Considering that online adoption / Wrap Implementation is a relatively new entity, where does the Implementation team sit?
Is it operations, sales or a stand alone function?
How do these roles typically work?
IFA Networks / Product providers (who have a Wrap offering):(whether it’s their own built platform or white labelled through an independent)
Platform Providers historically have a separate specialist function, with specialist peer groups for Group Pensions, protection and individual pensions, all reporting into a Head of Specialist Sales.
These individuals are typically referred to as Platform Consultants.
IFA Networks, work collaboratively with their chosen white labelled platform. The platform provider will offer onsite assistance with their partnered IFA firms. Once the IFA Network experiences strong net inflow of assets there would be a strong business case to recruit their own specialist Implementation team.
Platform consultants are targeted on traction. Meaning that after the Business Development Manager has won engagement of a particular IFA firm, the Platform consultants are targeted on the amount of advisers who position funds on platform. They have less strategic input and would normally be more sales focused than operational.
Historically, their bonus will be paid on Individual KPIs (signing up XYZ amount of Advisors per firm) with a corporate led bonus.
Independent platforms / (fully) functional Wraps:
Field based Implementation consultants have a greater operational control. These individuals (similar to the platform consultants with product providers) will come in after the Business Development Managers have won the initial business. Where it differs is that there will be more emphasis on functionality and operations, hence greater understanding of the integration dynamics and being the main bridge between relationship management (with IFAs) and the ‘what can actually be delivered message’ via operational teams.
Independent Implementation consultants are better placed to manage client expectations with regard to the Business Development Managers over-promising on delivery in order to win the business.
The independents do have field-based Implementation, but the majority is run via the telephone in tandem with the Business development Managers in the field.
Summary
Firstperson’s findings are that online adoption / Wrap Implementation and RDR consultancy work is already, and will continue to be, increasing in demand. Product Providers are continually looking to become more profitable, and due to Asset Management firms and Banks looking to offer wider investment solutions to the intermediary sector, they need to become ‘Service Providers’ rather than Product Providers.
Product Providers are continuing to look at how they can partner with IFA and Network firms to come in line with the RDR distribution demands.
Whether it’s a Product Provider, Network, Asset Management firm, or a bank, the market demands a higher level of skills from its permanent members of staff. It requires individuals to have a wider understanding of the breadth of Industry functions and how they interact with one another. This is presenting gaps in the market and skill shortages. The online adoption / Wrap Implementation role is the broker consultant of the future for the firms who wish to become RDR compliant and create a sustainable proposition for market.
Product Providers will need a combination of experienced external hires and be open to individuals who have Wrap expertise but in a more sales focused roles currently. There are more sales individuals than online adoption / Wrap Implementation professionals in the market place. Being open to these backgrounds will create a wider pool to search from and create better results. If this route is to be considered, it is essential that the package would be weighted to a higher basic salary with less bonus potential. This will facilitate a more successful transition for sales professionals into a role that requires more emphasis on knowledge rather than sales skills. It would also support the demand for better service and lower emphasis on product selling. Finally, internal promotion of potential talent would be crucial. The experienced hires will be a critical part of creating and managing a ast track programme for suitable individuals.
Firstperson believes that Product Providers who are currently looking at Wrap Implementation and Sales campaigns need to consider the way they go about their search. This exercise would compliment a more detailed, collaborative and partnered approach with senior stakeholders, actual decision makers and a specialist recruitment firm.
The chosen recruitment firm needs to be knowledgeable and more focused on recognising individuals who can demonstrate dynamism, adaptability and a more holistic understanding of financial services distribution and its challenges it faces in the run up to the RDR. This is where Firstperson can add value.
Simon Evans, Lead Consultant
Simon.evans@firstperson-executive.com
0117 914 2314
Tuesday, 5 July 2011
Monday, 4 July 2011
Clients and Agencies : Has 'The Special Relationship' Changed?
Clients and Agencies: Has the ‘Special Relationship’ Changed?
The ‘Special Relationship’ is a phrase used to describe the exceptionally close relations between the UK and the USA, following its use in a 1946 speech by Winston Churchill. Although there has been much talk of recent strains to this relationship, the level of cooperation between the countries remains ‘unparalleled’ among major powers.
In Executive Search, which is traditionally the recruitment vehicle of choice for senior and strategically important hires, we have considered the client/provider relationship a special one too. Since hiring a key executive is such an important business decision, the Executive Recruiter must be seen as a trusted and well-informed partner, and the relationship very much a dialogic and consultative process. Over a period of time a strong bond is formed between a client and their chosen Executive Recruitment partner. The role of the best Executive Recruitment agencies has therefore evolved over time to be more akin to that of a Management Consultant. In fact, Executive Search was originally an offshoot from Management Consulting, and the best Executive Search professionals strive to maintain that professionalism and ability.
This is not surprising considering that we:
• Ensure confidentiality/discretion. We can be counted upon to be discreet in our enquiries for a potential candidate where company confidentiality is important, especially in the case of senior level recruitment, or sensitive market considerations, where careless talk can affect the bottom line.
• Keep costs down. Consider the high cost of maintaining an in house recruitment department. While Executive Search firms charge in the range of 20% to 35% of a candidate’s annual salary for the first year, this is still only a one-time cost and far less than the cost of running your own recruiting department. In addition, Executive Recruitment agencies will deliver a manageable selection of qualified and vetted candidates, meaning a client’s senior managers have more time to focus on their daily priorities. This can have huge monetary repercussion on the bottom line of a company. An Executive Search firm’s networking capability also gives access to candidates who are beyond the reach of an in-house recruitment team, talent that is not on the open market.
• Protect clients’ own employees. When a company hires an Executive Recruitment agency to fulfill its recruiting needs, the recruitment firm agrees not to poach people from that company for the duration of the contract.
