Interview - Chris Sier: Thirst for knowledge
Chris Sier, former chairman of the UK’s Institutional Disclosure Working Group (IDWG), talks about the power of data and his plans
When, in 2017, the UK’s Financial Conduct Authority (FCA) asked Chris Sier to convene asset management industry stakeholders and find solutions to improve cost transparency, some rejoiced and some, no doubt, shuddered.
Sier had set his sights on the £9trn (€10trn) UK asset management industry more than a decade before, determined to solve one problem. He wanted to identify the true cost of asset management and improve outcomes for savers. He has become known over the years as an authority on cost transparency and sometimes outspoken critic of the asset management industry. At times, some have mistaken his determination for stubbornness or even arrogance.
“I wanted to solve a problem and was very single-minded in that. I can be a pretty uncompromising person,” says Sier. In the end, his determination was rewarded in that the work of the FCA-backed Institutional Disclosure Working Group (IDWG), which he chaired, received widespread praise. The IDWG published a series of recommendations on how to improve cost transparency in asset management and produced standard templates for cost disclosure.
At present, the UK’s Pensions and Lifetime Savings (PLSA) is testing the templates as part of its Cost Transparency Initiative (CTI). Given the positive feedback that the IDWG’s work has received so far, it is likely that the templates will truly become an industry standard. Sier says the templates will be developed further over the coming years.
Sier’s first attempt to design a cost reporting standard had produced the Local Government Pension Scheme (LGPS) Code of Transparency. Asset managers working within the UK LGPS have to sign up to the code. He recounts: “I’ve always wanted to get hold of data on costs, so that we can understand the scale of the problem.
“I was so frustrated with everybody building their own data-collection frameworks. I saw companies operating according to their own standards, with small sample sizes, and producing frameworks that were not comparable. To me, that was just expensive chaos. So I created an open data standard. The framework formed the basis for the LPGS Code of Transparency.”
That is what prompted the FCA’s call. At the time, the regulator was working on its Asset Management Market Study, a comprehensive investigation of the asset management industry. The study confirmed what campaigners like Sier had been saying for years. Disclosure of costs by asset managers was opaque and this could be having dire consequences for their clients. “The FCA said there was a market failure, and it is one of information,” says Sier.
He says: “I want empirical data on which to base and test my hypotheses. Any hypothesis – whether transaction costs are negligible, or whether asset management is the most expensive part of the supply chain – cannot be tested without a good, congruent dataset.”
After completing his PhD, Sier joined the police force, where he spent several years. He then got his MBA at the University of Oxford’s Saïd Business School in 2003 and started a career in investment management consulting. His experience since then has earned him two professorships – at the University of Newcastle and the University of Leeds – as well as a role with the UK Treasury as fintech envoy.
Aside from the cheap jokes on him being the ‘sheriff’ of the asset management industry, Sier says his police experience helped him subsequently but only up to a point. “My policing work gave me enough insight about human nature. But as a police officer you tend to be cynical about people’s motives and I had to rein in that cynicism. I am a natural optimist and want to see the best in people,” Sier says.
His main achievement was to get agreement on a standard cost-reporting framework. “The hardest thing was managing the complex diversity of the interests represented around the table,” he says. “I had to be fiercely independent. But once I understood that everyone wanted to succeed, that made it easier.”
Sier says the reticence to disclose data that asset managers usually show disappeared once it was understood that the approach would be scientific. “The asset managers were totally on board. They understood that this helped them as much as it helped their clients,” says Sier.
He adds: “The success of the IDWG means that when pension funds now want the data, they will get the data.” And improvements in transparency should lead to greater efficiency. Even a small basis-point reduction in fees for each fund would have a hugely positive impact on the industry, he says.
I believe that the only way to reduce the cost base of the industry is to improve the technology that serves that cost base - Chris Sier
That experience has led to Sier’s latest adventure as a social entrepreneur. At the end of last year he launched ClearGlass, a technology outfit that proposes to collect the fee data from asset managers and fill the IDWG templates on behalf of investors. It then offers analysis of the data and does everything for £100 per mandate. Clients will also have the option of requesting benchmarking services. The company has been operational for barely two months but is already working with 12 pension funds. “We have already created a marketplace for ourselves, so we are not on the typical start-up journey,” says Sier.
As databases on fees and costs grow in size and quality, pension funds might find that asset management is not the most expensive part of the supply chain, Sier says. Either way, the industry should become more efficient with information becoming more readily available. Sier played no small part in this change and it is likely he will continue to play a key role.