Providers that don’t move forward might lose members

BCT set to embrace reforms

By David Macfarlane

Bank Consortium Trust Co. (BCT) is one of Hong Kong’s top five MPF service providers and a leading third party trustee and administrator to pension plans (MPF / ORSO / international pension plans) and global investment funds; it is committed to corporate governance and international best practices.

Lau Ka Shi, managing director and CEO of BCT, says the firm lives by its motto of commitment, expertise and professionalism because the company’s mission is to protect, manage and safe-keep members’ pension assets which it achieves through sound corporate governance, an effective compliance framework and robust internal controls, in addition to integrated risk management. “In building a customer-centric, solution-driven servicing culture, we care for and motivate our colleagues to share the vision and work towards a common goal: to be the Provider of Choice in the pension and trust industry. Our team strives for product innovation and service excellence in realising our vision,” she says.

In regard to the much-heralded MPF reforms in Hong Kong that have to be postponed by a year, Ms. Lau says that the news was a genuine surprise to the industry – “we were not consulted or notified on this issue,” she admits. “The conduct of MPF intermediaries and their supervision, together with the marketing and selling process, will be the key focuses for the regulators. Statutory backing will have a positive impact on enhancing protection for over two million members.”

Ms. Lau says according to the MPFA, the Employee Choice Arrangement (ECA) aims to increase members’ engagement in caring for their MPF account, i.e., employees will be able to make their own choices in regard to their own portion of contributions made under current employment. The government sees that members are not fully engaged now in the management of MPF accounts – with little attention paid and limited efforts made. If members were given more control over their balances, then it would encourage them to be more active in managing their MPF investments.

The second aim of ECA is to enhance market competition. Ms. Lau says that when portability is introduced, members will be able to move around a greater portion of MPF assets and market competition will increase, which is in turn expected to translate into lower fees.

It remains to be seen whether the introduction of ECA will bring about some consolidation in the industry as it becomes more consumer-oriented and the demands for service increase, Ms. Lau notes. “Up to now, we approach employers in delivering services and information who would then pass them onto their employees. With ECA, because employees will have a greater control over their MPF accounts, providers will have to do more in regards to the deepening and broadening of servicing, such as approaching members on an individual basis and implementing new ways to contact members, for example through an electronic platform, SMS or by email. Resources dedicated to call centres and telemarketing will have to be enhanced,” she says. “Also, there will be need for product innovation to meet members’ varying needs.”

In terms of products, Ms Lau says that there is a good chance members will want to know more about pre-retirement products and post-retirement products. She says, “Members might want financial planning advice in looking holistically at their personal savings, insurance, property and MPF – which is not to be overlooked. In terms of fund types and fund choices, members will be asking for more as well. Companies that do not move forward might lose members but it is still really a game of wait and see.”

According to Ms. Lau, investor education is a critical factor in deciding whether member will be able to ultimately benefit from ECA. She notes that while many investors in Hong Kong are familiar with short-term investment / speculation, MPF members need to know more about long-term investment and retirement planning in order to make informed decisions. “With longer life expectancy, our post retirement life may be as long as 30 years. To have sufficient retirement income protection, inflation risk and longevity risk have to be considered in addition to other risks like market risk when doing retirement planning,” she says.

Ms. Lau reminds members that it is important to take responsibility for their retirement planning, and that if they are not sure how to approach it, there are many tools such as retirement planning calculators and risk profile questionnaires available from service providers, facilitating them to make appropriate fund choice based on their risk tolerance levels and investment objectives. “When choosing an MPF scheme, members should pay attention to the number of funds offered and their spread across the risk/return spectrum, fees and charges, long-term sustainable performance of funds, as well as the levels and scope of service, whilst making apple-to-apple comparisons between funds across schemes.”