For Aegon’s recently appointed chief distribution officer Ronnie Taylor, the completion of July’s Part VII transfer – the legal process oftransferring the BlackRock platform to Aegon – is the firing gun for a new chapter in the the pension provider’s history.
Hired from rival Scottish Widows back in February, Taylor’s message is clear – that Aegon is now ready and able to do business with all employers and schemes, regardless of size.
Best of both means improving both the trust-based and contract-based parts of the newly joined workplace proposition, he explains. For the former BlackRock proposition, previously known as TargetPlan but now called the Aegon Master Trust, that means a adding a new, simpler digital interface for scheme members to provide an improved online experience, and to enable the segmentation of member communications. For the historic Aegon proposition it means more support for advisers and clients going forward.
“The trust-based proposition will now get Aegon’s SmartGovernance governance capability, which uses a data driven approach to enable trustees and corporates to analyse the performance of their scheme and guide members towards informed choices. And later in the year we will introduce a broader range of savings options to the trust-based proposition, including Isa and GIA,” explains Taylor.
So what else can advisers, consultants, employers, trustees and members expect? “The former BlackRock platform’s main area of expertise was around single trust and is very strong in administration, service and bespoking for large clients. And we have the Aegon Retirement Choices (ARC) platform which plays really well in the SME and mid-market space, with savings other than pensions, good engagement, really proactive governance. We want to refresh the look and feel, the whole e-journey, of Compass – the former BlackRock workplace proposition – introducing new digital innovations for member statements and the SmartGovernance that we have on the Aegon side.
“Likewise in the mid-market space we do think there is more we can do around supporting advisers and clients through ongoing relationships. And some of the techniques that BlackRock have through the service capability in Peterborough, we want to roll out to the mid-market. You will see the same front end of Aegon out in the market, whether you are in own trust, master trust or GPP.
“For the SME market we will be looking to develop more of an ongoing client relationship model – that can use digital means to generate better annual governance reports,” he says.
One area currently under review is how the provider’s defaults, and other propositions, deal with environmental, social and governance (ESG) factors. ESG issues have shot to the top of the agenda in DC in recent months. Aegon was itself of the wrong end of a recent report from ShareAction, which named the provider, along with several others, as having weak screening of weapons manufacturers.
“When we talk about engagement, social responsibility, transparency and ESG – these are big themes the industry is going to have to address,” says Taylor. “When you get right under the bonnet and see what the investments are, some of that is going to have to change.
“The investment part of the business is something that we want to develop, and we are looking for new innovative solutions, perhaps working with other partners. ESG is an area we are looking at,” he says.
Running a default fund that takes in the ethical considerations of hundreds of thousands of individuals is a complex matter however.
“We need to develop some broad principles and guidelines that IGCs and master trust boards can use when dealing with these ESG factors. Industrywide guidelines would be helpful, but individual organisations are going to have to develop clarity around this too,” says Taylor.
Looking at the Corporate Adviser Master Trust Default report, publish in July, it is apparent that providers’ defaults are currently divided into those that use multiple asset managers – including the consultant master trusts and Nest, and those that use a single provider, including the vertically-integrated providers.
The Aegon Master Trust has a default investment offering made up entirely of BlackRock funds. So will that continue going forward? And does Taylor see this single asset manager model continuing going forward?
“We will in due course broaden out what we are doing. But in terms of where we are with the LifePath default, our intention is to stick with that and BlackRock will continue to be a key partner of ours. We intend to do more with BlackRock, but we will be broadening out our investment capability going forward,” he says. “We are going to see a lot of growth and innovation and change in the market, and our investment proposition will evolve.”
And with regard to the Aegon contract- based default? “We have no immediate plans to change the investment strategy right now. But if you look on an 18-month time frame we will be looking to broaden out our proposition,” he says.
Today’s default funds operate widely varying investment strategies – does Taylor think this plurality of approaches will remain, or will strategies converge around an industry view of what ‘best’ looks like?
“People aren’t putting these strategies in place for fun – they are doing so because they believe they are going to deliver better returns and because they think it’s the right thing for members. The challenge we have, which we need to get better at, is trying to understand the risk profile of the demographic that we have, and across our book making sure our investment strategy reflects that as much as possible,” he says.
Master trust or GPP?
Aegon and Scottish Widows have both bought master trusts in recent years, while LGIM, Standard Life and Aviva already have them. As a provider running both, which does Taylor think is lighter touch, cheaper and more profitable?
