Sticking to the plan
Paul Haines, investment director at DMGT Pensions in London, and a former investment consultant, discusses the future of consulting, the dangers of SRI and the positive influence of heavy metal music with Brendan Maton
Who is or was your biggest mentor in pensions and investments and why?
On my understanding of the word, I wouldn’t identify anyone as being a ‘mentor’, but that probably says more about my personality than it does about the people I have been lucky enough to work with. Many colleagues have influenced me: some I’ve worked with, some I’ve worked for and some who have worked for me. If I have to name names, then the following, in strictly alphabetical order, are the ones I remember as having the most positive impact: Brian Coote (now retired), Alastair Cuming (now AXA IM), Tim Gardener (Mercer), Keith Jecks (ABN AMRO), Andrew Kirton (Mercer), Mark Nicoll (Lane Clark & Peacock), Tricia Sellors (no longer in the pensions industry) and Martin Slack (Lane Clark & Peacock).
This is an opportunity for me to thank all of the people I have shared an office with over the years. With rare exceptions, “no man is an island, entire of itself”, and most of what we achieve we do so by the collective will and effort of a team.
Who do you most admire in the industry and why?
As an individual, Robin Ellison, former chairman of the UK’s National Association of Pension Funds. For years, he has been a clear-headed advocate for the pensions industry. His articles and speeches are consistently well presented, coherently argued and - most important of all - make sense. They should be compulsory reading for all politicians who seek to opine on pensions. It also helps that he is, in my view, a thoroughly nice bloke.
As a collective group, pension managers. They may not gather the headlines the way politicians, investment managers and pension professionals do, but day-in, day-out, these are the people running pension arrangements and seeing that people are paid their pensions on time (see question six below). If this group had had a bigger voice, then perhaps we would not now be burdened with a body of legislation that effectively means that the ordinary man or woman has virtually no chance of understanding what they can and cannot achieve though pension saving.
Which writers’ or economists’ books have influenced you the most?
I can’t identify individual books or writers that stand out in this regard, save perhaps for the actuarial textbooks without which I could not have qualified as an actuary. I have tried, and still try, to read as much material as I can, from as many different sources as I can, and just let it all filter through my brain. Over time, I would like to think that this has an impact in refining what I believe in, but I never expect any of it to have a life-changing effect on me.
The three books I feel most guilty about not having read - which to me means having read cover-to-cover - are The Road to Serfdom by F A Hayek, The Rights of Man by Thomas Paine and The Wealth of Nations by Adam Smith. They sit on my bookshelf, along with many other titles, a daily reminder that I need time to read more.
The ever-present reading in my professional life is The Economist, which I read cover-to-cover with an almost religious devotion, sometimes weeks and occasionally months out-of-date. This despite the fact that a client once cautioned me against reading it as it was just reinforcing my existing prejudices.
What event, good or bad, has influenced how you approach your present role?
It seems to me that life is just too complicated for any one event to be identified in this way, but maybe I’ve just been lucky (or unlucky, depending on how you view these things). You have to take support, guidance and inspiration from as many sources as you can: family, friends, colleagues, books, music. You can then carry this collective ‘moral reserve’ with you, and draw on it as and when required.
To give a somewhat trivial example, a cathartic blast of Symptom Of The Universe by heavy metal legends, Black Sabbath is sometimes just what I need to put me into a positive frame of mind, and being in a positive frame of mind is what I consider to be the most important part of doing any job.
What is your investment philosophy?
There are two key elements to this. First, you need to know your investment objectives. Second, you need to know your investment constraints: your wealth, risk tolerances, and time horizons. Marry these two elements together, and you can produce an investment plan, always remembering the need to understand the difference between investment and speculation. Once the plan is set, stick to it, but always be prepared to review if factors change. And if your readers do not think that this is dull and boring, albeit with the virtue of being straightforward, then I haven’t explained it properly.
What are the most important challenges facing the industry?
To see that people receive the pensions they are expecting: everything else is detail.
However, it does not seem to me that this thought has always been uppermost in everybody’s mind. The pool of UK pension fund assets has proved irresistible, and over the years many have suggested priorities other than achieving the best long-term return: supporting local start-ups, the environment and ethical factors too numerous to list, almost always accompanied by ill-defined and subjective investment criteria. Such proposals are irritating at best, damaging at worst.
It has proved hard enough to fulfil the simple objective set out above: it will be harder still if we allow ourselves to be diverted from our task by seeking to achieve other objectives. This is the pensions industry, not some offshoot of a campaign to change the state of the world.
And finally, what is the future for investment consultants and consulting?
As a long-time advocate of the benefits and virtues of investment consulting, I would like to be able to say that it will be long and glorious, but I’m not so sure. Concerns over the consultant ‘business model’ are, I fear, persuading some consultants that they need to become quasi investment managers. I do not think that consulting and investment management can be successfully delivered from the same organisation: one will eventually drive out the other. The contortions that some consultants seem to go through to earn investment management-type revenue streams while claiming that what they are doing is not investment management is, to me, less than edifying.
Consulting is based on trust. Trust that the advice is delivered on an objective basis; that the consultant’s prime, if not only, concern, is the client’s interest; and that the advice is not being driven by consideration of the consultant’s revenue stream. If that trust is broken, the ability to deliver advice will be compromised. Consulting needs, in my view, to rediscover its original purpose if it is to survive, let alone flourish.