• Provide insider knowledge and market information. Recruitment firms are in constant touch with a large number of candidates across several industries. We build strong personal relationship with candidates and are able to get valuable industry information and insight from them. Our unique dialogue with the market can deliver insights about an employer’s brand and attraction to candidates, as well as information that can help make decisions about strategy and structuring.
• Help set the right salary package. We will tell you if your offer is competitive, excessive or below industry standard, and help ensure retention of key candidates once they have been recruited.
• Bring a fresh perspective to the recruitment process. Working with an external agency that is removed from the internal politics and preferences that plague senior hires provides distinct advantages. A professional Executive Search agency will bring an objectivity and rigorous selection process, allowing them to present the best candidate for the requirement.
• Provide an end-to-end service. Executive Search professionals can be involved throughout the entire hiring process- identifying appropriate candidates, approaching and qualifying them, conducting detailed interviews, and presenting well-qualified and vetted candidates. We also carefully manage the resignation and offer process, and maintain contact with candidates as they start their new role.
• Keep client interests at the heart of the search. Executive Search professionals are acutely aware of their position as brand ambassadors for their clients. We articulate and promote the qualities of the client that make them aspirational as an employer. The best Search consultancies will have done their research and be well-informed about the client’s offering, their reputation, changes within the business and the industry, and future prospects. Senior Executives (themselves well-placed, professional and appropriately rewarded already) appreciate this level of engagement, and are more likely to consider a move seriously when an approach is professional and well-informed.
But given the volatile nature of markets recently, has this ‘special relationship’ changed? Are clients less likely to value all the tangible and intangible benefits of using a professional Search consultancy? Would they prefer an in-house recruitment capability to an external hiring solution?
There is no doubt that the proliferation of job boards, the increasing tendency to have an internal Resourcing Specialist on board, the perceived expense of using retained search, the tapping-up of internal referrals and the belief that Search consultancies ‘take months’ to deliver results, have led some to question the ‘special relationship’. There has been turmoil in the economy over the past few years and this has impacted the recruitment of Senior Executives. But it is widely agreed that the picture is improving. Following a precipitous 32.5% decline in 2009 (according to the Association of Executive Search Consultants, AESC), the industry grew by an average of 28.5% in 2010 and is on track to do well again in 2011.
Does this mean the worst is over, clients will once more appreciate the value in engaging Search firms, and the ‘special relationship’ is back on track? ‘Relationship’ implies longevity and resilience and trust. Though the client/Search consultancy partnership has been shaken, key concepts such as professionalism, well-informed competence, standards of ethical behaviour, and flexibility of approach, will ensure that the relationship will continue into the future, and that more ‘special relationships’ will grow and flourish too.
Gina Sargunar
Service Delivery & Research
The ‘Special Relationship’ is a phrase used to describe the exceptionally close relations between the UK and the USA, following its use in a 1946 speech by Winston Churchill. Although there has been much talk of recent strains to this relationship, the level of cooperation between the countries remains ‘unparalleled’ among major powers.
In Executive Search, which is traditionally the recruitment vehicle of choice for senior and strategically important hires, we have considered the client/provider relationship a special one too. Since hiring a key executive is such an important business decision, the Executive Recruiter must be seen as a trusted and well-informed partner, and the relationship very much a dialogic and consultative process. Over a period of time a strong bond is formed between a client and their chosen Executive Recruitment partner. The role of the best Executive Recruitment agencies has therefore evolved over time to be more akin to that of a Management Consultant. In fact, Executive Search was originally an offshoot from Management Consulting, and the best Executive Search professionals strive to maintain that professionalism and ability.
This is not surprising considering that we:
• Ensure confidentiality/discretion. We can be counted upon to be discreet in our enquiries for a potential candidate where company confidentiality is important, especially in the case of senior level recruitment, or sensitive market considerations, where careless talk can affect the bottom line.
• Keep costs down. Consider the high cost of maintaining an in house recruitment department. While Executive Search firms charge in the range of 20% to 35% of a candidate’s annual salary for the first year, this is still only a one-time cost and far less than the cost of running your own recruiting department. In addition, Executive Recruitment agencies will deliver a manageable selection of qualified and vetted candidates, meaning a client’s senior managers have more time to focus on their daily priorities. This can have huge monetary repercussion on the bottom line of a company. An Executive Search firm’s networking capability also gives access to candidates who are beyond the reach of an in-house recruitment team, talent that is not on the open market.
• Protect clients’ own employees. When a company hires an Executive Recruitment agency to fulfill its recruiting needs, the recruitment firm agrees not to poach people from that company for the duration of the contract.
• Provide insider knowledge and market information. Recruitment firms are in constant touch with a large number of candidates across several industries. We build strong personal relationship with candidates and are able to get valuable industry information and insight from them. Our unique dialogue with the market can deliver insights about an employer’s brand and attraction to candidates, as well as information that can help make decisions about strategy and structuring.
• Help set the right salary package. We will tell you if your offer is competitive, excessive or below industry standard, and help ensure retention of key candidates once they have been recruited.
• Bring a fresh perspective to the recruitment process. Working with an external agency that is removed from the internal politics and preferences that plague senior hires provides distinct advantages. A professional Executive Search agency will bring an objectivity and rigorous selection process, allowing them to present the best candidate for the requirement.
• Provide an end-to-end service. Executive Search professionals can be involved throughout the entire hiring process- identifying appropriate candidates, approaching and qualifying them, conducting detailed interviews, and presenting well-qualified and vetted candidates. We also carefully manage the resignation and offer process, and maintain contact with candidates as they start their new role.
• Keep client interests at the heart of the search. Executive Search professionals are acutely aware of their position as brand ambassadors for their clients. We articulate and promote the qualities of the client that make them aspirational as an employer. The best Search consultancies will have done their research and be well-informed about the client’s offering, their reputation, changes within the business and the industry, and future prospects. Senior Executives (themselves well-placed, professional and appropriately rewarded already) appreciate this level of engagement, and are more likely to consider a move seriously when an approach is professional and well-informed.
