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TURNING TO THE BACK OFFICE TO MOVE FORWARD WITH PENSIONS REFORM

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TURNING TO THE BACK OFFICE TO MOVE FORWARD WITH PENSIONS REFORM 1

By Tim Taylor, Chief Marketing Officer eg solutions plc

Retirement planning has undergone a seismic shift since the announcement of the UK pension changes in this year’s budget. In April 2015 many individuals aged 55 or above will get the chance to withdraw part or the whole of their pension pot as a cash lump sum if they wish to do so. As a result of the changes, industry providers have had to radically change their propositions and products and unsurprisingly queries have begun to flood in causing the pensions industry major logistical headaches.

Pension savers will now be able to drawdown and invest as they see fit and are no longer obliged to take out an annuity. As a result, annuity providers have already seen a marked downturn in applications, and the changes have created a heightened interest in pensions from people at varying stages of their retirement planning. This is creating a frenzy of activity for financial advisers and pension providers alike.  All coming in a year that has seen the introduction of guidance guarantee, a proposal to ensure that greater freedom and advice is being offered to those approaching retirement.

Tim Taylor

Tim Taylor

Pensions providers are spending an increased amount of time speaking to clients to respond to questions savers may have about how the changes impact on their retirement. For the majority, this will prompt a substantial increase in administration, resources and training to deal with what some have described as a bow wave of activity. Some major pension providers have already indicated that they are already struggling to cope with the pace of the reform outlined by the Treasury and the increase in workload it brings. From our own discussions with customers, one provider has estimated the need to double the workforce to cope with just one pension book describing the incoming work as a ‘deluge’.

Many enquiries will be complex and need to be handed off from contact centres to the back office teams. Gaining control of workloads by optimising the back office workforce will become all the more important as companies strive for efficiency and avoid being overwhelmed by incoming queries. The ability to gain control and understand the workloads and capacity while observing and evidencing compliance regulations will be crucial. Firms are seeking every opportunity to make efficiency improvements and reduce administrative backlogs to, not only maintain but improve customer experience and efficiency. It’s a difficult challenge to overcome given the increased need to provide recommendations and face-to-face advice. Firms have an opportunity to optimise back office workforce processes, manage work arriving through multiple channels and increase back office capacity through existing resources to cope with demand. Now is the time to embark on an efficiency drive especially as the year comes to a close while we await further changes in 2015.

Technology can help provide a solution to help bridge the gap between front and back offices, the provider and the consumer. Solutions are available today that guarantee the creation of extra capacity from existing resources and provide evidence that their processes are meeting regulations. Never before will so many depend on so few as the demands of the UK savers lay siege to their pension pots. Using an enterprise back office workforce optimisation software solution to provide the control, visibility and ability to continually improve processes, skills and capacity ensure they are not overloaded they tackle the predicted increase in workloads. Having the ability to balance workloads, in real-time, between individuals and teams according to their availability, capability and backlog to optimise the time available can help to not only maintain, but improve, customer satisfaction. For pension providers this means the reduction of end-to-end processing times, increased accuracy and the ability to meet or exceed SLA targets.

In this time of great change, firms are quite rightly concerned with performance, customer satisfaction and the cost of delivering the service driven by regulations. Incoming work will extend beyond contact centres to back office therefore pension providers will also need to revise forecasts and blend resources to match peaks in activity. This will be key to ensuring that they are complaint and are able to avoid any operational risk.

Pensions providers are already busy with these new changes, and the amount of administrative backlog they’ll have to overcome in the New Year should be pre-empted. Some challenges, such as how to apply tax to certain withdrawals, and how much they should charge customers have still not been addressed by the Treasury, so pensions providers need to be prepared and ready to hit the ground running when they are. Keeping to the old adage “an ounce of prevention is worth a pound of cure”, firms should look to make sure that are well equipped to deal with increased queries in advance of the rules we are expecting in April. A smooth back office will be a vital component in this preparation.

Investing

Are clients truly getting value from their BR solution?

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Are clients truly getting value from their BR solution? 2

By Matt Dickens, Senior Business Development Director at Ingenious

Financial planners and wealth managers strive to deliver on the needs of their clients by always providing the most suitable and effective advice. But as with any service, this advice should also be delivered at the best possible value for the investor. Value can be simplistically defined as the service that delivers the most benefit, balanced against the financial cost, but in the estate planning space, how do you assess what good value is?

1. Total fees and charges

Product fees are guaranteed to negatively impact returns, so it is important to minimise their impact when looking to gain the best value from the investment. Some managers report little or no fees paid by the investor to the manager, but instead charge the company or investment service itself. While this might initially be seen as better value for the investor, it is not as simple as that. Investors in unlisted BR services become a shareholder of the portfolio companies, so the reality is that any fees paid by the companies are effectively being paid by the shareholder (or investor). Therefore, both investor fees and company fees will both negatively impact the final return and must be considered together.

Analysis of what a manager is paid by the investor and by the company over a significant period will enable an adviser to conclude if the manager is offering good value, or if a disproportionate amount of fees is going to the manager at the expense of their investors.

2. Real investment returns

Another key component of assessing value is what the investment actually delivers. For BR solutions, investors’ main objective is commonly to pass on the maximum sum possible to their beneficiaries upon death. This may lead to a conclusion that delivering Inheritance Tax relief at the lowest possible cost is the primary driver of value. However, especially for clients with longer time horizons, the one-dimensional goal of avoiding a potential 40% Inheritance Tax bill can easily over-shadow the equally important goal of aiming to steadily grow the investment, preventing erosion by inflation, drawdowns and investment fees. Unlike some IHT-focused solutions, such as trusts or gifting, investors in BR services do not have to accept zero growth of their wealth from the point of investment.  Instead, investors can continue to earn returns, either taking an income stream or increasing the final sum to be passed onto their beneficiaries, precisely in line with their original objective.

While most BR managers predict their ongoing returns at a certain level, those targets are not guaranteed and historic performance varies widely.

3. The relationship between fees and risk

Given that the majority of managers in the BR space state their performance targets net of fees, to produce positive growth and achieve their target return, those managers must first earn back any fees they are taking. Let’s take the below scenario to illustrate this point.

 Are clients truly getting value from their BR solution? 3Manager 1

Annual performance target, net of fees: 3%

Annual fees: 3%

Gross performance target: 6%

 

Are clients truly getting value from their BR solution? 4Manager 2

Annual performance target, net of fees: 4%

Annual fees: 1%

Gross performance target: 5%

Initially, it might appear that Manager 2 must be taking more risk to target a higher net return of 4% than Manager 1, who is targeting 3%. However, Manager 1 has to deliver an additional 2% of gross return than Manager 2, to make up for charging higher fees. Higher fees not only impact returns and value, but they can also mean greater risk.

Market comparison

In the Tax Efficient Review’s most recent analysis of Unlisted BR Services1, they released data that ranks services in the market in terms of both investor returns and total fees. IEP Private Real Estate achieved the top rank for returns delivered, with the second lowest total fees in the market, demonstrating that it represents attractive value for investors in comparison to other services.

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Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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