Tripling its numbers in since it was spun out of KPMG in 2020, independent consultancy Isio now has nearly 1,300 employees. As the firm celebrates its five-year anniversary, its expansion and evolving role within the defined contribution (DC) and wider workplace benefits landscape has been rapid.
Holistic may be an overused word in the benefits space, but head of DC Richard Birkin says that the firm’s speedy growth owes as much to its expansion into disciplines beyond DC and defined benefit (DB) pensions as its acquisition activity.
Isio acquired Premier Pensions Management in January 2022 and in 2023 it also took over Deloitte Total Rewards & Benefits, making it one of the largest independent advisory consultancies in the UK.
The acquisition of Premier brought around 200 new members of staff and a wealth practice. The DTRB (Total Reward Benefit) business, which also brought in around 200 people added significant capabilities in administration, actuarial consulting, and investment consulting.
Isio also completed its acquisition of K3 Advisory which specialises in small to medium-sized pension schemes, in recent weeks. K3 has closed almost 100 deals with a combined value of £2bn. Birkin says the firm is ‘constantly looking’ at other acquisition opportunities.
Holistic consulting
One of the biggest transformations within Isio has been its shift from solely focusing on DC to encompassing the broader workplace reward space. The demand for holistic financial planning, including Isa, risk benefits, healthcare, and member coaching, has risen dramatically among employers.
“We are being asked more and more questions about wider reward issues, workplace Isas, risk and healthcare,” says Isio head of DC Richard Birkin.
“The health and risk component came with Premier. They had an established risk and healthcare business and already did some member coaching. They also had admin capability and a flex benefits portal. This flex benefits portal is helping us respond to demand for more consulting on the wider reward piece – holistic reward planning, not just DC. We’ve overhauled the technology and relaunched that into the marketplace.”
As a result, DC now sits within the reward and benefits team rather than as a standalone service benefit. “The conversations often start with DC but then they quickly expand into these other things.”
The member coaching proposition, which came with the Premier acquisition, is an element of a graduated service aimed at employees. “For most people you can do good quality guidance, coaching and good technology. For others that need advice, they can flip into the advisory side.”
Healthcare opportunity
While rising private medical insurance (PMI) premiums are a challenge for those with this benefit, Birkin reports strong appetite to get cover from those who don’t. “The R&B team have a lot of clients that haven’t got private medical that are interested in it because they feel it is worth paying those premiums to help people quickly get back to work.”
Independent view
Birkin says as a truly independent consultancy, with no audit clients or product to push, Isio is enjoying a marketplace with relatively little competition.
“It’s a funny market, right? Because there are very few competitors to us in the DC space, those that don’t have product, that are independent and are credible in that space. I think we’ve done more consolidation change exercises than anybody else in the marketplace. And we’ve done a lot of the very big ones that have come to market. And we’ve got all the skill sets to do that – investment, non-investment, asset transition specialists. It’s quite difficult to enter this marketplace.”
He cites this independence angle as a key factor in some of the very big DC deals it has advised on in recent years, including the £1.6bn Siemens own trust to master trust transaction, the biggest DC transfer to date as well as transactions for FedEx and Vodafone. The Siemens scheme went to the Standard Life master trust, while Vodafone has joined Willis Towers Watson’s LifeSight master trust.
Selection process
With so many different sorts of master trust in the market – life insurer owned, consultant-led, auto-enrolment focused and others – what is Isio looking for on behalf of its clients?
“It is whoever is right for our clients, the design features, the demographics, the maturity of their population. Clients for us will be the participating employer and the ceding trustees when it is coming from an own-trust environment. They will have key red lines, things they absolutely must see in the chosen provider. That will rule some in and some out,” says Birkin.
“They may want a bespoke default, or a transactional app from day one, or video benefit statements. Or they may say we need a corporate Isa attached to it as well, or we want charges below a certain level. Then if we have had a poor relationship or experience with providers A and B, they can be excluded. Then we do a full assessment of all aspects of the proposition they all offer.
“Then when it comes to the last two or three, particularly for the bigger schemes, it is often down to the feel for the client when they meet the team. They will meet the trustees of the master trust to talk about what’s on their agenda. The diversity of this group is really important for many.
“On price, thankfully we are starting to have a far more sensible conversation on charges. It is now about the quality, the experience, the outcome for members, rather than price. But this is not always the case.”