But given the volatile nature of markets recently, has this ‘special relationship’ changed? Are clients less likely to value all the tangible and intangible benefits of using a professional Search consultancy? Would they prefer an in-house recruitment capability to an external hiring solution?
There is no doubt that the proliferation of job boards, the increasing tendency to have an internal Resourcing Specialist on board, the perceived expense of using retained search, the tapping-up of internal referrals and the belief that Search consultancies ‘take months’ to deliver results, have led some to question the ‘special relationship’. There has been turmoil in the economy over the past few years and this has impacted the recruitment of Senior Executives. But it is widely agreed that the picture is improving. Following a precipitous 32.5% decline in 2009 (according to the Association of Executive Search Consultants, AESC), the industry grew by an average of 28.5% in 2010 and is on track to do well again in 2011.
Does this mean the worst is over, clients will once more appreciate the value in engaging Search firms, and the ‘special relationship’ is back on track? ‘Relationship’ implies longevity and resilience and trust. Though the client/Search consultancy partnership has been shaken, key concepts such as professionalism, well-informed competence, standards of ethical behaviour, and flexibility of approach, will ensure that the relationship will continue into the future, and that more ‘special relationships’ will grow and flourish too.
Gina Sargunar
Service Delivery & Research
Thursday, 23 June 2011
Increasing Demands and Significant Risks: The Growing World of Asset Transition
What Is Asset Transition And Why Is It In Demand?
Asset Transitions occur when a client wishes to replace an investment manager or change the investment strategy of a pension scheme. This can be an incredibly complex and difficult process requiring an art as well as a technical skill, and the potential risks involved are significant. As the Defined Benefit market shrinks and the Defined Contribution market continues to mature, Asset Transition is likely to become an increasingly high profile and competitive area, with highly sought after experts and reputations that are key to winning new business.
Historically, Asset Transition was the domain of the fund management groups, but the market is seeing a rising number of insurance companies and platform providers who are entering this space as transitions become more mainstream and demand increases. Companies with a proven track record of success and known capability within Asset Transition are finding that it can make the difference in winning a new scheme. However, Asset Transition is not an easy thing to do, and as new businesses enter the market it may be that they do not appreciate the work and intricacies required to be successful. In the DC world, the complexity arises from the fact that the assets are attached to each member based on their individual investment choices, and it is key to preserve the value of these assets whilst minimising out of market exposure. The process can be very complex, firstly because of issues arising from transitioning the funds themselves and secondly as assets need to be attributed accurately back to the members. This is an involved process that can take many weeks to plan and execute successfully, and every case is different.
Asset Transition expertise is becoming more in demand as competition increases, platforms proliferate, and the DC market matures. The more traditional method of liquidating assets to then reinvest can often reduce the value by around 1%, a significant implication for investors nearing retirement and a driver for Asset Transition, which can be more efficient. Regulation is driving platforms to provide reregistration of assets for individuals, and Asset Transition is the answer to this in the Corporate Pensions arena. Transitions have always happened within DB, but DC is more complicated and calls for different skills. DC Asset transition demands a lot of technical skill and knowledge, but there is also a definite art to it, and there are more techniques now than there have been previously. Transitions in the DC space are more visible to members, thus attracting more attention, and also assets to be transitioned tend to be larger in DC. This profile of skills is much sought after and not easy to find. Because of all this, it is becoming increasingly popular to promote from within and for companies to ‘grow their own’ expertise in house. The advantage here is that these individuals will be familiar with the company’s set up and internal systems and their capability is a known quantity.
The pace of change is also driving the demand for DC Asset Transition skills. Employers and trustees are reviewing their schemes, going to more platforms and diversifying their assets. There is an increased demand for flexibility, for blended funds that allow more choice and modification. The market is seeing a lot of market and proposition developments that continue to drive dynamism and competition. This, coupled with a greater awareness of the need and ability to minimise out of market risk and transaction cost through carefully managing transitions, is driving the demand for this rare skill set.
The Pitfalls Of Getting It Wrong
Getting the process wrong can be a very expensive mistake to make. DC Asset Transition is highly visible to members, and in an extremely competitive marketplace you can be sure that competitors and customers are watching closely for mistakes. There’s a significant reputational risk involved here, as well as the responsibility to the interests of members. Volatile markets only further emphasise the need to manage out of market risk and minimise the cost of transactions. There are also risks in the need to work with other parties as schemes transition. Those working inside fund managers and platform providers work with Third Party Administrators and Consultants, handling sometimes very high profile cases. If the work isn’t accurate on both sides then there is a huge cost implication, a significant amount of work involved to correct the mistake, as well as the risk to your reputation. If neither party accepts the mistake or moves to rectify the errors, then potentially the value of members’ investments could be negatively impacted. Given that the provision of bad or inaccurate advice has recently been a big media story, and the increased public concerns over pensions, perhaps it will be mistakes in transitioning our pension schemes that provide the next public scandal for Financial Services.
One thing is sure, as the DC world continues to grow and Asset Transition becomes increasingly sophisticated and well-known then there will be a growing number of watchful eyeballs scrutinising every move of their vital pensions as the media and regulators sharpen their claws for those who make mistakes.
Giles Lewis, June 2011
With thanks to those who kindly contributed their time and thinking to help me put this piece together.
Asset Transitions occur when a client wishes to replace an investment manager or change the investment strategy of a pension scheme. This can be an incredibly complex and difficult process requiring an art as well as a technical skill, and the potential risks involved are significant. As the Defined Benefit market shrinks and the Defined Contribution market continues to mature, Asset Transition is likely to become an increasingly high profile and competitive area, with highly sought after experts and reputations that are key to winning new business.
