembled speakers from academia, regulators, the asset management industry along with speakers from various industry and professional bodies to discuss transparency and how it could be improved.
Introducing the conference, Transparency Task Force chairman Andy Agathangelou explained: "Transparency is a pre-requisite for a fairer and more stable financial services industry."
The first speakers – Newcastle University Business School lecturer in strategy and corporate governance Anna Tilba and University College London professor of economics and finance Michelle Baddeley – presented interim findings of their research into the Local Government Pension Scheme (LGPS), titled The True Cost and Value of Pensions.
Tilba said, while there was extensive academic literature about the behaviour and performance of asset managers, very little was known about pension fund cost structures.
She said there was a lack of both transparency and data – and noted it was "near impossible" for scheme investors to figure out how much their investments were costing them.
Baddeley said the preliminary findings of their research found conflicts of interest in the pension fund value chain were "endemic" and higher fees were not leading to better financial performance for schemes.
Transparency is vital
The next speaker, former Investment Association chief executive Daniel Godfrey, said transparency was "vital" – noting that without transparency there could be no trust.
He said that, as agents, asset managers should be acting as "champions" of scheme investors and strive to deliver mandates at the lowest possible costs.
Will Goodhart – chief executive of the CFA Society of the UK, a professional body for analysts and fund managers – spoke next and said one of the reasons asset managers were not trusted more was because the vast majority of the population had no idea what they do.
He urged asset managers to do more to explain the real value of what they do rather than simply just compete for business.
He said: "We have been engaged in a competition for market share rather than engaging people with what we do, which I don't think has served us well."
Share Action chief executive Catherine Howarth talked about her work campaigning to open up the pensions industry to the "voices and experience of members" – and commented on the lack of member-nominated trustee requirements for master trust boards or rules to require policy-holder representation on independent governance committees.
Financial Conduct Authority director of competition Mary Starks talked about the regulator's asset management market study, which was launched last year following concerns raised over the asset management value chain.
She said the work was important as "even a small improvement in the ‘leanness and meanness' of the asset management market could deliver significant benefit to investors.
But she said concerns the regulator was only focused on price or regulating price were "misconceptions" – saying the key aim was to help investors compare costs between managers rather than focus on price alone.
She said the consultation was also looking at the role of investment consultants and asking whether their move into fiduciary management - and the provision of both advice and asset management services - was creating conflicts of interest.
Federation of Dutch Pension Schemes policy advisor Tomas Wijffels and PGGM Investments fund manager Frits Meerdink talked about the Dutch system, where pension funds publish asset management costs and transaction fees as a percentage of the average assets under management.
Although the publication of these costs is now mandatory, the rules were driven by recommendations issued by the Federation of Dutch Pension Schemes in November 2011, recommendations that have just been updated to improve definitions and comparability.
Meerdink said the publication of cost information has led to an increase in cost comparability between funds, increased media and media scrutiny, and increased fee discussions between trustees, service organisations and asset managers.
The final speaker of the day was Investment Association (IA) interim chief executive Guy Sears, who announced the launch of a steering group as part of its work on a revised industry disclosure code.
He said the IA had held off revising this code as there was a large amount of UK and European legislation in the pipeline – such as MiFID II and PRIIPS – which would have an impact on this issue.
Sears added that while a blueprint has been on the table since 2014, this will only be implementable once the final shape of EU rules become clear on both transaction cost disclosure and use of dealing commission.
He also said the IA also wanted to ensure the next generation disclosure code was compatible with accounting initiatives – including Pensions SORP and CIPFA guidance – before embedding it into pension scheme reporting.
In this week's Pensions Buzz, we want to know whether you support the ruling that defined benefit (DB) trustees must equalise GMPs in past transfers.
More than £130bn of company funds are tied up in pension schemes specifically due to lower than expected levels of life expectancy improvements over the last decade, according to PwC.
XPS Pensions Group has launched a scam protection checklist to assist trustees in meeting The Pensions Regulator’s (TPR) scam pledge initiative.
This week’s top stories included the rejection of an automatic guidance amendment in the Pension Schemes Bill, while The Pensions Regulator posted a sharp increase in the use of its powers.
The majority of the pensions industry agrees an eventual net-zero target should not be mandated for schemes as part of the Pension Schemes Bill, according to a Professional Pensions poll.