A ‘unique’ retirement offering for a million workers, a bigger role for corporate Isa and the development of a master trust draw down proposition make JLT UK Employee Benefits primed for accelerated growth, says chief executive Bala Viswanathan
Just six months after taking the helm as JLT UK Employee Benefits chief executive, Bala Viswanathan believes the organisation’s fundamental restructure during that time has made it ready for expansion.
Succeeding Duncan Howarth last October, Viswanathan wasted no time in implementing a root-and-branch restructure designed to remove unnecessary layers of management and tailor the business to the new, leaner pensions and benefits environment.
A universal advice and guidance proposition for the organisation’s million scheme members is a key part of its new offering, which will also see a higher profile for corporate Isa in response to the Lifetime Isa launch and potentially a master trust drawdown decumulation offering.
Few organisations have been as candid as JLT about the impact on operations of the Retail Distribution Review. Last November’s global results highlighted the drop-off in revenues and profit in the UK benefits business.
“Two factors impacted our results – the RDR and the slowdown in the market, with people watching and waiting to see what was going to happen with all of the regulatory changes that had come in,” says Viswanathan.
“Over a period of 20 or 30 years, a lot of the activities that had been done by insurance companies moved over to be done instead by the EBCs. The RDR has changed that.” So, in adapting to this new world, what sorts of role has JLT rationalised and what type of business model can we expect from the firm?
Viswanathan says: “Since I came into the organisation six months ago, we have been positioning the business for accelerated growth. I strongly believe that, given the capabilities, the people and the composition of what we have at JLT, we should be getting more than our fair share of the pie.
“Our focus for the past six months has been on analysing where we are, understanding market trends, speaking to our clients in terms of what they want from us and listening to our people.”
He continues: “We carved the project into three categories: the first was about being a specialty-led organisation; the second was about being client-centric; and the third was about putting ourselves on a path of continuous investment and reinventing ourselves as the world about us changes.”
“The specialty factor is about making sure we bring together all our capabilities, skills and technology under different verticals to provide appropriate solutions. We want to transform our conversations with the client so that we are talking about strategic flightpaths rather than offering a point-in-time solution.
“It is about measuring how we support our clients, so every profit-centre head has under him or her a group of people ensuring that we fulfil clients’ expectations. Everybody needs to be judged on the client satisfaction barometer,” says Viswanathan.
“The second point, ensuring JLT is a client-centric organisation, is easy to say but we need to make sure it gets recognised in our organisational structure. Very often, organisations have values but their structures do not reflect them.
“So our structures are now flatter than in the past. Rather than having six or seven layers of management, which distanced us from the client, we have flattened the organisation to make sure that no profit centre is more than two or three levels away,” he says.
Viswanathan adds that a significant proportion of JLT’s role rationalisation derived from this initiative.
He goes on: “The third element of our plan is about keeping up with the world as it changes around us. The world has gone digital and will go more digital as we progress. So this is about investing in ourselves – and making sure there are no investment holidays.”
He adds: “We are now at the end of our restructuring ourney and are all set and firing on all cylinders, ready to achieve that growth.”
If the ending of pension commission was one of the key issues that drove the organisational change, what type of role does the pension consultant have now? Will there be fewer actuaries and more communications consultants?
Viswanathan says: “There has been a lot of investment in insurance companies, where straight-through processing is now quite common. So our focus is moving on to ensure they have the right kind of structures and benefits, and the servicing and administration are being done by the insurers. Rather than being consulting administrators, we are now being consultants.
“That has meant no change in terms of our actuarial teams and consulting teams, which have pretty much remained as they were. So it is administrative roles that have been taken away,” he says.
In a rapidly changing market, where the line between intermediaries and providers is being blurred, how does Viswanathan describe JLT’s stance on independence?
“We have the master trusts and that enables oversight of the arrangements in the accumulation phase, and we are working on the concept of being able to move that over into decumulation as well. If that is the most appropriate solution for employers, we should be in a position to be able to offer it,” he says.
And what about the potential conflict in being both adviser and provider to the same scheme?
“It is about ensuring that we have the appropriate governance. We would have independent governance and trustees, and independent legal support, and we would ensure that they were being managed independently. And we have the charge cap.
“The market is developing quickly and there is a need for solutions. Our role is to be a whole-of-service provider. Our clients’ expectation is that JLT should be a one-stop shop. So we must have all the capabilities that the market and the clients require,” says Viswanathan.
