Our Pension Advisory Service After 40 Years: What Did We Accomplish.....And What's Next

“KPA Advisory Services provides strategic advice on pension design, governance, and investment matters to pension plan sponsors, pension providers, asset managers, pension industry associations, and government agencies dealing with pensions.” 

KPA Advisory Services Website

Addressing Pension Issues in the Theory-Heavy 1970s

The 1970s were a theory-heavy decade for pension design and investing. On the investment side, the  Modern Portfolio Theory invented by Harry Markowitz and Bill Sharpe had to be adapted to be become operationally useful in managing financial asset portfolios. On the design side, Peter Drucker laid out the future of pension management in his 1976 book  “The Unseen Revolution”. In it he argued that workers would  eventually become major owners of the means of production through their pension funds. This would go well only with the existence of pension organizations that embodied both ‘legitimacy’ (i.e., would act solely in the best interests of workers), and ‘competence’ (i.e., were capable of devising and              implementing value-creating pension management strategies).

Saying is one thing, doing another. In the early 1970s, I wondered how the vast gaps between the ideal practices inferred by the new theories of investing and pension design, and the actual practices in place at the time would be bridged? Fortunately, I was not alone in wanting to address this question. I had worked with Bob Mitchell on addressing it in an asset management context throughout the 1970s, and with Don Ezra in a pension design context in the late 1970s/early 1980s. Sensing a business opportunity in these  ‘gap-closing’ endeavours, we created the consulting firm Pension Finance Associates (PFA) in 1981. Five years later I would write my first book, titled “Pension Funds and the Bottom Line”. It documented PFA’s actual theory-practice bridge-building experiences over the 1981-1984 period.

By the time the book was published, PFA had dissolved, with the three founding partners heading off in different directions. Mine was to form, with spouse Virginia Atkin, KPA Advisory Services, with a mission that continues to be well-captured on KPA’s website to this day (see quote above). The key concept was to operationalize the Drucker insights on pension organizations, and the Markowitz/Sharpe insights on investing retirement savings.

As a starting point, the KPA mission statement raised an obvious question: how to achieve such a mission through time in a way that is mentally, physically and financially sustainable? The answer came to us through the publication of the “Pension Funds and the Bottom Line” book: just keep on writing! And so The Ambachtsheer Letter was born in 1985: a 4-page monthly think-piece on a topic somewhere in the pension design, governance, or investing space. In addition to the monthly Letter, the Advisory Service would include a client ‘call option’ to discuss Letter content, and how that content related to client-specific situations.         

Looking back 40 years, the ‘monthly Letter plus call option’ business model formula has worked well. It has resulted in the publication of 480 Letters to date, categorised broadly into being pension design, governance, or investment-related. They have also provided the raw material for a raft of broader national and international studies and initiatives, as well as three more books. 

40 Years of Studies, Initiatives, and Books

After 40 years, what would a list of these studies, initiatives, and books look like? Answering this question made for an interesting 4-decade journey through time. I was the sole author/producer in many cases, but also a co-author/producer in some of these cases:

1986: “Pension Funds and the Bottom Line”: a book published by Dow Jones Irwin. Translated into Japanese in 1991.

1987: “In Whose Interest?”: a study commissioned by the Government of Ontario to improve public sector pension management. Led by Malcolm Rowan, the study became the foundation upon which the Canadian Pension Model would be constructed, leading to the creation of organizations such as CPP Investments and Ontario Teachers’ Pension Plan. 

1988: The founding of the Canadian Investment Review , a publication focusing on Canadian investment topics. The CIR was acquired in 1992 by Benefits Canada and continues to be published by them today.

1991: The founding of CEM Benchmarking with John McLaughlin (originally called Cost Effectiveness Measurement Inc.). Its purpose was to provide ‘value for money’ insights into the pension investments and administration functions. Today CEM, a 50-person organization, is the dominant global provider of these insights, with 400 participating pension funds managing a collective $16 trillion.

1995: “Canada’s 20% Foreign Property Rule” Why and How It Should Be Eliminated”: a study commissioned by PIAC and IFIC.

1997: “Creating the Best Retirement Income System in the World”: with co-authors, a study for the Association of Canadian Pension Management (ACPM).

