Who's minding the store?
For this month’s ‘Off The Record’ we asked you about one of the most critical elements of any pension fund set-up: the people that work for the scheme.
As staff retention at any level in the pensions and investment industry becomes crucial, how are pension funds coping in keeping people on board faced with the financial lure of a position in investment management or consultancy?
The answer it would seem is quite well, thank you very much. Certainly there is little indication of a personnel haemorrhage.
One thing is certain, judging by scheme replies. Pension funds can’t be compared like-for-like across the board. Obviously a significant number will outsource as much of the work as possible.
For example, we quizzed you first about staff numbers working at all levels within the plan, to a revealing conclusion.
The range of employees within funds stretched from solo shows with one individual on board, to those with several dedicated departments – the largest consisting of 550 people. The average figure came out at 36. (Some of you may begin asking for larger numbers now!)
In terms of those employees dedicated to investment, however, the figure drops to an average of six per scheme, with some plans having no particular investment professionals in-house, while the largest comes in with a team of 75.
And most of you seem to be happy with your current staffing arrangements. Only 10% complain about being understaffed.
Some of you are short of a pair of hands, nonetheless and, as ‘Off rhe Record’ considers it serves a social function as much as anything, we can announce that one fund has two vacancies and would like to fill them as soon as possible.
Unfortunately, we can’t break our vow of anonymity, so it’s up to you to find out who they are!
Sixty three per cent of you say that the pension scheme is adequately staffed, despite a few noting that they are slipping towards understaffing. Come on now, get it off your chest… Somewhat unsurprisingly, not one response pointed to an overstaffing problem. Now why doesn’t that shock us here?
In terms of recruitment, expectations must be geared towards growth in scheme activity as 21% of managers say they will be hiring this year. Only one respondent indicates a likely drop in numbers for the year ahead.
Much of this heightened activity, it would seem, reflects the ever increasing complexity of the investment world.
For the most part, hires will be on the investment side, with scheme chiefs indicating that portfolio managers, investment professionals and analysts will be top of their shopping lists.
A smaller number say the shortfall is in accounting and administration and that they will be looking to recruit accordingly.
That’s the theory anyway. In reality, bringing in the right people is not nearly so easy.
By far the biggest problem pension funds say they have in getting staff is experience – reflecting perhaps that pension funds may be somewhere near the bottom of the pecking order for investment professionals with a few years under their belts.
For the same reasons maybe, that old devil ‘remuneration’ comes in as the second most difficult hurdle in hiring well. There’s not much of a comparison in budget between, say, a local authority pension fund and an expanding investment bank with deep pockets.
Next up, the funds say, is a lack of qualified employees available on the market, although training seems to be less of a problem once the recruits are on board, with few schemes placing this anywhere near the top of their list of bugbears.
Individual problems being experienced by pension fund managers in their recruitment drives include, as one manager puts it, “approval” for additional staffing, or just the location of the office itself.
One manager highlights a crisis looming in the Dutch market: “There is no-one available in the actuarial field in Holland!”
Another would appear to have a problem with staff taking themselves a little too seriously: “ I just cannot recruit humble people who do not think that they own the world.”
We asked you then what exactly it is that you look for in potential employees at the level of qualifications etc. Interestingly, only 37% of pension plans demand a university degree or national equivalent before taking on staff. Those that do look for a general economics or finance certificate, while others probe a little deeper, seeking graduates in actuarial sciences.
Less than one in 10 seek any post-graduate qualifications from staff – and we at ‘Off the Record’ hope that this is not just because you don’t want to employ anyone better qualified than yourselves!
Half of you do seek a professionally recognised certificate, however, with most requiring a CFA or local equivalent. Other qualifications sought include the ACCA, CIPFA and CIMA standards.
For some funds there are no hard and fast rules on who can be taken on: “It depends on the asset class really. We don’t ask for a university degree for a money market trader, but we do for a fixed-income analyst,” says one.
It appears the CFA is gaining credibility fast as the benchmark for professionals in the field, with 52% of respondents saying they felt that it was now the standard level to be attained by pension fund staff.
And the advent of the euro will reinforce this, you note. One manager comments: “With the single market and the harmonisation of social laws it will become a must.”
Nevertheless, most managers believe there is little need for a further European pensions qualification, with only 16% replying in the affirmative.
Getting the staff into a pension fund is one thing. Keeping them another. For the most part, you say that the lack of promotion potential within pension plans is the biggest reason why staff might be tempted to leave the fold.
Interestingly, this is closely followed by location. As financial institutions cluster in centres such as London or Frankfurt, the pension fund in Cardiff or Cologne just may not have the same pulling power for the career professional.
Pay appears to be less of a barrier than for recruitment, as are the size of the fund being managed and the relative experience levels of employees. Other factors flagged up as retention problems include maternity leave, competition for staff between pension plans and, of course, the looming spectre of poaching by cash-happy investment managers.
Still it seems that most of you are fighting amongst yourselves for good employees. Forty-two per cent of funds say that their staff defect to other schemes, while 32% head for asset managers and just over a fifth go to consultancy.
Some of you, it appears, just won’t let employees out of your clutches, with one manager ominously claiming: “They don’t leave us…” and another saying that the only way out is “retirement”.
On average though, staff appear to be committing themselves for between five and six and a half years to working at a fund before they move on. The majority of you feel this duration will decline in the coming years. This may come as a result of increased headhunting by investment houses, which at present only poach around 16% of pension fund employees, you say.
But few can resist when the cash and career ladder beckon, as one manager concedes: “We can do very little to get people to stay in these circumstances.”
Could bonuses for staff be the answer? Maybe. Only 37% of funds at the moment have any incentive programme in place. Most of these are performance-based, with only a couple of schemes noting that they also reward teamwork and project management.
Is a rethink needed here? After all, this is pension fund performance we are talking about not aggressive hedge fund returns. Surely there are equally important issues at stake!