Historically, Asset Transition was the domain of the fund management groups, but the market is seeing a rising number of insurance companies and platform providers who are entering this space as transitions become more mainstream and demand increases. Companies with a proven track record of success and known capability within Asset Transition are finding that it can make the difference in winning a new scheme. However, Asset Transition is not an easy thing to do, and as new businesses enter the market it may be that they do not appreciate the work and intricacies required to be successful. In the DC world, the complexity arises from the fact that the assets are attached to each member based on their individual investment choices, and it is key to preserve the value of these assets whilst minimising out of market exposure. The process can be very complex, firstly because of issues arising from transitioning the funds themselves and secondly as assets need to be attributed accurately back to the members. This is an involved process that can take many weeks to plan and execute successfully, and every case is different.
Asset Transition expertise is becoming more in demand as competition increases, platforms proliferate, and the DC market matures. The more traditional method of liquidating assets to then reinvest can often reduce the value by around 1%, a significant implication for investors nearing retirement and a driver for Asset Transition, which can be more efficient. Regulation is driving platforms to provide reregistration of assets for individuals, and Asset Transition is the answer to this in the Corporate Pensions arena. Transitions have always happened within DB, but DC is more complicated and calls for different skills. DC Asset transition demands a lot of technical skill and knowledge, but there is also a definite art to it, and there are more techniques now than there have been previously. Transitions in the DC space are more visible to members, thus attracting more attention, and also assets to be transitioned tend to be larger in DC. This profile of skills is much sought after and not easy to find. Because of all this, it is becoming increasingly popular to promote from within and for companies to ‘grow their own’ expertise in house. The advantage here is that these individuals will be familiar with the company’s set up and internal systems and their capability is a known quantity.
The pace of change is also driving the demand for DC Asset Transition skills. Employers and trustees are reviewing their schemes, going to more platforms and diversifying their assets. There is an increased demand for flexibility, for blended funds that allow more choice and modification. The market is seeing a lot of market and proposition developments that continue to drive dynamism and competition. This, coupled with a greater awareness of the need and ability to minimise out of market risk and transaction cost through carefully managing transitions, is driving the demand for this rare skill set.
The Pitfalls Of Getting It Wrong
Getting the process wrong can be a very expensive mistake to make. DC Asset Transition is highly visible to members, and in an extremely competitive marketplace you can be sure that competitors and customers are watching closely for mistakes. There’s a significant reputational risk involved here, as well as the responsibility to the interests of members. Volatile markets only further emphasise the need to manage out of market risk and minimise the cost of transactions. There are also risks in the need to work with other parties as schemes transition. Those working inside fund managers and platform providers work with Third Party Administrators and Consultants, handling sometimes very high profile cases. If the work isn’t accurate on both sides then there is a huge cost implication, a significant amount of work involved to correct the mistake, as well as the risk to your reputation. If neither party accepts the mistake or moves to rectify the errors, then potentially the value of members’ investments could be negatively impacted. Given that the provision of bad or inaccurate advice has recently been a big media story, and the increased public concerns over pensions, perhaps it will be mistakes in transitioning our pension schemes that provide the next public scandal for Financial Services.
One thing is sure, as the DC world continues to grow and Asset Transition becomes increasingly sophisticated and well-known then there will be a growing number of watchful eyeballs scrutinising every move of their vital pensions as the media and regulators sharpen their claws for those who make mistakes.
Giles Lewis, June 2011
With thanks to those who kindly contributed their time and thinking to help me put this piece together.
Friday, 15 April 2011
Reasons to be Cheerful
2008 saw a global financial crisis unfold and this triggered a massive debate in, among other areas, global pensions. Since Lehman Brothers’ meltdown in September 2008, the impact on the financial world in general, and pension schemes in particular, has been enormous, with many swinging from surplus to deficit in a matter of weeks.
According to recent research from Pension Capital Strategies, private sector UK pension schemes had a funding level of 98% in October 2008, under the standard accounting measure used in company reports, but this had fallen to 79% a year later. Strong performance in equity markets since March 2009 has not been sufficient to fill the gap – if anything, those gains are being more than offset by falling bond spreads and increasing liabilities. Rising longevity, uncertainty about inflation and interest rates and unpredictability within the equity and bond markets have added to the issues being faced. Many companies are now looking at risks within their pension schemes.
Even before the crisis, companies were transferring investment risk from employer to employee. In 2000, there were only seven companies in the FTSE 100 that had closed their defined benefit or final salary schemes to new entrants. Today, the picture is almost entirely the opposite, and there are only three (Tesco, Cadbury and Diageo) that still run a defined benefit scheme that is open to new members. And in more recent times, a large number of companies have taken this trend one step further and closed defined benefit schemes to future accrual. Vodafone, Barclays, Whitbread and Fujitsu have all closed schemes to existing employees. Following the precedent set by these high-profile companies, it seems inevitable that others will follow.
Transference of risk must be done fairly and with clarity. It is obvious that DC schemes are not as rewarding for long-term employees in the same way as DB schemes are. Employers have shifted emphasis from retention and reward to a transactional contract. Decisions and options need to be explained clearly: many people lack basic information or are sufficiently financially literate to make informed choices, though this is increasingly something that Government is legislating to improve.
‘The capital market volatility of the last few years has left DC members reeling. Nobody told them that all the risk and corresponding responsibility for decision making sits squarely with them. By acknowledging that a DC pension is something that needs to be done by someone rather than to them, service providers can start to develop propositions and messages that are better suited to an increasingly discerning audience. The industry would be well advised to start treating its customers as exactly that - consumers of a product for which there are numerous substitutes. Fully understanding the motivations and behaviours of our target audience is essential to the development of the next evolution of DC. The time for complacency is over’, agrees Nigel Aston, Director – DCisions
Innovation must meet needs, ensuring that new ideas deliver value, and creative minds must find new ways of meeting client needs. The Government has signalled their agreement on the need for pension reform, though the full scope of programmes is unclear. Professionals in the business conclude:
‘Market dislocations provide an opportunity for truly active managers to achieve good risk-adjusted returns and those that take a macro view of the world will find opportunities in the current crisis’, said Mark Hodgson, Managing Director of Gatemore Capital Investment.
