Irish Financial Review

Declaring war on pension fund fees and charges

PGGM, a Dutch pension fund running €186.6 billion has announced that it is to cease investing in outside money managers, including private-equity firms, that don’t fully disclose their fees.

Retirement planning debtate requires a new approach

Moves are growing to tackle high pension fees and charges

The fund sets out for the first time what it deems to be acceptable compensation for money managers. It is worried that the pensions of its clients—social workers and nurses—are being undermined by high fees.

PGGM is concerned that the interests of its pension beneficiaries and the interests of the asset management industry are not always aligned. In other words, the management industry takes such a slice of fees that it robs the future income of workers.

The moves by PGGM are another major strike against the pension management industry where high fees and commissions are taken at the detriment of contributing workers, a major problem that is starting to be addressed at the highest level across many countries.

PGGM’s determination to reduce fees coincides with the US Securities and Exchange Commission (SEC) investigation into the private equity industry which has focused on expenses. In addition to annual management fees and keeping a share of profits, private-equity firms sometimes charge less-visible administration and transaction fees. In July, a group of U.S. state and city officials wrote to urge the SEC to require private-equity firms to make better disclosure of expenses.

PGGM will gradually introduce its new rules and will stop investing in funds that don’t disclose all fees by 2020. In addition, it will also stop investing in funds whose fees are deemed to be “considerably higher than costs.” PGGM expects remuneration to be based mainly on the performance of managers’ funds, and it is monitoring how much of each manager’s own money is invested in their funds.

To reduce its fee bill, PGGM stopped investing in infrastructure funds and started investing directly in infrastructure assets a few years ago. As a result, annual infrastructure fees have declined from more than 2% of assets to less than 1% and PGGM expects them to decline further. PFZW paid €36 million in infrastructure fees in 2014 and had €4.3 billion in the asset class last year.

In private equity, the pension fund has started to invest directly in takeovers, such as the €3.7 billion purchase of car leasing company LeasePlan Corporation NV in July. It is also backing the creation of new private-equity firms in exchange for better terms on fees. Last year, PGGM supported the spinout of Nordian Capital Partners, formerly the private equity unit of Rabobank. The fund is also committing larger amounts to some managers to gain more favorable terms.

Why property retains its investment allure

With the value of property rising in key markets across Ireland, the UK and the US, the memory of the property collapse is slowly becoming a distant memory.

Here in Ireland, the introduction of very generous capital gains incentives provided a major boost to invest in the Irish property market at a time when values were still falling. Those incentives ended in 2014.

Less emotion and more reason needed when it comes to a long-term investment strategy

Property retains allure for many investors

Across much of the western world, restrictive lending guidelines are now forcing would-be first time buyers to rent for longer as they save for higher deposits which have provided a major boost to rental yields.

Across the US, a country with a long history of investing in a wide variety of asset classes, including equities, bonds, alternatives and more recently, ETF’s, it is property that continues to have the highest appeal.

Highest appeal

More than 1 in 4 Americans (27 percent) said property was the best investment for money which they would not need for at least a decade, according to a new survey of 1,000 investors. Cash came in second with 23 percent of investors, only 17 percent said the stock market is their preferred place for long-term money and just 5 percent said they would put their long-term money in bonds.

Just this week, the drop in value of gold has shaken the confidence of investors in that sector. But emerging markets have also come into the spotlight. Blackwater Associates, the world’s largest hedge fund has now flipped its view on China, from positive to negative. China’s stock markets have been battered in recent weeks where Shanghai’s main index lost a third of its value prompting a growing chorus of China-watchers to warn against investing there.

Property returns.  

Stung by minimal returns on cash and concerns about stock, bond and commodity prices, property markets are again proving highly attractive, especially to those with funding.

Firstly, capital appreciation potential is still very strong.

Second, rental yields are healthy. With more would-be first time buyers forced to sit on the property sidelines and save for higher deposits, this has pushed up rents in major urban centres which in turn boost the attractiveness of the property sector.

Third, property supply is a major problem in many markets. Following years of significant under-investment, there are substantial shortages of suitable residential properties across many urban centres which means that property prices are likely to continue rising.

