Henderson: Fund Managers Must Help Investors in Retirement

People need help to understand the investment landscape, says Henderson's Simon Hillenbrand. To understand their retirement options

Emma Wall 17 April, 2015 | 4:13PM
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Emma Wall: Hello and welcome to Morningstar. I'm Emma Wall and here with me today is Simon Hillenbrand, Head of U.K. Retail for Henderson.

Hello, Simon.

Simon Hillenbrand: Good morning, Emma. Thanks for having me in.

Wall: So we're talking about retirement this week. I thought I'd ask you as someone who works for an asset manager and has a lot of communication with the real end investor. What are people looking for in this post pensions freedom world?

Hillenbrand: Good question. I think clearly we're week two post the reforms actually landing. I think in the run up there was a little excitement about what people needed to do. I think a lot of people may have thought that they only had a very short space of time to actually do anything, that's categorically not the case. So I think people are taking a bit of time to think about what are the implications.

The other thing to say, I think most importantly is that a lot of what we have in the marketplace already was the same as we had two, three weeks ago. There isn't a great change that's suddenly taken place overnight in terms of product and the way that people need to think about their retirement and how they investment necessarily. So I think it's still early days, but there is a long way to go.

Wall: I think that's a very important point in what you just said because sometimes it can feel to the investors, and indeed to those of us who work in finance, that the City's answer to any sort of change in legislation or new pensions tweak is just; launch more products. And retirement and investing can be confusing. So actually keeping things simple, can be the answer to investors’ prayers.

Hillenbrand: Yes, I think simple is best. But that is not the same as assuming that everybody knows exactly what they need to be doing with their pension savings. And I think that is certainly a big challenge for all of us in the City.

We do have a role to play in helping people to plan for their futures. I mean, the big change that we have seen post the reform, what people do need to think about is the fact that they will not be provided for by the State, which means they do need to think very actively about how they invest their hard earned cash.

Wall: And you've been having communication with advisers. What are they telling you that their clients want from products and where are they putting their money?

Hillenbrand: Well, we've heard a lot about income and I don't think this is a fad, I think this is a long-term trend. We know from the demographics of the U.K. that more and more people will be over 65 every day. We know we'll – I think on current projections, around 20 million people will be 65 years or older in 20 years' time.

So we know that this income situation is not going away, people need to invest for income and our job as fund managers is to listen to what clients want. We need to build solutions and give them options, which allow them to provide an income in the future. So I wouldn't say that anything particularly complicated is being discussed at the moment, it's quite simply how can the City to help us to provide for our retirement.

Wall: And transparency is key, not just with these recent pension changes, but also with regulation that started a couple of years ago – RDR – that is a continuation of the theme, isn't it?

Hillenbrand: Yes, I think it is. I think it is, but I think what is inescapable is that a lot of people in this country need help to understand the investment landscape, to understand their options and what they need to do about providing for their retirement. So I think post-RDR, if you like, we will see more people perhaps coming to advisors was the – maybe wasn't the initial thinking immediately post-RDR. I do think that's going to change because this is relatively complex subject for a lot of people and there is responsibility on everyone to help.

Wall: Do you expect to see considerable inflows into the income focused products then, I know we're only two weeks in, but sort of looking forward?

Hillenbrand: Yes, I do. I do, I mean I think single biggest thing that's changed in the last few years is – for us – as for managers, we need to think very much about the outcomes that we are delivering to end investors. We need to understand the propensity that people have to take on risk and what is their capacity to sustain loss and the need to – the very real need for them to provide for themselves in future. So that I think has a big bearing on the source of product that we as the City need to provide for the end investor.

Wall: Simon, thank you very much.

Hillenbrand: No trouble. You're welcome.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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Emma Wall  is former Senior International Editor for Morningstar