“You get bigger lumps of business in the trust-based world, being blunt. But the checks and balances that will be there for master trusts are very similar to those on the FCA-regulated side. I sit on both our Independence Governance Committee (IGC) and our master trust board and I am expecting exactly the same level of duty of care towards members. The two constructs are very similar. From a commercial point of view, master trust is what we think is the growth area and is quite an immature market. But I would not say it is easier to do business there,” says Taylor.
So high is the standard that will be demanded from master trusts when regulation takes full effect next April that Taylor does not believe all providers that apply will make it through to authorisation.
“I really don’t think everyone is going to get authorised. So that is a concern at an industry level – that we have a safety net for members for where master trusts don’t make it. The regulator is setting a high benchmark and quite right,” he says, adding that Aegon has enough on its plate with the BlackRock integration to be thinking about buying up unregulated master trusts.
Ecosystems in the workplace
Now auto-enrolment rollout is completed, where does Taylor see the new business opportunity in workplace pensions? “There is very little movement in contract-based to contract-based. But we are seeing quite a bit of interest in movement from own-trust to master trust. Own trusts tend not to be clean and straightforward and what they are looking to do is clean up those arrangements,” he says. He also sees financial wellbeing as a growth area, one that Aegon will be looking to expand into, leaning on its global expertise, particularly from its Transamerica business in the US. But he also expects Aegon and other pension providers to partner with niche fintech health and wellbeing players that are focused on engaging with employees in a way that life insurers have not done in the past. This, he argues, will lead to a future where providers and tech engagement organisations work together in an ecosystem of digital messaging that delivers a better benefits proposition to employer and employee alike.
“Employee wellbeing is a high-profile issue across corporate Britain. Employers are focussed on the physical, mental and financial wellbeing of their staff. And it is right that some organisations are better at engaging with employees and addressing their wellbeing issues than others. There is quite a lot of work running a master trust. There’s quite a lot of work running a wellbeing proposition. And there’s a lot of customers out there. Not everyone is going to want to do what we do, and we aren’t going to want to do what some of these other organisations are. We see a future where ecosystems in the workplace will develop that weave these things together,” he says.
Personalisation of proposition
“The next stage of personalisation for me is what it means for the corporate client,” says Taylor. “We have been doing some work around how do we use staff panels within an organisation to see what they think of benefits, how do we use annual governance meetings and smart governance capabilities to see how well used workplace benefits are, and by using this information and data from our RetireReady tools we can have richer conversations with corporate clients and trustees and their advisers and start to tailor activity and solutions for them.
“Personalisation at the employer level is the next stage, though I do think artificial intelligence and different types of engagement will happen sooner or later. This is another area where we can draw on what Aegon are doing globally, particularly in the US.
“In the US they are more advanced in using video and digital to personalise things like benefits statements and annual reviews, and in the way they talk about investment, and the techniques used to help us see our future self are absolutely key. Personalised statements are great, but they don’t go far enough in showing what life will be like in the future, and how you can change it,” he says.
Pension freedom worries
Taylor sees a big challenge for providers managing the millions of people set to go into drawdown over the next decade.
“We are going to see a generation of members rolling into drawdown without advice who will be in drawdown for 20-plus years. Most won’t get advice. So we need to develop some form of guidance, whether it is an ongoing health check, or annuity quote service. Regardless of advisers’ attitudes, there are simply not enough advisers in the market at the level and price that is required. We need more innovation around guidance, investment processes, about running down the pot. It is still an immature market in the UK,” he says.
But he disagrees with Baroness Altmann’s recent call for a blanket ban on firms using leads derived from cold-calling, a move she argued would be considerably more effective than simply criminalising an activity that scammers can move offshore or just ignore.
“There are a number of advisory firms that will make contact with clients and will give them a fantastic service and will use well-established product providers. There are bits of that market that work incredibly well. Where there is any sense of the seedier side of the business then controls are needed. But a blanket cold- calling ban is going too far. You really need to understand the business model of the adviser, how they are getting clients, what sort of service are they offering, before you can make that call. It’s too broad-brush to say it should be banned,” says Taylor.
How does Taylor see the difference between where he works now and his previous job at Scottish Widows?
“Both are really large businesses – one’s a global business, one’s UK-based. Both have been very successful insurance businesses in the UK. I had a great time at Scottish Widows. The reason I joined Aegon is because they have done a lot of the heavy lifting over the last few years, in terms of bringing together the different parts of the business. The building blocks are all in place. We are able to make decisions and move much faster. And because even though we are part of a global business we are very separate in the UK. And we can draw on global best practice,” he says.
And is he looking forward to going head to head with his former employer? “It would be nice to beat Widows at the odd pitch, and I’m sure they feel the same.”