According to Colin Williams, MD of Friends Life, ‘This watershed moment for pensions and savings may be leaving us gasping for breath. But Iain Duncan Smith’s lofty ambition to ‘make it crystal clear to young savers that it pays to save’ could be the coup de grace for savings inertia in the UK. This directive must continue to inform the decisions the coalition makes, but the industry must seize the initiative it is being handed. Changes to pensions and savings will continue to circle like confetti at a wedding, but private provision, so often the bridesmaid, is ready for its big day’.
Without credible innovation and viable products, deep-seated problems cannot be solved. Analysts and experts agree that the State will move away from pension provision, and employers will want to at best share the burden with the employee. There seems to be a responsible, informed and reasoned debate taking place right now among all stakeholders. On the surface it appears to be about pension provision in the future, but actually, the debate is about the kind of society we wish to live in. The hope is it will be safe, secure and sustainable and fair.
According to recent research from Pension Capital Strategies, private sector UK pension schemes had a funding level of 98% in October 2008, under the standard accounting measure used in company reports, but this had fallen to 79% a year later. Strong performance in equity markets since March 2009 has not been sufficient to fill the gap – if anything, those gains are being more than offset by falling bond spreads and increasing liabilities. Rising longevity, uncertainty about inflation and interest rates and unpredictability within the equity and bond markets have added to the issues being faced. Many companies are now looking at risks within their pension schemes.
Even before the crisis, companies were transferring investment risk from employer to employee. In 2000, there were only seven companies in the FTSE 100 that had closed their defined benefit or final salary schemes to new entrants. Today, the picture is almost entirely the opposite, and there are only three (Tesco, Cadbury and Diageo) that still run a defined benefit scheme that is open to new members. And in more recent times, a large number of companies have taken this trend one step further and closed defined benefit schemes to future accrual. Vodafone, Barclays, Whitbread and Fujitsu have all closed schemes to existing employees. Following the precedent set by these high-profile companies, it seems inevitable that others will follow.
Transference of risk must be done fairly and with clarity. It is obvious that DC schemes are not as rewarding for long-term employees in the same way as DB schemes are. Employers have shifted emphasis from retention and reward to a transactional contract. Decisions and options need to be explained clearly: many people lack basic information or are sufficiently financially literate to make informed choices, though this is increasingly something that Government is legislating to improve.
‘The capital market volatility of the last few years has left DC members reeling. Nobody told them that all the risk and corresponding responsibility for decision making sits squarely with them. By acknowledging that a DC pension is something that needs to be done by someone rather than to them, service providers can start to develop propositions and messages that are better suited to an increasingly discerning audience. The industry would be well advised to start treating its customers as exactly that - consumers of a product for which there are numerous substitutes. Fully understanding the motivations and behaviours of our target audience is essential to the development of the next evolution of DC. The time for complacency is over’, agrees Nigel Aston, Director – DCisions
Innovation must meet needs, ensuring that new ideas deliver value, and creative minds must find new ways of meeting client needs. The Government has signalled their agreement on the need for pension reform, though the full scope of programmes is unclear. Professionals in the business conclude:
‘Market dislocations provide an opportunity for truly active managers to achieve good risk-adjusted returns and those that take a macro view of the world will find opportunities in the current crisis’, said Mark Hodgson, Managing Director of Gatemore Capital Investment.
According to Colin Williams, MD of Friends Life, ‘This watershed moment for pensions and savings may be leaving us gasping for breath. But Iain Duncan Smith’s lofty ambition to ‘make it crystal clear to young savers that it pays to save’ could be the coup de grace for savings inertia in the UK. This directive must continue to inform the decisions the coalition makes, but the industry must seize the initiative it is being handed. Changes to pensions and savings will continue to circle like confetti at a wedding, but private provision, so often the bridesmaid, is ready for its big day’.
Without credible innovation and viable products, deep-seated problems cannot be solved. Analysts and experts agree that the State will move away from pension provision, and employers will want to at best share the burden with the employee. There seems to be a responsible, informed and reasoned debate taking place right now among all stakeholders. On the surface it appears to be about pension provision in the future, but actually, the debate is about the kind of society we wish to live in. The hope is it will be safe, secure and sustainable and fair.
Tuesday, 23 November 2010
Cart Before the Horse?
Cart Before the Horse?
Simon Evans, Lead Consultant, RDR
A bright new age, driven by innovation and new technologies, beckons to us all: No longer do we need to trudge down to the restaurant, or evening classes to learn a new language, or queue for hours for tickets. The internet, mobile communication, and other frankly amazing new ‘star-trek’ devices have changed every aspect of our lives
So too in business, specifically, (since that is where I am expert), the Financial Services sector. It is in the midst of unprecedented change. Indeed, it would not be wrong to say this is a transformation that is under way, and the landscape will not be recognisable in a few years.
We are familiar with the impact RDR will have in just over 24 Months. IFAs are already assessing its impact, and devising ways of meeting all the (sometimes conflicting) stakeholder requirements. Wrap platforms are viewed as key to ensuring that independent advice is given in an efficient and cost-effective (and technologically advanced) manner, and there are a wide range of Wrap offerings available to choose from. Where early adopters such as CoFunds, Standard Life, Transact, Fidelity led the way, Barclays will follow
But have they been rewarded for their efforts? Early investors in innovation traditionally and justly reap the financial benefit of their trail-blazing. They made all the initial effort, after all, and they were far-sighted enough to study their market place, see the need, and act to fill it. Given today’s announcement of Macquarie exiting the UK wrap provision market, due to ‘challenging’ business conditions, what are we to think?
