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Newsmakers

Legal & General, British Airways Cut Largest UK Bulk Annuity Deal

The financial services company will take over $5.7 billion of the airline’s pension liabilities.

By Chris Butera

Legal & General, a financial services provider specializing in insurance, pensions, and investment management, will assume £4.4 billion ($5.7 billion) of British Airways’ pension liabilities in the UK’s largest bulk annuity deal.

The deal, announced Thursday, shields the airline from a growing pension hole, which may continue to expand due to poor returns and life expectancy increases among beneficiaries. The business has struggled with its liabilities for years.

The Airways Pension Scheme (APS), the defined benefits plan Legal & General will assume, had £7.7 billion in liabilities, resulting in a £469 million deficit at the end of 2017, the annual report shows.

British Airways froze its defined benefits plans last year, creating a defined contribution plan with flexible benefits in their place. The new plan, known as the British Airways Retirement Plan, launched in April.

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Legal & General’s deal will cover nearly 22,000 beneficiaries, or 60% of the airlines’ pension liabilities. Each beneficiary will receive an annuity payment.

Legal & General and British Airways will complete additional transactions designed to remove legacy liabilities in the coming months, Nigel Wilson, the financial service’s chief executive, confirmed. He expects the second half of this year to be “a record six months” for its pensions risk transfer business.

Virginia Holmes, APS’s chair of the plan’s trustee, said the bulk annuity was the latest deal to insure benefits against longevity and financial risks as well as improve their security. She also reassured members that their pensions will continue to be paid at the same rate as before.

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Home > News > Research > Advisors Increasingly Turn to External Asset Managers
Research

Advisors Increasingly Turn to External Asset Managers

Survey finds growing number of financial advisors need outside help.

By Michael Katz

Financial advisors are increasingly seeking out third-party investment managers and are devoting a growing amount of assets to external providers, according to a new survey from ETF provider FlexShares.

The biennial report found that 43% of advisors polled currently use third-party investment manager, and outsource an average of 57% of client assets under management in 2018, up from 53% in 2016.

“As advisors adapt to a growing demand for financial planning services and rising pressures on their bottom-line, they are increasingly looking to employ external investment management services,” Laura Gregg, director of client development at FlexShares, said in a release. “As they dedicate more client assets to outsourcing, advisors are able to benefit by spending more focused time with clients as well as concentrating on business development activities.”

The report said the main reasons given by advisors for outsourcing include seeking help for more niche strategies, such as alternative investments (65 %), freeing up time in their practice (61%), access to institutional quality due diligence/monitoring, (47%) and the ability to access to a variety of investment product strategies (43%).

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However, the report found that external managers were not embraced by all advisors. It said that, consistent with past surveys, many respondents said they are hesitant to use external investment managers because investment research remains a core part of their firm’s value proposition. However, it also said this attitude may be changing as the percentage of advisors that cite this reason has declined to 32% in 2018, down from 45% in 2016, and 56% in 2014.  Additionally, the desire to maintain flexibility was also cited as an important consideration by 15% of advisors who do not outsource.

It also said that satisfaction rates among advisors with external managers have consistently increased, rising to 97% in 2018 from 92% in 2010, while 62% said they have grown their client base as a result of external management, with 30% saying they have realized an increase in revenue as a result.

Of those responding to the survey, 39% were identified as wealth managers, 24% as financial planning firms, 18% as investment advisories, and 17% as investment managers.

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