"Ripping off customers is nothing new for asset managers... "

Check the FT article here 30 June 2017

The FCA’s report is a travesty that is bereft of remedies, writes Gina Miller

In 2002, the Sandler Report on the UK retail investment market found “the reporting of product charges is typically neither clear nor consistent”. More than 15 years on and the UK regulator is still allowing the industry to rip off customers by charging excessive fees, which has a huge detrimental impact on the returns investors are getting on their hard-earned money.

Granting people the basic consumer right of knowing how much they are paying appears to be too difficult for an industry that works with complex data, facts and figures. In terms of price competition, there simply cannot be any genuine price competition if the consumer does not know the price.

This is why, as the most recent FCA report reveals, the asset management industry has profit margins of 36 per cent. This is more than double the operating margin of the FTSE pharmaceutical and biotechnology sector (14 per cent), which is based on intellectual capital and extending lives.

When the FCA’s interim report came out in November 2016, it was hard hitting and exposed the numerous dubious practices SCM Direct has been highlighting for years through our True and Fair campaign: closet index tracking, hidden fees, consultants’ conflicts of interest and false reporting of performance.....

check out full report here and get angry if you have any pension or investment plans. You are being ripped off. When you exclude their bonuses the profit of fund managers is not 36% but 48%. 

Boris and his Pension Merger Plan to Rescue GB Plc

On Monday the FT rather oddly announced that the new Chair of the London Pension Fund Authority (LPFA), Edmund Truell, with the support of Mayor Boris Johnson, is to merge all 34 London Staff Council funds "into a single scheme and channel more investment into the capital’s infrastructure projects".  The Evening Standard also waded in on Tuesday in a similar vein here

The fact that neither Boris nor the LPFA has any legal powers to do this was not mentioned.

Now it makes perfect sense to look into merger in order to see if it will save money and stop Councils and pension scheme members being ripped off by vested interests. Equally, no one would be more happier than me if we could use pension funds to kick start the economy and say build more homes.

But there is a problem. Some 4.6 million Brits have a local government pension entitlement. Its primary purpose is to pay an income in retirement and not to be a substitute for inadequate investment in infrastructure by Government.

Some people also think that the LPFA is looking at merger due to its own internal financial predicament as a mature scheme with many pensioners claiming their money but relatively few active members still paying into the scheme.

There has also been claims of scaremongering. The Local Government Pension Scheme as a whole has assets of £160 billion. It is not broke. Some schemes do indeed have difficulties but in many cases this is due to outdated and irrelevant accounting measures which price scheme liabilities on the current abnormal 200 year low in gilt yields.

So far there has also been no mention either that in the new LGPS 2014 scheme members (and their "widows & orphans") will face the future costs of poor investment performance.  Under European and UK law pension funds must be run in the interests of beneficiaries, then the case for or against merger or for investment in any particular asset class, must first and foremost take into account their interests. Not short term political ambitions for a flat in Number 10.

There are a number of obvious risks. What if merged Council pension funds invest in building homes for rent and there is a property price crash? What if investment in alternative electricity supply is undermined by a change in future Government policy? In other countries pension funds that invest in infrastructure get significant Government financial support or guarantees.

There is also the issue of "why only the LGPS?". While it may seem rather strange that there are 101 separate LGPS schemes worth £160 billion, there are about 53,000 private Pensions schemes. The vast majority of whom are tiny. How well managed are they? This is also important to GB Plc since the Private sector defined benefit schemes alone have £1.1 trillion in investments. Surely it makes sense to look at merging private sector schemes as well?

The Secretary of State, Eric Pickles, who the FT claims is a supporter of Council Pensions merger, may have the legal power to force merger.But unless this is done sensitively and by putting the interests of beneficiaries first, then it is likely to end in tears. Which if the supporters of merger are right, would indeed be bad news not only for the LGPS but also for GB Plc.

TUC 2012: Unions21 fringe - Extending collective bargaining; Extending union influence

Lunchtime fringe sponsored by Unions21. Somewhat similar content to last nights History & Policy fringe.

Meeting Chaired by Brian Groom. Business & Employment Editor of the FT.

Paul Nowak (left of picture) from the TUC spoke first about the crisis in the private sector. The Government is trying to drive a wedge between the public and private sector.  The reason why there tends to be poorer terms and conditions in the private sector is due to low density. His 3 big ideas are:- due to fragmented workplaces we need to work better together, we need to think strategically; examine other sources of leverage such as the campaign for a living wage & develop a coherent political narrative or "ask".

Christine Payne General Secretary of Equity. Her union has gone from 35k to 43k members in 6 yrs with no extra staffing resource. Her 3 ideas are to increase member participation in the running of the union, involve young people & improve communications.

Mike Clancy, General Secretary Designate of  Prospect was a little provocative. He posed the question How well have we really done during the last few days? Surely quality is better than quantity? All the breast beating, the suicidal brand damage we have done to ourselves in the last 24 hours?

Frances, our new GS will have her work cut out. We have got to be part of economic alternative that is believable. Not just about fairness at work but message that unions are good for business. We will still be the sword of justice for our members. We have got to be realistic. Is there an alternative to a market economy by 2pm today? How to make the market economy better for all. We have got to be credible.  Why is it that we all consider ourselves to be progressive but we appear to be so conservative?

Tess Lanning,  IPPR Research Fellow, spoke last (apologies but out of photo). She quoted Tony Benn "nationalisation & robens doesn't mean socialism". In Europe they tend to do things better. Trade Unions involved in redesigning work & jobs; they favour the "high road to growth". UNISON praised for helping to win an in-house bid in Newcastle.

My question (modified from last night's fringe) was piped to the post by Paul from 1st Actuarial who also asked whether there is a role for unions to play in the provision of pensions. I made the specific reference to organising around running a decent defined benefit scheme based on the new look LGPS.