When we talk about retirement fund reform both globally and in a South African context, the natural tendency for people in the financial services industry is to focus on the statistics and metrics that we are comfortable with and tend to understand. Aspects such as the number of funds, the population dynamics, longevity, structural changes, contribution rates, tax reforms and spreadsheet after complicated spreadsheet with annuity rates, and the like, are typically the key points discussed.
While this conversation has much merit and serves as a basis for many dialogues about retirement fund reform, in our view, in addition to this, we need to take a step back and focus on three objectives of retirement reform from a member and potential new member point of view. These objectives are: to increase participation in the system, to increase coverage and to improve the overall savings rate.
In 2015, is it natural and right to simply expect less financially literate members to trust us because we are investment managers and can speak the language of wealth?
When we do this it is very obvious that apart from the traditional approaches to discussions about retirement reform – which are by their very nature exclusive in that the language of reform is one of industry jargon – we believe we need to broaden this dialogue and talk in a more inclusive way about how we improve both the quality and the level of our engagement with the people whose hard-earned money we are investing. The key question is what is the industry doing to improve the levels of trust in retirement funding, retirement provision and investment management and what could and should we be doing? In 2015, is it natural and right to simply expect less financially literate members to trust us because we are investment managers and can speak the language of wealth?
How do we measure and talk about trust? Interestingly, there is an independent and international survey that has been running for 15 years that does exactly this. The Edelman Trust Barometer measures trust in institutions, including business, media, NGOs and government. In 2015, they surveyed 33,000 respondents in 27 countries. For companies looking to build or restore trust in themselves and in their innovations, the 2015 Edelman Trust Barometer offers actionable insights on the attributes and behaviours that shape trust.
According to them, trust is built through specific attributes, which can be organised into five performance clusters: integrity, engagement, products and services, purpose and operations.
Of these clusters, the barometer reveals that integrity is most important, followed closely by engagement. As in past years, areas such as excellence in operations or products and services, while important, are simply a ‘ticket to the game’ or what is expected from consumers.
According to the barometer, there is hope to increase trust against what has become a complex backdrop. Innovations that touch consumers on a personal level can counter balance security concerns. Companies can act to chart a path to public trust. Some 82 percent of respondents agreed that ‘making their life easier’ is an important trait for building trust.
Benefits of reform
Extracting and applying the lessons directly from the barometer, the following become obvious for a retirement reform process.
We must focus on discovery, while establishing personal and societal benefits of reform. According to the barometer, communicating the financial stability of institutions, listing the steps they are taking in data security and highlighting the innovations that traditional institutions are developing can make a difference. Mobile banking and electronic payments are a good example. Only 30 percent of respondents believe that businesses are interested in ‘improving peoples’ lives’. The innovation story so proliferate in financial services needs to resonate with consumers through regular, two-way engagement and active consumer participation in product development and also in the reform process itself.
Another lesson is the need to act with integrity, rigor and self-awareness. Take sustainability into consideration. Be consistent in reporting and tell people how you are doing. This is a long-term, not short-term strategy. Start with social listening; having a well-communicated culture that is focused on an institution’s people and the communities in which they live and work. Only 24 percent of respondents expect that businesses will ‘make the world a better place’ (see Fig. 1), while 54 percent say they will refuse to do business with companies that do not. Consumers are sending a crystal clear message with this finding. Companies that are listening to their customers on this will gain the greatest advantage.
Finally, we must listen, share information and improve products. Do not be afraid to acknowledge problems, but be sure to take steps to solve them. It is vital to communicate across all platforms and in every priority area – operations, purpose, products and services, engagement and integrity. Of those surveyed, 83 percent said that keeping their family safe was an essential attribute – but only 56 percent thought the financial services industry was performing well on this measure. Strengthening collaborative approaches to data security and privacy, standing for consumer protection and making sure the institutions themselves remain strong will help to close the gap. The good news is that the 2015 Edelman Financial Services Trust Barometer shows a public willing to partner and engage and one that is open to innovation. Now is our chance to build on that. We need to make them aware of what the industry is doing to improve security, safeguard our financial systems and bring greater access to developing communities around the world.
Integrity and engagement
The trust-building opportunity for the reform process, therefore, lies squarely in the area of integrity and engagement. These areas encompass actions for individual participants in the retirement industry such as having ethical business functions, taking responsibility to address issues or crises, having transparent and open business practices, listening to customer needs and feedback, treating employees well, placing customers ahead of profit and communicating frequently on the state of the business.
Unsurprisingly, these are the qualities also evidenced to build trust in innovation and change. When it comes to retirement reform, integrity and engagement with members is therefore critical. But unfortunately, the financial industry dialogue currently tends to focus on the technical jargon, tax, product and contribution changes rather than embracing the challenge of deepening our understanding of what integrity and engagement may mean to the process and what is required to build trust with consumers.
At Argon Asset Management, we are entrusted to be stewards of hard-earned money from members of retirement funds. We therefore proactively maintain a strong, non-negotiable values orientation. Our values are honesty, integrity, thoroughness, accountability, respect for self and others, and a solid work ethic. This combination allows us to engage with external stakeholders with care, attentiveness and a proactive and socially consciousness approach to meeting their needs. We believe a key aspect of this is our culture and healthy internal people dynamics. We recognise that the effectiveness of our engagement with clients and members depends on the quality of our people, our discipline and passion to really listen to evolving needs and respond appropriately in a culturally sensitive way.
It is important to understand that engagement is a two-way thing. As an industry, we are very good at talking at people, perhaps because the consequence of listening and really paying attention across all of society in an inclusive way could change our paradigm and appear too costly in the short term. So, as an industry we don’t tend to stop and ask what members want and understand, never mind listen when they tell us. We fall into the trap of patronising many members or ignoring their financial, cultural, language and other needs, which, unfortunately, we believe will be much more costly to us as a society locally and globally, in the long run.
We are embracing the challenge at Argon and we will continue to deepen and broaden the quality and reach of our investment management services and the level of engagement with the clients whose needs we strive to meet and whose trust we seek to earn.