After 18 years with Hewitt, Andy Cox could be forgiven for wishing he had ascended to the role of managing director for the UK and Ireland at Hewitt Associates at a slightly less tempestuous time.
But the down to earth actuary, a Yorkshireman by upbringing, is relishing the challenge of taking over the organisation at a time when its consultancy services are arguably more valuable than ever.
“I am a member of the world’s two most exclusive clubs – I’m half Welsh and half Yorkshire. And they let me run this place,” says Cox.
Self-effacing comments like these pepper conversations with Cox, but they are not a sign of lack of confidence. Rather examples of an empathic personality that has helped him win some of Hewitt’s biggest clients. Royal Bank of Scotland and Merrill Lynch are just two of the big name clients he brought over to Hewitt, new business wins that marked him out as a rising star in the consultancy he joined in the early 1990s.
“Winning new business is always a significant high. Merrill Lynch was my first major new business pitch soon after qualifying, back in 1993. It gets you on the map internally as someone who can stand there and do it, and probably the other pitch of most note is Royal Bank of Scotland for whom I am a scheme actuary to this day,” says the qualified actuary and graduate of Birmingham University.
Like all businesses today, Hewitt is facing a different environment to the world of six months ago, and for Cox, the new role has much to do with making sure the business meets these challenges.
“This is an interesting time to come into a role like this,” he adds. “There is a need to get some of the business basics right in terms of just how we run the business and that is a painful bit that I have just got to get out of the way.”
Cox says he still intends to find time to carry on with his first career love, client facing consultancy work, but will be also grappling with strategic issues that face all the big employee benefit consultancies.
“The new role is a managing director role so there is quite a bit of business management. That pulls together a combination of the stuff with real clients that I’ve done for years and love, together with the financial part of running a business. We are after all a commercial organisation,” he says. “The stock with which we work is our people and their intellect and the hardest part of running the business is running the people in the business and keeping them focused on the client side which is the part that makes money.”
He agrees that the reduced role for actuarial services and the growth of cheaper DC models put in place by corporate IFAs is one pressure the big EBCs have been dealing with.
“It is without doubt that the big employee benefit consultants will change. We are already a very different animal to the one we were 10 years ago when we were Bacon and Woodrow which is a quite narrow actuarial organisation.
“But demand remains as strong as ever. The world has got significantly more global and at the higher end of the organisations we deal with, they too have become more global and more sophisticated. Their desire to compete with each other in the benefits arena means that there is always going to be a market for the high quality end of the benefits range,” says Cox.
“There will undoubtably be a raft of organisations that want to go down the keep it simple and keep it cheap route and we would be crazy to deny that. But in the pure benefit arena mindsets have shifted somewhat in terms of what people are after,” he says. “The number of firms that are trying to get consistent benefits across the world is growing.”
Cox sees the next big thing in workplace benefits as being a more holistic offering from employers that offers staff the financial assistance and benefits they need at all the stages in their life cycle.
“We will see that people’s biggest problem is managing their finances across the entire piece. Retirement is part of that but just one part. It’s about coming out of college through to how do you save and provide your first house and even for renting accommodation and school fees even, the whole life plan,” says Cox.
“The biggest problem employers have is their overall financial management and we can see more and more UK employers looking at how they can offer programmes which don’t involve them in a lot of risk or costs, but do become helpful to them in terms of managing finance,” says Cox.
“This could be integrating pensions with shorter term savings vehicles where people can use their savings during their lifetime rather than just in their retirement. Or related to student loans and mortgage deposits. There are a number of employers just scratching the surface and starting to think about it,” he adds.
But he thinks that the current financial meltdown means these projects, while just about ready to go earlier last year, will be on hold for some time now.
“I think it was about to happen, but I think the impact of recession will mean that this innovation will go on the back burner for a couple of years,” he says, adding that the proposition is an incredibly compelling one, which means its time will come some day.