This brings him on to what he regards as a huge opportunity for JLT: the delivery of advice and guidance to the tens of thousands of people retiring every year with more complex needs resulting from the pension freedoms.
He says: “It is often quoted that only one in five people is willing to pay for financial advice. And for the others there is no source available to get the right advice or the facilities for executing.
“So JLT is looking to bridge that gap and make sure that all our members at retirement can be provided with advice and guidance on all of the options, and that we help execute on those options. This is a full service that is going to be offered to allour members; we are looking to launch the programme on 1 July.
A pilot scheme is already under way and this is going to be a huge market differentiator.
Over time, all of our members will get access to at-retirement advice if they want it,” he says.
Viswanathan sees this as a logical step for the EBC given the scale of the yawning advice and guidance gap.
“We administer their pensions up to retirement. At the point of retirement we speak to them and we provide them with an opportunity to speak to our advisers. We present them with the various options and agree with them what they are looking for and how they want to proceed. Some will be looking just for execution-only services, whereas others may want wealth management advice. So we have a group of wealth managers to accommodate this.
“It is the complete gap in the market that none of the other EBCs are looking to fill,” says Viswanathan.
JLT is therefore on the lookout for advisers to help it meet this huge new demand.
“We are actively seeking advisers to make sure we are able to bridge that gap. The intention is to build out the service over the next six to 12 months so that we can offer it to all of our members.
“As I speak, we have between 20,000 and 25,000 members retiring in any one year, so that is the level of population we are looking to service. And we are gearing ourselves up to provide service on that scale. We believe that, at peak, it will need between 20 and 35 people to service that,” says Viswanathan.
While the likes of LV= and Nutmeg are offering a robo-advice approach, Viswanathan believes that humans are necessary at retirement.
“Our analysis is that the first point of contact is one that people prefer to be a human interface, either on the phone or face-to-face, to discuss their life ambitions and objectives and thereafter transact. That execution part of the process is something that people are not comfortable doing over the web,” he says.
And will that service be free to everybody?
“At the end of the day, we will need to get consent from the trustees to be able to offer that service. On the basis that this is something that everybody is looking for and it is an established gap in the market, we believe all our trustees should be willing and more than happy for us to be providing this service to our members.
“There are two factors that assist. The first is the regulation, which allows up to £500 to be extracted from the pension pot to help pay for the advice, which is welcome. The second is the fact that the tax allowance on advice on pensions has been greatly increased, from £150 to £500. That is a very welcome and necessary move and, through a combination of those two, we should be able to address the advice needs of retirees.
He adds: “That first conversation about the advice will not be charged for; we would expect the trustees and the companies to provide it. But after that, as execution takes place, the investor will pay for that service.”
As part of its new guided proposition for those who do not want to pay for advice, JLT will also offer non-advised drawdown, as well as all other retirement options. However, the crucial difference, according to Viswanathan, is that it will be able to choose from the whole of the market.
“This proposition is absolutely new on the market and is unique to JLT. LV has something similar, Scottish Widows has something similar; providers are doing this. And Aegon has got Origen.
“But then in comes the challenge of being able to offer whole-of-market products. We have all heard about the internal vesting of annuities and the challenges associated with that.
A lot of the pension freedoms came out of the concern that was felt over annuities. “We, on the other hand, have a unique opportunity to be completely non-conflicted and offer a wide range of options for our clients, making sure they get our members the right solutions,” he says.
Viswanathan believes the pension Isa is coming, although it is unclear how soon. In the meantime, JLT will be taking the Lifetime Isa seriously, incorporating it into whatever employers want.
“Work is under way to develop our corporate Isa. We have a membership base of about 1 million members who sit on our Benpal platform, which provides flexible benefits. So it is very easy for us to make this available to all of our people,” he says.
The Chancellor’s revolutionary pension freedoms have created a huge new market for EBCs bold enough to grasp the nettle and assume the challenge of delivering the mass-market solutions that retiring workers so desperately need. Rivals – both EBCs and providers – will watch with interest to assess how Viswanathan’s newly fashioned proposition meets the needs of the nation’s retirees.
- Spent earlier years in Chennai, and latterly in Mumbai, before moving to the UK in 2014
- Joined JLT in 2006 and helped to establish its shared services centre in India, “where I was employee number 1, starting that business” – which has since grown to over 1,400 people today
- Held roles at Axa, Prudential, Paternoster and ANZ
- Enjoys spending time with the family, tennis, running, reading and watching Formula 1