Illiquid dilemma

Putting large chunks of one’s personal wealth into this illiquid investment class has its detractors but from a long term investment strategy, it is proving difficult to beat.

Less emotional stress

In a conversation with an attendee at a recent personal finance clinic I was giving, they summed up their investment strategy most succinctly: “I know the investment folks tell me to spread the risk but for me, I like to stand in the investment that I make, I like to see it, touch it and know it. With stocks and bonds, every day it’s up, it’s down and there are all these so-called experts scaring the wits out of me and the daily media frenzy, well…it’s so emotionally draining. With property, you just buy it and its there for the long-term and over the long-term, it’s value does grow!

Nothing more to say!

Frank Conway is a Qualified Financial Advisor and author of Cents & Sensibility, a financial guide.

Financial education lesson 4: personal budgeting.

Using the map analogy, you wouldn’t start a journey without knowing how to get to your destination. The same applies to money. If you have a long-term money goal, like travel the world or something more modest, like owning the next must-have video game or smartphone, you also need a plan to get the cash to buy it.

In this video lesson, we demonstrate the tricks effective money managers use to track their cash.



MoneyWhizz is now available to schools across Ireland as a series of video lessons. And, since this is a digital learning management programme, individual lessons are also available. Read more HERE.

If you wish to get MoneyWhizz, please feel free to contact us.



Future money; ApplePay and how it works

Apple Pay, what it is and how it works

A new contactless payment system that lets people use their iPhones to tap-and-pay in high street shops has been launched in the UK. Apple Pay will let iPhone 6, 6 Plus and Apple Watch owners pay for items costing up to £20 by just touching their gadgets to a payment terminal, much like contactless credit cards.

Contactless technology use on the increase

Contactless technology use on the increase

How does it work?

Apple Pay is effectively a digital wallet. It lets users use their credit and debit cards through Apple’s Passbook app. There are two ways to use it: in a physical high street shops and online.

Only those with the latest iPhones, or an Apple Watch, will be able to use it in shops. Apple Pay uses near-field communications (NFC) found in the iPhone 6 or Apple Watch in a similar manner to contactless cards.

Security innovation

Unlike contactless cards, Apple Pay includes an extra security measure known as tokenisation, which ensures that the card details stored on a phone are never passed to the retailer. Instead, the payee receives a one-use “token” allowing them to debit the payment only once.

The payments are secured and verified by the owner’s fingerprint using Apple’s Touch ID system. This might make it slower sometimes when authentication is required compared to using a contactless card but the security-conscious may appreciate the extra check.

Which cards are signed up?

The first wave of banks to support the payment system in the UK include NatWest, Nationwide Building Society, Royal Bank of Scotland, Santander and Ulster Bank and MBNA. First Direct and HSBC are scheduled to join later in July 2015 and a further wave to include Bank of Scotland, Halifax, Lloyds Bank, M&S Bank and TSB Bank are slotted into the Apple schedule for later this Autumn.

Barclays is reported to be still in negotiations with Apple for a greater slice of the commercial action.

Where can the new technology be used?

Most retailers that already accept contactless payments via credit and debit cards will support the new pay system.

Is there a limit?

Most payments will be limited to the £20 cap that is currently in force for contactless payments using credit or debit cards and this limit is set to rise to £30 in September.

Larger limits for Apple users

Apple Pay will be able to support larger payment amounts using updated terminals in shops that verify the user’s payment credentials using Touch ID instead of having to enter a pin.

What’s the competition doing?

Companies such as PayPal, services operated through mobile phone operators such as EE’s Cash on Tap and smartphone manufacturers such as Samsung and Google also have their own payment solutions, but have struggled to gain traction.

Here in Ireland, while the rollout of contactless technology has been continuing apace, the rollout of other proprietary technologies such as Apple Pay has been slow. However, there is little doubt that as the payment innovation gains pace in the UK, especially as banks such as Ulster Bank are in the mix, it is only a matter of time (assuming the U.B. bank system holds up!).

Frank Conway is a founder of, the financial literacy initiative.

What the Greek debt crisis can teach us about personal debt

If we are to learn anything from the debt negotiations between Greece and its creditors, it’s this; strength wins!