Diverse needs
Provider capability to adapt to the diverse needs of particular populations is also key he says, as highlighted by the Bolt scheme Isio advised on. Ride-hailing app Bolt, like its competitor Uber, has a very high proportion of Muslim staff and wanted to make it easy for users to opt right into the Shariah scheme. “Several providers didn’t really have the structure and ability to do this. It was an innovation that seemed quite obvious, but had never been done,” says Birkin.
£25bn hurdle
With consultancies such as Isio actively implementing the market consolidation
the Government is so keen to see, what does Birkin think of the recently-floated £25bn minimum size threshold for DC pension providers?
“I don’t like the £25bn. It is too high and it could stifle innovation and reduce competition. I get the Government’s drive for infrastructure, but I would still like to see a reasonable number to offer that bit of diversification and choice. There will be no new entrants coming into the market.”
Default profusion
Some providers are responding to Mansion House taking a conviction view and switching to private markets defaults with increased charges, while others are offering a dual-default approach with a low-cost offering to get them to the table and a higher cost alternative should the client want it. So which approach does Birkin prefer?
“I think there are too many defaults full stop. So my preference is to keep it clean and straightforward, and invest in the future and follow your convictions.”
Birkin is supportive of the value for money (VFM) initiative. “It can only be a good thing. It will force people to accept they are not great and consolidate. There are some brilliant single-employer trusts. But others that don’t have the time, money or inclination to do everything needed will, when they are exposed in this way, consolidate.”
Retirement solution
The requirement for retirement income solutions is also going to be another force for consolidation, believes Birkin. “I think the biggest differentiator of provider propositions going forward is going to be the retirement solutions they come out with,” he says.
So what are his front runners? “It’s hard to say at the moment, because providers are just having their first stab at this, which is bolting together something that already exists – combining annuity and drawdown, drawdown and then a deferred annuity, or a different pot approach.
“But I think you could get more value from thinking about what could be a version of CDC decumulation with pooling. We need to start talking in a different language – they understand the pot is X but they don’t understand what that means for income until it is too late.”
Isio has responded to the Australian consultation on decumulation a couple of years ago, and has analysed systems in Chile, the Netherlands and North America, bringing in expertise from the University of Manchester.
“In North America you have got a very developed annuity market, which is different to ours. But the CDC decumulation really interests us. A pooling environment, if done correctly, based on your pot, with some flexibility in there and some sustainable and stable income, but some revocability to it as well, has appeal. Inevitably there will be people who pass the revocability stage and die, and the pool gains from that. It seems a fairer system, and can give a better income than an annuity might,” he says.
He sees a lot of interest from large own trusts in what bolt-on decumulation solutions will look like, and also potentially sweeping deferred members out of the scheme, potentially into a bundled environment. They may then ultimately move over en masse further down the line he says.
Future of consultancy
It may take years to get there, but once the very fractured UK DC market has consolidated, how will the DC consultancy sector evolve?
“There will be a smaller number of very large providers, hopefully enough to offer competition and innovation. I think there will still be a need to independently compare these providers as they continue to evolve. We have a couple of hundred clients that we advise on a post-change governance advisory engagement, to ensure the roadmap is being met, and admin and technology are performing. But the advisory market needs to evolve into something more holistic, looking at the wider reward piece. But there is lots more to do – there is a whole long tail of shifting between products still to happen, particularly if that huge contract-based book opens up with the bulk non-consent transfer easement we have been hearing about.”
From a personal perspective, Birkin’s journey started as a professional footballer. He played for Mansfield Town and then moved to the US on a football scholarship, at a college in North Ohio. He then got some work with his parents’ financial adviser in the UK and that led to a job at KPMG.
“My journey here started with football actually, way back. I was a youth footballer, a professional schoolboy footballer at Mansfield, before I moved to the US on a football scholarship. And then I fell into pensions because I was doing some work with my parents’ financial advisor, and just got a bit interested in some of that stuff,” he says.
Since his time in the US, which he describes as ‘brilliant’ he has had 26 years across KPMG and then Isio, where he now wears three hats – partner, head of DC for the UK and the office head for Birmingham where there are around 180 staff based in the centre of the city.
With further acquisitions on the horizon and a clear strategy to expand beyond pensions into holistic financial wellbeing, this consultancy is positioning itself as the go-to advisor for workplace benefits in the UK. As the industry continues to evolve, they are ready to lead the way.