In the context of the UK, the demand is massive, and Macquarie folding is particularly puzzling as the size of the potential Wrap and Platform market is estimated at £1.8 trillion of assets and so far all platforms combined total just over 100Bn.
This leaves a huge potential market still available as the Wrap and Platform development in the UK is still in its early stages. So there is more than enough business to go round.
I would guess "execution challenges", another cited reason given by the company, is the real key in this case, as this would indicate a failure to deliver despite high start-up expenditure, and hence reduced business volumes.
Time and time again it has been proved that large reserves, inducing vast expenditure, are not a recipe for success. AMEX, Lifetime, and now Macquarie (not to mention many expensive false starts by other providers) go to prove my point.
In fact, good business management, good systems and delivering a service that meets market expectation are what are essential, and not merely the ‘jump on the bandwagon’ ethos, the ‘dazzle them with lights and mirrors’ adoption of new technology.
Innovation for innovation’s sake does not work. Due diligence, with it’s implied study of the market, and of technology, with a clear view of their aims and ambitions are as important as the resources (money - yes, but crucially the right people, too).
The news of Macquarie’s demise is already resulting in scepticism and caution: IFAs are watching to see who will be next. Do Transact, Ascentric , Novia and Nucleus have a firm enough footing to weather the turbulence before technology is outdated and the solvency rules catch them out? Are their sponsors’ pockets deep enough, and are they patient enough to stay in the market? And will IFAs thank their stars for a wake-up call to properly investigate the provider they sign up to? Some providers have indeed spent time and money in developing a sound business model, together with an understanding of the Wrap market, and will succeed. Others won’t be so lucky.
So yes, technology is amazing, and we live in exciting times. But there is need too, for the old-fashioned stuff: common sense, diligence, caution and the long view.
Simon Evans, Lead Consultant, RDR
A bright new age, driven by innovation and new technologies, beckons to us all: No longer do we need to trudge down to the restaurant, or evening classes to learn a new language, or queue for hours for tickets. The internet, mobile communication, and other frankly amazing new ‘star-trek’ devices have changed every aspect of our lives
So too in business, specifically, (since that is where I am expert), the Financial Services sector. It is in the midst of unprecedented change. Indeed, it would not be wrong to say this is a transformation that is under way, and the landscape will not be recognisable in a few years.
We are familiar with the impact RDR will have in just over 24 Months. IFAs are already assessing its impact, and devising ways of meeting all the (sometimes conflicting) stakeholder requirements. Wrap platforms are viewed as key to ensuring that independent advice is given in an efficient and cost-effective (and technologically advanced) manner, and there are a wide range of Wrap offerings available to choose from. Where early adopters such as CoFunds, Standard Life, Transact, Fidelity led the way, Barclays will follow
But have they been rewarded for their efforts? Early investors in innovation traditionally and justly reap the financial benefit of their trail-blazing. They made all the initial effort, after all, and they were far-sighted enough to study their market place, see the need, and act to fill it. Given today’s announcement of Macquarie exiting the UK wrap provision market, due to ‘challenging’ business conditions, what are we to think?
In the context of the UK, the demand is massive, and Macquarie folding is particularly puzzling as the size of the potential Wrap and Platform market is estimated at £1.8 trillion of assets and so far all platforms combined total just over 100Bn.
This leaves a huge potential market still available as the Wrap and Platform development in the UK is still in its early stages. So there is more than enough business to go round.
I would guess "execution challenges", another cited reason given by the company, is the real key in this case, as this would indicate a failure to deliver despite high start-up expenditure, and hence reduced business volumes.
Time and time again it has been proved that large reserves, inducing vast expenditure, are not a recipe for success. AMEX, Lifetime, and now Macquarie (not to mention many expensive false starts by other providers) go to prove my point.
In fact, good business management, good systems and delivering a service that meets market expectation are what are essential, and not merely the ‘jump on the bandwagon’ ethos, the ‘dazzle them with lights and mirrors’ adoption of new technology.
Innovation for innovation’s sake does not work. Due diligence, with it’s implied study of the market, and of technology, with a clear view of their aims and ambitions are as important as the resources (money - yes, but crucially the right people, too).
The news of Macquarie’s demise is already resulting in scepticism and caution: IFAs are watching to see who will be next. Do Transact, Ascentric , Novia and Nucleus have a firm enough footing to weather the turbulence before technology is outdated and the solvency rules catch them out? Are their sponsors’ pockets deep enough, and are they patient enough to stay in the market? And will IFAs thank their stars for a wake-up call to properly investigate the provider they sign up to? Some providers have indeed spent time and money in developing a sound business model, together with an understanding of the Wrap market, and will succeed. Others won’t be so lucky.
So yes, technology is amazing, and we live in exciting times. But there is need too, for the old-fashioned stuff: common sense, diligence, caution and the long view.
Monday, 22 November 2010
The Silver Lining
The Silver Lining
Simon Evans, Lead Consultant, RDR
RDR is coming, and as the deadline approaches, talk everywhere is of the problems and confusions it will bring. A recent survey by JP Morgan of over 200 Wealth Management firms revealed that:
Simon Evans, Lead Consultant, RDR
RDR is coming, and as the deadline approaches, talk everywhere is of the problems and confusions it will bring. A recent survey by JP Morgan of over 200 Wealth Management firms revealed that:
- Fewer than half say they currently meet the RDR's definition of independence and can advise across the full range of retail investment products.
- 30% expect outsourcing of wealth management by IFAs to increase significantly
- 43% of wealth management firms expect the cost of implementing the RDR to be high, or very high
- Most believe the cost of RDR is to be met through reduced profit margins, lower staff remuneration, and higher client charges
There are plans by some firms to look at ways around the need to conform. There is a growing trend of UK-based IFA firms looking to use 'passporting' to benefit from the regulatory regime of a different country as RDR draws closer.
