Punter Southall became the first pensions consultancy to adopt PFaroe in early 2012. PFaroe is now offered to all the company’s existing and prospective clients – both corporate sponsors and trustees – from its offices throughout the UK.
Undoubtedly, Punter Southall was ahead of the curve in realising how risk management technology, purpose-built by specialist financial technology companies, could be a strong fit for the consulting business, providing significant cost-effective benefits for sponsor and trustee clients.
According to John Batting, Punter Southall Chief Executive, PFaroe has been “a game-changer”: “Back in 2012 we recognised that valuations needed to be constantly updated and reflect the full range of outcomes rather than just one. RiskFirst enabled us to build on our inhouse tools and we worked with them to create a single secure platform that combined our statutory valuation duties with their technology to give our clients a better appreciation of the risks they were running Our clients wanted real-time data supplemented by detailed risk analysis upon which they could make timely decisions. RiskFirst provided us with an opportunity to start using technology that could satisfy these demands and that, ultimately, we felt the whole market would gravitate towards over time. This has since proved true.”
PFaroe has allowed Punter Southall to offer its clients more frequent, transparent and accessible valuations. The user-friendly analytics and up-to-the-minute information has also fostered greater collaboration between employers and trustees to create a sharper focus and insight into managing pension liabilities.
Since 2012, Punter Southall has moved all of its clients onto PFaroe for actuarial valuations, also offering them the ability to access PFaroe’s risk functionality – including Value at Risk (VaR) interrogation, “What if?” analysis and stress-testing against historic market events – either directly on their own desktops or through the consultancy’s services.
The original business case for implementing PFaroe – the need to provide real-time information on a consistent basis across assets, liabilities and risk – has only grown stronger post-2012 given the pensions industry’s state of flux, driven by market ebbs and flows, changing regulation and changing client needs. Yet PFaroe’s flexibility and evolving nature has allowed Punter Southall to pre-empt and react to client and regulatory demands. PFaroe has proven especially valuable in educating clients, driving a collaborative approach and ensuring Punter Southall retains a technological edge.
The pensions industry has come to realise, especially in the aftermath of the financial crisis, that the traditional triennial valuation – even allowing for subsequent roll-forwards – is not fit for purpose. Certainly, funding levels have the potential to swing significantly while information to make a decision is prepared.
PFaroe helps Punter Southall clients avoid surprises through facilitating a more pro-active approach to risk management, allowing sponsors and trustees to understand what is driving the risk within their pension scheme at a very granular level. With The Pension Regulator putting more and more emphasis on risk over the past few years, especially in assessing scheme VaR, it is becoming increasingly vital that schemes can value this accurately, as and when is required.
Batting comments: “We encourage clients to be interactive – and PFaroe’s clear and easy-to-use interface allows them to ask questions and test their data in real-time – yet, at the same time, we are happy to work in the background, run the analytics, and present our findings. Either way, PFaroe does not replace what we do but rather allows us to focus our time and efforts on our key value-add – providing advice and solutions around the numbers. Ultimately, if clients are better informed, the debate is elevated and our skills can be utilised in full.”
PFaroe is also a cost-effective solution for clients. For those that have it on their desktops, they can run analysis which may have previously taken weeks of actuarial work, at the press of a button. For those that still rely on Punter Southall to drive the analysis, risk metrics can be generated without a great deal of additional programming. This means that all of Punter Southall’s clients, regardless of size, can receive detailed risk analytics that would previously have been the preserve of only the very largest schemes.
It is fair to say that many corporate sponsors and trustees have different viewpoints, objectives and responsibilities –when it comes to pension scheme management...
Punter Southall therefore put greater collaboration at the very centre of its corporate strategy. In this respect, it found the perfect partner in RiskFirst, which was also working to improve the effectiveness of the industry through joined-up analytics that could be shared by all parties. Implementing PFaroe has allowed Punter Southall to go a long way towards realising its goal of creating more collaborative relationships – allowing it to provide both sponsors and trustees, as well as other stakeholders, with consolidated and consistent scheme-specific information in one place. PFaroe is therefore often used as the focal point for meetings –and can ultimately help produce more efficient decisions.
Batting says: “While there remains work to do to create a truly collaborative pensions environment, our work with RiskFirst has driven a huge leap forward. With more than one of our trustee clients, we have witnessed how being able to provide company FDs or treasury departments with reliable, real-time information – presented in an easy and attractive way – can dispel much of the suspicion that can sometimes occur between trustees and sponsor. Quite simply, it shifts the conversation from one about the legitimacy of the numbers to one about the best way forward for the scheme.
In any industry, a new invention today can be outdated by tomorrow. Technological evolution must therefore keep pace with market change – a key reason Punter Southall chose PFaroe, a constantly-updated software as a service (SaaS) solution.,
Batting says: “PFaroe has evolved continuously since 2012 in response to both market changes and RiskFirst’s solutions to our own ideas and challenges. We’ve seen a number of risk analytics systems enter the market over that period, yet I still believe that PFaroe has genuine capabilities that other systems don’t. This is borne out of the fact that it models a scheme’s data right from the individual member upwards, seamlessly across assets, liabilities and risk. This remains unique in the market. Yet the biggest endorsement comes not from us, but from clients that have evaluated all the systems available to them and chosen Punter Southall as representing the perfect balance of technology, advisory outlook and service delivery.
The security of the system was also a key draw for Punter Southall – which spent a considerable amount of time analysing RiskFirst’s data security measures, compliance with key information security requirements, and the data security tests that it had conducted.
“Naturally, our line of work means that data security is of paramount importance,” says Batting. “The fact that RiskFirst puts data security at the very heart of its offering – rather than it just being an afterthought – was a key reason behind our adoption, providing comfort to both us and our clients. They passed every test that we put in front of them.”
Having better informed clients with more efficient governance set-ups ultimately leads to greater opportunities for reducing risk and broadening the scope of the solutions we can offer to clients particularly around de-risking
“PFaroe allows us to engage with clients more interactively than ever before; making complicated concepts and analytics intuitive, allowing us to present specific solutions and examine their effects with clients in real-time,” says Batting. “We find that it is far more effective for them to see the output on screen rather than just be told verbally the impact it may have.”
“Some of the biggest pension schemes in the country already run their data through PFaroe. To be able to go to prospective clients and say that we have software that is being used by schemes with hundreds of thousands of members gives them great confidence that we have the technical tools to meet their needs. It also puts us ahead of the competition – we can provide the same information and analysis yet, in many cases, at a lower cost and in a more up-to-date fashion. That has enabled us to talk to, and ultimately win, many new clients of all sizes.”
Punter Southall provide a unique range of services including actuarial consulting, administration, covenant assessment and investment services for pension funds, corporates and individuals.
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