Valuable investment

Intermediary involvement in the investment arena looks set to grow

John Greenwood
John Greenwood, editor

As the employee benefits sector continues its quiet revolution the battle for control of assets and their distribution is intensifying. Many new advisory and distribution models are developing, and research carried out by this magazine has identified an intention amongst corporate intermediaries to take on a greater role in the oversight of clients’ pension funds, particularly in the default space.

Millions of employees will have gone through the intense volatility of the last three years in funds that bear no relation to their risk profile, and some near to retirement will have paid a big cost for that in terms of their future income. Yes, better solutions are coming to market, but how many legacy default funds that are not up to scratch still exist?

Default funds have been one of the great failings of the defined contribution arena for many years, and although forward thinking providers, advisers and employers have recently been bringing better practice to market, the prospect of greater oversight of employees’ retirement funds has to be welcomed.

Millions of employees will have gone through the intense volatility of the last three years in funds that bear no relation to their risk profile

So the idea of more governance in the contract-based arena than less has to be a good idea. Some life offices have already developed off the peg products that do something approaching the job.

Feedback I get from the industry is that an increasing number of intermediaries, whether EBCs or corporate IFAs, are looking to get in on the act. Some are already doing so.

For some firms it will be a question of importing expertise they already have in the trust-based arena to the contract-based world. For others the investment ideas will come from what they are doing for high net worth individuals, scaled for a wider audience.

To reflect this increased interest in investment performance Corporate Adviser is this month starting a new investment comment space in our Adviserzone section, which we hope will prove an arena for discussion of best practice on default and other pension accumulation strategies.

But these new initiatives will not just be a walk in the park. As detailed in the interview with Bill Galvin in this issue, the regulator is alive to the changing structure of the pensions industry and will be looking for conflicts of interest.

The onus is on our industry to develop models that meet the needs of scheme members at a justifiable cost, while still making a profit. There is much to gain for those who succeed, not least for their scheme member clients. But this is not an area that should be entered into lightly.