Financial industry pension heist under fire: First provider cuts pension fund fees

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Pensions have been falling for years. But the financial sector’s fees for managing pension fund assets are rising. The industry now draws 20 billion francs per year – 4,500 francs per insured. More than half are hidden costs that almost no one knows about.

A big chunk is the so-called management fee that asset managers collect annually. It is charged according to the volume managed, so the pension fund grows in proportion to its assets. This makes a difference because these assets are growing tremendously: when the mandatory pension fund was introduced in 1985, the Swiss pension fund had CHF 150 billion – 55 percent of gross domestic product (GDP). 1200 billion today, believe it or not, 160 percent of GDP.

However, personnel expenses per managed francs have not increased, so financial service providers are making more profit with each additional piece of supply. Your performance is irrelevant: the management fee is always paid, whatever the return. Whether this is positive or negative has no effect on the level.

Federal Bern doesn’t help

This federal is well known in Bern. But the Federal Council and Parliament are doing nothing to stop the profits of the financial sector from increasing at the expense of the insured. Some bourgeois politicians sit on the board of an insurance company or bank. And the left prefers to deal with AHV. The result: More and more retirement money is pouring into the coffers of financial service providers.

But now things are moving – from the industry itself. “Politicians are just debating which insurers need to tighten their belts to keep the second pillar alive,” says entrepreneur and pension expert Serge Aerne, 44. But nobody talks about the fact that the financial sector can also contribute.”

Aerne wants to change that. He is the Chairman of the Board of Directors of Admicasa, a real estate and service company that invests pension funds in housing for investment foundations. Like other financial service providers, Admicasa previously charged a flat rate management fee. “Good for business,” Aerne says. “But it’s bad for those insured who have no control over it.” It is clear to the entrepreneur: “We have to stop the flood of wages in the supply market.”

For this reason, Admicasa removes the administration fee. Beginning in June, Aerne will replace these with a limited management fee that covers only the actual costs of asset management. Of the 60 million managed annuities, policyholders are saving more and more compared to the linear management fee. In a billion, the difference is a big difference, like two million francs a year.

more transparency

In addition, Aerne overcomes hidden fees: Admicasa is the first provider to show all costs. “It’s the only way insurers can realistically evaluate us,” says the pension expert. “When other providers do the same, it will eventually create comparability.” This is not available in the pension fund market today.

Terra Helvetica Investment Foundation is the first client to benefit from the new fee model. Foundation Chairman André Schlatter (61) says: “The previous model charges for external asset management at a flat rate proportional to the volume of investment. It becomes untenable when wages are not reasonably commensurate with the effort put in.”

Schlatter says it’s a matter of decency to lower the proportionately unreasonably high fees when conversion rates are falling and technical interest rates are falling. “The new model rewards the external asset manager appropriately for the work done, but relies more on the effort put into it. That’s more into pensions and the second column actually needs to be about that.”

Removing the management fee is only a first step for Admicasa. The company plans to introduce a performance fee in the future. The asset manager receives compensation only if it achieves its return target. If he doesn’t, he won’t get anything. For the first time, the provider’s performance must decide how much the insured should pay for asset management.

The Swiss Association of Asset Managers told SonntagsBlick that Admicasa contributes to several compensation models. Does the association recommend the new model to its members? “Fees structures are basically a matter of the asset manager,” the association says. Reluctance is not accidental. A lot of rumors are swirling in the background. The industry fears their interests. Because starting in June, pension funds have an alternative to the expensive management fee.

Pension fund association Asip says discussions about fee models that would deliver the same returns at lower costs, at least with the same collateral, would be welcome. Factual and fair communication is important.
The superannuation market is changing – probably purely in the interest of the insured.

Source :Blick