A White Label Case Study - IAPF. Noel Friel ESB White... · A White Label Case Study Noel Friel ESB...

IAPF Annual Investment Conference : 25th March 2010 www.iapf.ieIAPF Annual Investment Conference : 25th March 2010 www.iapf.ie

A White Label Case Study

Noel FrielESB Sub Co Pension Scheme

IAPF Annual Investment Conference : 25th March 2010 www.iapf.ie

Agenda

• Introduction to the Scheme• Strategy Review / Recommendations• What is white labelling?• The appeal of white labelling• How trustees incorporated white labelling• Communicating changes to members


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Introduction to

• Defined contribution scheme• Pension arrangement offered to all of ESB’s

subsidiary companies. • Over 1,200 members: Total asset size = €50m• Members have on-line access and annual

Pensions Briefing• Revised Contribution Structure



Revised Contribution Structure



Age Profile

56

454

257

85

16 60

50100150200250300350400450500

Under 25 25 - 35 35 - 45 45 - 55 55 - 60 60+

Members

Averge age = 34



Investment Strategy Review

• Investment Strategy was reviewed by Trustees in 2007: Fund Choices and Introduced Lifestyling.

• Following market collapse the Trustees wanted to ensure that current fund choices/strategy were:– In line with best practice– Future “proofed”– Reflected current trends/thinking

• Undertook strategy review in June 2009



Main Recommendations

• Introduce a diversified fund

• Some re-structuring of lifestyling

• Introduce white labelling

Workshops with Trustees– Diversification– White labelling

Implementation Issues– Legacy funds– Communication

Prior to Trustee Decision

Recommendations



What is White Labelling?• Derives from image of a white label on the

package – Rebranding

• Member choice traditionally communicated by exact fund name

• Investment Strategy drives long term performance, not individual fund

• Natural extension – Offer members Investment Strategies not specific funds


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Appeal of white labelling to Trustees

1. Focuses attention on strategy– Strategy drives long term performance– Offers real choices

2. Efficient management– Ability to change investment managers quickly– Communication simpler



Having decided to go white labelling..

• …the Trustees needed to consider. – How many strategies to offer?– What asset classes?– Naming of labels?– What underlying funds?– Legacy funds – mapping to new strategy

Focusing on:• Re-capping on the main risks to DC members..3 main risks• Behavioural finance ..3 examples

Further Trustee Workshops


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1. Even when educated, investor understanding is low

…make the investment decision process very simple for members….



2. Too many options is not ideal

…Ensure there is a manageable number of real choices…

65%

75%

2 5 10 15 20 25 30 35 40Number of Funds

Participation Declines

Choices Increase

75

65

(%)

65%

75%

2 5 10 15 20 25 30 35 40Number of Funds

Participation Declines

Choices Increase

75

65

(%)

401(k) Participation Rate

Source: Sheena Iyengar, Wei Jang and Gur Huberman, 2003. “How Much Choice is Too Much? Determinants of Individual Contributions in 401(k) Retirement Plans” Pension Research Council Working Paper, Wharton



3. Choice is driven by Available Options

• Naive diversification (1/n)

…Be aware that the menu of funds offered has a strong effect on portfolio choice…



Risks facing DC Investors

• 3 main risks facing DC members– Inflation risk

– Investment risk

– Annuity risk

…Ensure options offered cover a suitable spectrum of asset classes and addresses these needs


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Strategies Offered to members

Expected Risk

Multi-Asset

Global Equity

Specialist Equity

Bond

Cash

ExpectedReturn

Active Strategy Choices Default/Lifestyle

Lifestyle / Default Strategy



Implementing Trustee Decisions

• Ensure:– Each white label has a distinct investment objective – Underlying mix of funds is optimal– Administrator could deal with this structure– Mapping appropriate - similar fund/strategy– Transition is smooth – Competitive fee structures – Member communication is effective– hired Pensions

Communication Specialist


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Member Communication - Booklet• Honest communication – why

changes have been made and how members will be affected

• Clear emphasis on members’future

• High visual impact, powerful messaging



Member Communication – 7 Steps

“Complex information broken into manageable sectionsfor members to digest...”



Member Communication PackCovering letter from Trustees, positively positioning investment options

Switching, AVC and Wishes form - simple



Noel Friel CFAInvestment Analyst

A White Label Case Study


IAPF Annual Investment Conference : 25th March 2010 www.iapf.ieIAPF Annual Investment Conference : 25th March 2010 www.iapf.ie

THANK YOU

Noel FrielESB Sub Co Pension Scheme

A White Label Case Study - IAPF. Noel Friel ESB White... · A White Label Case Study Noel Friel ESB...

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