Global money managers are scrambling for the talent and strategies that will work for defined contribution “lifers” — those with only DC plans to provide income in retirement — and with a particular focus on the ever-changing U.K. market.
While this re-emphasis on DC also stretches to the U.S. and Australia, recent changes to the U.K. retirement market in particular have tripped up some money managers and made them realize they need to do more to continue to be relevant in the next phase of the retirement market.
The U.K. has undergone what sources called a revolution. There is no longer a requirement for DC participants to purchase an annuity to provide income in retirement; the government is promoting “freedom and choice” for DC participants; a fee cap of 75 basis points has been introduced for DC default strategies; and automatic enrollment now is widespread among workplace plans following 2012 reforms.
As part of that, and particularly in relation to the increased freedom and choice of participants, money managers are having to come to terms with what sources in money management said is the “retailization” of retirement.
“The war for talent is raging in the DC sector at the moment, not just in the U.K. but globally,” said Paul Battye, London and Leeds, England-based CEO at executive search firm Moorlands Human Capital Ltd. “Our clients from the U.K., U.S. and Australia are fighting hard to ensure they have the best people in place ... (to) remain ahead of the game.”
In 2015 alone, money managers around the world created several new roles focusing on DC, including Legal & General Investment Management, Allianz Global Investors and Aberdeen Asset Management in the U.K. and Capital Group and Northern Trust Asset Management in the U.S.
Other executive search firms have seen a similar increase in demand for DC experience.
“The DC talent pool remains small and with these increased requirements, we would anticipate compensation levels rising for DC specialists as this mismatch between supply and demand plays out,” added TC Jefferson, senior consultant in London at Plenum Group.