Faced with a threat of extniction after 2012, the opportunity to continue advising in the UK from a foreign base is a tempting proposition for those who are unwilling or unable to conform to the RDR's requirements.
But why not look at the positives?
Professionalism: The past 18 months have challenged traditional thinking about investing and asset allocation, diversification and correlation. Wealth managers must now be prepared to respond to clients' needs to understand, access and communicate with advisors regarding their relationship, products and services. And advisors must have sufficient information from objective sources regarding all products and services, to answer questions regarding performance and degree of risk.
The advent of RDR is prompting a structural shift in value away from old-fashioned providers, and towards the advisor as customer.
Professionalism will increase, though many do concede that the cost of qualifications will be steep and more qualified staff will expect to earn more. Dr Peter Williams, Head of Industry Development at Aegon, accepts this fact, but believes that increased professionalism within the sector is vital.
He states that:'The RDR started off with the right objectives. Two in particular stood out (for me):
(1) To increase consumers' trust and confidence, and (2) Increase the number of consumers using our (provider) goods and (adviser) services. I firmly believe that the move to Level 4 is a step in the right direction and will go a long way to achieving 1. However at the top echelons of advice, Level 6 - Chartered Financial Planner - should be seen as the real goal. All the independent research I have seen and my own academic research, points to Chartered being the level that the consumer expects. This is not to say that all advisers will want to be, or will need to be, Chartered. The future will have various levels of advice and qualification'.
Operational Efficiencies: The issue of requiring transparency, accessibility and performance by clients means IFAs will need to re-engineer their services in order to reduce costs, and may do so using fund supermarkets and wrap accounts, both of which offer real opportunities to cut operational costs.
Outsourcing: Also, more than half of wealth management firms surveyed believe outsourcing of wealth management by advisory firms will increase, with 30% believing it will increase significantly. Solicitors and Accountants outnumber IFAs 5:1, suggesting IFAs will be at an advantage in the professional connections market. 80% of Solicitors and Accountants currently refer clients to an IFA, and both these groups of professionals believe this will increase after RDR implementation. The RDR will encourage more solicitors and accountants to forge alliances with IFAs as professional standards become clearer and more aligned to their own. RDR would raise the IFA's competitiveness in these professional markets.
IFAs themselves widely acknowledge the commercial and client benefits of oursourcing. Most expect to outsource in order to access expert fund research.
Research conducted by Axa recently reveals that many consumers prefer IFA channels to Banks or Accountants, but acknowledge there is a huge difference between preference and reality. Axa believes the contrast between agreement and acceptance is a clear indication that IFAs who are helped to market to new audiences will capture market share, despite concerns about the impact of RDR.
Aviva's research meanwhile, indicates that large numbers of IFAs will leave the industry, while those who remain are likely to adopt business models to service fewer and wealthier clients. As with any dislocation, there will be winners and losers, and it is the fear of losing (in some cases the expectation of losing), that is driving most of the industry resistance to the RDR. The conclusion is similar to Axa's: Customers on the whole will be better off in terms of price, access and performance, and IFAs need help to achieve this.
At the heart of all the changes will be the need for system changes: Extra IT resources, and therefore expertise in terms of design, implementation and training will be in demand. Also, with many IFAs wondering if they will be able to afford to service their smaller clients, the solution may need to be based on technology to be cost-effective. Online support could be the focus moving forward, and wrap providers already provide an online forum to support IFAs, together with IT support and training to ensure their platform fits the IFA's business objectives.
Many wealth managers believe demand for their services will increase, partly as others exit the industry, or are forced tomerge. A number hope that the entire advice sector will adopt a GP/Specialist structure, with generalist planning outsourcing to specialist investment managers.
Certainly the impact of RDR goes beyond the issue of re-training and it's associated costs and disruptions. What will emerge at the end of the implementation process will be a professional, innovative, responsive and accountable body of IFAs, with consumer confidence and growth as their reward.
Postscript: MPs have been granted a three-hour slot for a full Parliamentary debate on the RDR. This follows on from the first half-hour RDR debate MP Harriet Baldwin, a fromer investment manager at JP Morgan, secured last month. Financial Secretary to the Treasury, Mark Hoban MP, caused anger among IFAs during that debate when he compared the current Level-3 minimum qualification for advisors to that of a McDonald's shift worker.
Ms Baldwin's office says the correspondence from IFAs 'has not stopped' since last month's debate. 'Everyday we get more emails and letters'.
'Grandfathering', the appropriateness of exams, and the McDonald's comment are the hottest topics, she says.
Friday, 8 May 2009
Shrunken Heads!?
As the globe spins further into recession, and businesses continue to reduce their work force, the challenge of recruiting those specific, hard to find individuals who fit a role’s unique requirements has shifted. The talent pool has become suddenly flooded with capable individuals seeking their next role; job advertisements yield an embarrassment of riches. Consequently, has the role of the headhunter been shrunk? With this deluge of talent, is the headhunter left high and dry, looking rather superfluous and uncomfortable over there in the corner? Surely now that more people are looking, it has become a lot easier for a business to attract the talent they need on their own. Isn’t it just a case of putting out a carefully worded advertisement on targeted job boards or in specific publications? In a market with this many people actively looking, the talent will come flocking! And if this is the case, has the age of the headhunter come to a close? Because if the pickings are this easy, the practice of headhunting seems somewhat anachronistic, and (dare I say it?) redundant.