“I think it is the tie-in employers get if their employees have got savings or debts with them, that is key. You don’t want to have to get your cheque-book out when you move jobs because there are not that many employers around now who will give you a big lump of money to move to them,” says Cox.
He is confident that while clients are in the position of reducing their staff count, with demand for the services that benefits consultants offer high, the same cannot be said about his firm. “We are in a business environment that is actually doing very well. There is a lot of demand for the work we do. We are mindful of the fact that our clients are wanting different things from us. They are mostly in a cost-cutting state of mind. A year ago it was more what can we do to attract more people, but we are talking more on a cost basis with clients now.”
So given the fact that part of Hewitt’s job is to advise companies on the risks the economy present to them, how bad do they see the current downturn? Cox says he feels Armageddon will be averted, and government intervention has been strong enough to mean we will come out the other side sooner rather than later.
“This recession is the first time that I have seen out in the real world people throwing their hands up in the air and saying ‘We just don’t know what is going to happen here’. In previous recessions people know where it’s going and what impact it will have on their businesses. There is much less certainty this time around and this is leading people to take action just in case, rather because they know something is going to happen,” says Cox.
“We have a team of economists who look at this and we give asset allocation advice to clients. They have looked closely at it and our view, which has changed, is that we are going in very steeply into a recession that is really going to hurt in 2009. The reason we have changed our view is the determination of government to throw the kitchen sink at pulling us out of recession. This gets us to a view that yes there will be some kind of bounce that will bring us out reasonably quickly. If you had asked me in November I would have said that we are on a really slow crawl out of this over two or three years but I think the stimulus that has been put in there means that we will come out quite quickly,” he says.
“What happens on the way out is where the uncertainty is. Our view is that we will come out the other end, although quite what that will mean to inflation is uncertain,” he adds.
Cox’s stint working for Hewitt in the US has given him an insider view into the way its pensions system actually works.
“Lots of people think that the US moved out of DB and into DC years ago and are well ahead of the curve in this issue. But they have still got as much DB pensions as we have. Yes, they started the transition over to DC a lot earlier but they have been on a very gradual curve. The UK started very late but has been on a very steep curve and will very soon have overtaken the US in terms of making the transition,” he says.
“Most people think the US is all DC, all 401K. This is not true. But importantly they didn’t get themselves into the pickle that we have through inflationlinking. That means your typical US company has around half the risk exposure to their DC plan that the typical UK company has. Most of our inflation linking came in through legislation and has added 50 per cent plus to our cost and to our risk,” he says.
“And in the UK risk comes very quickly through to our profit and loss. The US isn’t as quick as that. The combination of an easier regulatory accounting system and generally lower risk has meant that the stresses and strains that pensions play on the UK are much less in the US and as a result the US are slower to the party in terms of risk management techniques,” he says.
ANDY COX ON…
“Lows are with some clients were their own business has got itself into a position that is just not sustainable. You get so close to clients both from a personal perspective and also in relation to their organisations that you share their depression. The lows are situations where we can’t help, where their problem isn’t in the benefits arena, but their real problem is that their business is going off the rails.”
New business pitches:
“I hate it when you go in and there are 12 grey faces looking at you waiting for you to do your party trick. You have to establish some kind of rapport because at the end of the day our job is to help people round the table understand their own concerns a bit better and to help them make their own decisions. It is when you realise that you are in a conversation rather than a presentation that you know that you are starting to get there.”
“I am a terrible rugby player and I was a prop forward in a Sunday side. A personal high for me was the one time I actually scored a try, against some rubbish pub side on a wet Sunday morning.
“We have a little three-year-old terror and cottage in Wales where we take him and the dogs up the biggest wettest coldest mountain we can find. I work pretty hard but I have a real life as well. I live in Northampton where there are real people doing real jobs, farmers and the like, so I go from a swanky dinner in London on Thursday night to a fish and chip supper on a Friday night.”