For the Greeks, their situation all along was that of a family that came into easy cash. Yes, it can be a little tempting to blame the other folks with the fat wallets and a willing pen and all too ready to sign their cash over, but debt is ultimately about rights and responsibilities.

Family disposable income

Personal debt

We all know the story. Easy cash, easy borrowings and lots and lots of tears when it came to paying back!

At first, we had denial, a sort of “what, us?” when creditors came calling.

Then came defiance “Hey, it’s your problem, you shouldn’t have lent the money in the first place”.

Then the silence!

Followed by the refusal (again)!

Then some more defiance (again), in the case of Greece, it was the election of Syriza.

Then more silence mixed with defiance and a sprinkling of refusal to top things off.

Of course, I am not just talking about the Greek reaction here, I am also referring to the EU politicians that have made a total blunder of things and have made a bad situation much worse for the millions of ordinary Greeks whose economy was put in a stranglehold.

But for the Greeks, the lessons they need to take away from this historic mess is that they are the losers in this game of might.

This is how debt works; in the real world and for families all over the world.

Over the course of the last four years, Irish families have discovered exactly what the Syriza politicians have done in the last few days and it is this:

  1. Debt – its ability to grow and multiply is extraordinary, especially when late fees and additional charges are factored in.
  2. It is persistent – it follows the debtor across borders and through time.
  3. It’s a destroyer of personal wealth – especially when it goes wrong.
  4. It is a destroyer of personal reputations.
  5. It can even destroy families.

The history of the Greek people has been put through the reputation shredder. Across the EU family of nations, there have been disputes for and against debt settlement where the rich are refusing to assist the less well off.

If the Greek debt crisis teaches us anything, hopefully it is this; might is right when it comes to debt repayments. When debt goes wrong, the borrower always ends up worse for wear.

Frank Conway is founder of, the financial literacy initiative for students and young adults. View this short video on on PERSONAL CREDIT REPORTS. 


Lesson 3: Teaching kids about income tax

For students entering the workforce for the first time, there is always a degree of shock on receiving their first official paycheck with that inevitable question; where’s the rest of their money.

In this, our third lesson, MoneyWhizz demonstrates the basic elements (we are not attempting to be tax nerds here!!!) of how the tax system works and how it impacts on the final salary.

What’s the difference between a fund analyst and a computer?

Very little apparently!

Personal investing options

Personal investing options

Back in the late ‘90’s, when I was still a credit underwriter, I worked on a project that I thought was a little bonkers.

The project was to evaluate the precision of automated underwriting software and how it compared against the job that the regular underwriting team did.

For some time, we had all known that different underwriters took different ‘views’ on various applicant credit risks which resulted in pricing anomalies.

The company behind the new computer-based programme was Fair Isaacs. The new computer programme and the credit score it presented was its FICO score and to say that there was a lot of around-the-office scoffing at the idea that a computer programme could replace their job was putting mildly.

But, as Fair Isaacs persisted and time went by, the computer won. Today, automated credit grading is how creditors make decisions on millions of loan applications across the US.

As automated technology takes a greater slice of the financial services action, algorithms are replacing some of the traditional work of traders, clerks and financial advisers and now, a collection of market innovators and tech startups are employing artificial intelligence (A.I.) to actually write news stories and financial reports.

There has been a high degree of dismissal among investment analysts that their job, their unique skill of identifying investment risk nuances contained within the forest of financial data could NOT be undertaken, completed and reported on by a computer programme.

But now, it looks like many major Wall Street brands, with the help of innovative start-ups are calling their bluff.

Names such as Narrative Science Inc., and Automated Insights are adding some Wall Street big hitters to their client list as providers of report services and a way for those brands to reduce analyst costs. For example, Narrative Science’s extracts data from filings, databases and internal documents and then use A.I, to synthesize the information for corporate presentations or product descriptions. Generally, the software can produce information summaries quickly and cheaply, enabling businesses to publish more reports and marketing materials.

Brands like UBS produce an estimated 30,000 research reports each year…that’s a lot of cost for any bank and with increasing pressure on banks for greater efficiencies, my money is on the computer.

So, with computers increasingly taking on the role of investment adviser through ‘robo-advisor’ services as now edging their way into the sanctum of job of analyst and report writer, I need now is a computer to do my commute and earn my income for me!



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