Social media is opening up possibilities for trustees to benefit from greater exposure to group thinking on the problems facing pension schemes. Marek Handzel finds out about one such platform.
In 2004, a business writer for The New Yorker magazine called James Surowiecki, had a book published called The Wisdom of Crowds.
The premise of his work was quite simple. Given the right circumstances, groups of people are generally smarter than the supposedly more intelligent individuals within them.
Surowiecki argued, convincingly, that collective intelligence trumps elite thinking as long as four basic criteria are met by a crowd. There needs to be a diversity of opinion; members have to think independently of each other; the crowd should be in a state of 'decentralisation'; and a robust method for aggregating opinions is required.
These conditions lead to the kind of joined-up thinking that the financial services industry and its pensions subset, in particular, could do with utilising. Up until recently, however, there has been no real effort to connect the thoughts of the various sections of thepensions community. But there are signs that this could soon change.
Dawid Konotey-Ahulu and Robert Gardner, the founders of consultancy outfit Redington, are both believers in the 'wisdom of crowds'. They are also devotees of social media and disciples of its power. Shared thinking, they believe, is a concept that is desperately under-used in pensions, while digital platforms are the perfect avenue through which to set it free.
"It's always been clear to us that the industry has been segregated," says Konotey-Ahulu. "From an information perspective it's more inefficient than other industries because the decision makers are in so many different places."
"If you look at all the information that is available, from banks, asset managers, lawyers, consultants, trustees, accounting firms, it seemed obvious to us that if you could bring this all together in one place, and find a way of sifting it and serving it up to the community as the best of the best material, then everyone would benefit."
The right platform
Despite having the idea of an online community in their original business plan in 2005, Konotey-Ahulu and Gardner had to wait until about 18 months ago to begin planning their web-based group; about the same time that sites spawned from web 2.0 – such as Facebook and LinkedIn – had already made inroads into people's personal and professional lives.
Their vision was for a platform that used elements of various successful web sites to deliver a "unique online meeting place and source of pensions information". It would work as an online community to help foster debate, facilitate idea sharing and allow for service and product recommendation.
Its originality would lie not only in its multi-functionality, but also in its all-encompassing net. Unlike other trustee discussion platforms, this one would try to link together individuals from all the professions tied in with pension provision.
They began building the site in earnest in early 2009, and work on the technical aspects of the project coincided with a comprehensive consultation process, including a day where trustees where invited to meet up together at a neutral location in central London and have ideas for the site run by them.
It was at this gathering that many of the features of the platform were given the green light such as private chat forums and connection transparency (allowing all uses to be able to view other people's contacts).
But perhaps more importantly, they bought in the idea of the 'wisdom of the crowd'.
"We asked them if they felt too reliant on one or two advisors and they said they were," claims Konotey-Ahulu. "So we also asked them if they would be interested in being able to, for example, see the views of an inflation swaps trader on the market rather than having to rely on an outlook that has been distilled, sanitised and reproduced by your consultant. They said that would be great."
And so, in November of last year, the digital pensions online meeting place, Mallow Street, was born. Named after a street where Redington's offices are based in London, it was created to meet trustees’ needs from its very inception.
Mallow Street's users can be confident that they can trust the site, according to its founders.
Everyone has to apply to become a member and is vetted by one of the team behind the community. So only genuine pensions people gain access, there's no media intrusion, and no-one is going to try and give you the hard sell.
According to Konotey-Ahulu, connections can also be made on a more personal level.
"What you're starting to see is connections between different people from different communities on Mallow Street. You can seek connections between people not just through a professional capacity, but also through a crossover in personalities. Keen runners or people who support Ipswich Town can be brought together due to a common interest, rather than just professional activity. That's powerful as it helps build trust."
At the moment, Mallow Street has about 450 people registered on it, with 250 trustees representing over half – £550 billion – of all assets in private defined benefit schemes.
Konotey-Ahulu wants that total to eventually peak at about 5,000, in order to have a good representation of the industry.
In terms of operation, Mallow Street works in a commercial sense by charging a quarterly subscription for product providers. For trustees, consultants and other external contributors such as financial services academics, the site is free of charge.
What's more, there is a big ‘Chinese wall’ between Redington and Mallow Street and they are registered as two separate companies, emphasising the site’s neutral stance.
But will it grow into the fount of knowledge that Konotey-Ahulu hopes it will? He certainly acknowledges that the industry that it is aimed at is rather Luddite-like when it comes to the web.
"The financial services industry just doesn't do this – participate in digital platforms. It may be because typically the industry professionals are more busy than most and also the products that they're dealing with are very complex and have to be looked at carefully. But when we looked at other industries it became obvious to us that others would benefit."
"It has to be a good thing."