Digging Deeper…
Well, that could be one view, and these are certainly strange and exciting times for many professionals, including headhunters. But the impression of easy pickings is a red herring, a mirage. In a world overpopulated with individuals looking for their next role, and with more people applying to advertisements than at any point in recent memory, ironically the role of the headhunter has become even more crucial. Of course, some big heads will find themselves shrunk down to size, but for those headhunters that really know their market, and take the time to build understanding, consultative relationships with their clients and their candidates, there is definitely opportunity out there and value they can add. There are more people competing for a (comparatively) smaller number of available roles. Many of these individuals will be highly skilled and determined to prove that they are the right person for the job. However, that isn’t to say they necessarily are. If it’s a niche, unusual role that requires a specific, hard to find skill set, maybe the right person for the job isn’t one of those applicants. Maybe the right person for that job is already employed, working away, building an enviable résumé of successes in a competitor. But how can you know that, and how do you reach that person? Surely if they are that valuable, that unusual, that skilled, then in these uncertain times they are going to be even harder to attract than ever?
This is the kind of situation where a professional headhunter can step up, provide an answer to that question, and add genuine value. In these turbulent times, headhunting isn’t dead. In fact it is more vital than ever.
- Thinking Heads
In a flooded market place, headhunting takes on greater value. A skilled headhunter will engage with the client and read between the lines of a brief, taking the time to really build an understanding of the business, its values and ambitions. A professional headhunter will listen, but a superlative headhunter will also contribute. Headhunters can become trusted partners to a business, giving real input and insight into the process and strategy, and influencing the thinking of decision makers. Headhunters have their ears closely to the ground; they can offer a different perspective that is closer to the heart of the beast. They can feed back the pulse of the market place to their clients, and crucially are also likely to have a view on how their client’s strategy compares with their competitors’. An accomplished headhunter can look beyond the headlines, and will take the trouble to understand the key underlying purpose of the job, and what the best fit candidates will really look like and sound like, not just in terms of skill set, but in terms of their background, personality, ethics, aspirations, and everything else.
Looking Beyond The Obvious…
Given the current market, almost every advertisement for a new role results in a torrent of applications; a flood of CVs. Whilst it is entirely likely that a strong candidate who ticks most or all of the boxes required lurks somewhere amongst that mountain of responses, it’s going to take time- and skill- to find it. However, a good headhunter can step in (hopefully before your money has been spent) and save a great deal of time and effort. A successful headhunter will already have a network of top candidates in place, or be able to tap up their network to find those hard to reach people who really know the ins and outs of that particular role. A valued headhunter will enable you to leapfrog the lengthy sifting process that often follows an advertised campaign, and instead present two or three well-qualified candidates who you’ll want to meet. In addition, given the intimate relationships that headhunters enjoy with their particular market, they are also able to bring out those candidates who may or may not stand out on paper. With such a large volume of profiles to sift through, it can be easy to miss a great candidate if their expertise isn’t obvious at first glance. A practiced headhunter will be able to identify and understand that candidate swiftly, reading between the lines of the CV and approaching those conversations with insight.
Thinking Smarter…
With such a competitive market, many of those candidates will be looking at more than one opportunity, and it can be frustrating if they choose to change direction at the last minute. A headhunter can help eliminate this risk. Headhunters typically source candidates who are not on the open market; they have access to highly skilled individuals who may not be found anywhere else, those people who are ‘passively looking’, those people who don’t typically respond to job advertisements. Likewise, with the current backdrop, many people who are currently employed are reluctant to take their chance on a new role. After all, they may be perfectly content where they are. It’s a known quantity, there’s little risk. A skilled headhunter, someone with a genuine relationship with their client, and a deep understanding of the role they’re recruiting for can approach that individual and engage them, make them see the value of that move and position the advantages of that opportunity in a way that a humble advert cannot. This is particularly valuable if a role demands a niche or particular set of skills or experience that is hard to find and that may not come through from the open market. A headhunter can run a highly targeted search, approaching select individuals from specific competitors to find their client the perfect match. Not just someone who ticks most of the boxes, but someone who ticks all of the boxes, and then goes on to draw some more boxes you didn’t know were there and then tick them too.
The art of headhunting isn’t dead, and it can be an art in the right hands. The heads aren’t shrunk, they’re just working harder, thinking smarter to bring those individuals to their clients.
- Talking Heads
Talking, talking, talking. Headhunters do a lot of talking. Good headhunters do a lot of listening too. They listen to their clients, they listen to the market, and they listen to their candidates as well. A headhunter isn’t just a valued partner to their client, they can also become a trusted advisor. The relationship works the other way around. A headhunter is out there talking to decision makers in various businesses across the sector, and the information they glean and the knowledge they gain of the market can be invaluable to those individuals they engage with from a candidate perspective. A consultative headhunter can take on a mentoring, career coaching role to their candidate. With a detailed knowledge of the market, the hunter can give a frank and honest evaluation of that candidate’s skills, their background, their CV, and from that conversation can give them ideas about what direction they can push their career in, and what opportunities and organisations would fit them best. A headhunter can even help a candidate improve their CV, teasing out the salient points and cutting out the soft stuff. And contrary to popular belief, most headhunters can spell and punctuate.
Putting Two And Two Together…
A headhunter that is in touch with their chosen marketplace is well placed to have a view on new opportunities before they hit the wider market. In certain cases, a headhunter who has taken the time to understand their client and build that relationship with them can be there at the creation of a new opportunity. Both of these scenarios can be a benefit to their candidate. A candidate that has been well briefed on an opportunity and also advised on how best to present their skills and aspirations by their headhunter is in an advantageous position when it comes to meeting the client. With that relationship in place, a headhunter can act as the champion of the candidate, playing matchmaker between two parties that desperately need to meet.
Headroom To Achieve…
In the current climate, headhunters aren’t redundant, they’re even more crucial. Headhunters have the expertise and the knowledge to help both clients and candidates alike find the next step on the road to success. Headhunters have the network to deliver the right skills and personality mix for a client’s most particular of requirements. Headhunters can help their candidates to maximise their potential and find where their expertise will add the greatest value. And choosing the right agency to partner with can make the difference between simply finding a good person for the job, or finding the best person for the job.
With thanks to those who responded to my question whilst researching this article on Linkedin.com.
Gi Lewis
Researcher
Firstperson Executive Search & Selection
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