Funds supermarket keeps an eye on pensions

A former Hibernian boss's latest venture aims to make the administration of pension schemes more transparent, writes SIMON CARSWELL

FOUR DECADES of working in the pensions industry prompted Adrian Daly to consider his most recent venture – a new business that allows small pension schemes to view the value of pension funds and a supermarket of funds online.

Daly’s experience has taught him that the pensions industry can be too opaque and a bit of “an administration nightmare” cluttered with confusing paperwork.

The former head of Hibernian in the 1990s and ICI Life in the 1980s has just launched Source, a third-party pensions administration company, into the market.

The idea is simple.

There are essentially four parties in pensions – the customer (or member), the employer or trustee who looks after the pension, the pensions adviser who says what’s best and the pensions company, which provides the right investment fund.

Daly says that large pension funds such as some of the schemes in the large semi-State companies are self-administered. He believes that some of the smaller schemes should be afforded the same opportunity and not put at a disadvantage just because of their scale.

Source provides a website called Root or what Daly refers to as “an online platform” – in other words, the technological know-how to allow pension advisers, trustees and, most importantly members, to view the value of their funds at their computers.

It’s similar to the 24-7 online access that banks offer customers, says Daly and, given that the same platform is there for all companies, it offers a one-size-fits-all approach for pension schemes.

Source has also separated the administration of pension schemes from the investments that schemes make. This allows the company to offer pension members and advisers choice from the full range of investment funds across the industry, rather than being tied to the funds offered by just one pension company.

This enables Source to compare deals and to offer better deals to pension advisers and trustees as it has larger buying power when it comes to selling members’ pension money into investment funds.

“It is a long, long time since my first job in an insurance company working in a pensions department, but it didn’t take me long to realise the administration of a pension scheme was a nightmare,” he says. Given the number of parties involved in the long “chain” of participants in the pensions industry, Daly noticed that the information gap was prone to miscommunication, while the renewal process has been “tedious to say the least”.

“Our core activity is to act as a back office to administer a pension scheme,” says Daly. “That is brought online and has made what was a very opaque system much more transparent.”

He says that “the self-administered pension scheme” has been opened up to a much broader number of pension schemes with the Source online “back office”.

By channelling more advisers through the company, Daly says that Source has developed “a wholesale fund supermarket”.

“We have spoken to all the fund managers in town and we have asked them for pricing so that we have a virtual supermarket of funds,” he said.

The company has a list of administrative charges on each fund offered by pension companies and, given that it can in essence buy in bulk because of the potential number of pension schemes using the company, it can negotiate administration fees downwards.

“There is good economic reason for them offering these prices,” he said.

Source has been developed by operations manager Clare Mulligan, who has worked in the British pensions industry for 12 years before moving to Ireland to join Hibernian in 2002 and later the Construction Workers’ Pension Scheme, the industry-wide plan for building workers set up as an independent subsidiary of the Construction Industry Federation.

Source is run by Daly and his son Emmet, who are both directors of the Dublin-based company.

The “funds supermarket” operated by Source is not a million miles away from another of Daly’s businesses, Adviser Plus, an online company which provides price comparisons on insurance for pensions brokers. That business offers a service for brokers rather than an administration structure.Adviser Plus and Source both operate from a premises on Fitzwilliam Street in Dublin 2 and employ 12 people.

Daly says that the company could “conceivably” double its workforce within the space of a year.

Outside pensions, Daly is a shareholder in Cafe Sol, the Dublin 2 coffee shop chain founded by his son Emmet in 1998.

Emmet had worked in pensions consulting for several years before setting up the coffee chain.

He is back working in pensions again with the launch of Source, which, his father says, has “the potential” to be launched in the UK.

Adrian Daly believes Source will be particularly appealing to pensions’ members at a time when there is deep concern about the collapsing value of many funds and when many defined-benefit pension schemes are heavily in deficit and facing potential collapse given these hardened economic times.

“All of that says we need to know where our money is, who is investing it in what and what it is doing,” he said.