1998: “Pension Fund Excellence: Creating Value for Stakeholders”: a book with Don Ezra, published by Wiley. Translated into Polish in 2001. 

2004: The co-founding of the International Centre for Pension Management (ICPM) with Brendan Calder. Its purpose was to create a self-help ‘best practices’ community among the globe’s leading pension organizations. Today, ICPM has 50 participating members managing a collective $9 trillion. The organization sponsors semi-annual discussion forums across the globe for its members and funds an in-depth research program in pension design, governance, and investing.

2007: “Should Japan’s Pension Investment Fund Become a High-Performance Organization?”: a study for Nomura Institute.

2007: “Pension Revolution: A Solution to the Pension Crisis” a book published by Wiley Finance. Translated into Japanese in 2008.

2008: “The Pension Governance Deficit: Still With Us”: with Ron Capelle and Hubert Lum, Rotman Journal of Pension Management.

2009: “Pension Reform: How Canada Can Lead the World”: CD Howe Benefactors Lecture.

2011: “Massachusetts PRIM Governance”: a study for Funston Advisory Services.

2011: The founding of the Pension Governance Education Program (PGEP) in collaboration with the Rotman School of Management at the University of Toronto. PGEP is a 4-day course focusing on effective governance practices for pension fund board members. Is has been offered each year since its inception 15 years ago.  

2013: “The Pension System in Finland: Institutional Structure and Governance”: a study for the Finnish Centre of Pensions.

2014: “Focusing Capital on the Long Term”: a study for the FCLT/Global initiative.

2015: “Taking the Dutch Pension System to the Next Level: A View from the Outside”: a study for NETSPAR.

2015: “Norway’s Government Pension Fund Global: How Should It Be Governed?”: a study for The Norges Bank Governance Review Commission.

2015: “A Study of the New York City Bureau of Asset Management”: a study for Funston Advisory Services. 

2015: “Pension Investing in Japan: An assessment of the 2013 Expert Panel Recommendations”: a study for Nomura Institute.

2016: The Future of Pension Management: Integrating Design, Governance, and Investing” a book published by Wiley Finance. Translated into Chinese in 2017.

2017: “Superannuation Fund Governance”: a study for the Australian Productivity Commission.

2018: “Tobacco-Free Portfolios”: a study for the UN General Assembly.

2020: “Improving Canada’s Retirement Income System”: a study for the National Institute on Ageing.

2020: “Rethinking Retirement”: a study for the World Economic Forum.

2021: “The Canadian Pension Model: Past, Present, and Future”: Journal of Portfolio Management.

2026: “Spreading the Benefits: A Targeted Tax Credit is Needed To Expand Retirement Plan Coverage in Canada’s Private Sector”: with Alex Mazer, a study for the CD Howe Institute.

After all this, what is next?

What Is Next?

Virginia and I have been pondering the ‘what is next?’ question for some time now. The view we have come to is that the time has come to pass the pension policy baton. Indeed, that process has already been under way for some time now. New ideas in the fields of pension design, governance, and investing continue to surface, with the best ones eventually finding their way their way into practice. We are proud to have been part of that process over the course of the last 40 years. However, all good things must eventually come to an end. Consequently, we have decided to close the Advisory Service at the end of this year.  

Despite this coming shift to more time for family and friends, for the arts, for looking after our health, and for spending time at our Niagara country house, we will continue to think about the ‘aging’ process, not just for ourselves, but for society at large. An important catalyst in that direction was Theo Kocken’s 2022 film “Your Hundred Year Life”. Readers might recall that the title of our September 2022 Letter was “Your Hundred Year Life: A Film That Explains Why and How We Should Retire ‘Retirement’”.   

It was followed on February 6, 2023 by the premiere Canadian screening of the film at the University of Toronto’s Rotman School of Management to a sell-out live audience of 240 people, with and additional 340 people participating virtually. A video of the event can be accessed HERE. 

A follow-on KPA paper describing the screening event made these key points:

• There is more to aging than just how it could/should be financed. It also has important health and social consequences which deserve equal study. For example:
• On the work design side, an aging population requires understanding what is happening at both the supply and demand sides of labour markets. It also means supporting people through a series of transitions as they age. The standard working career span of 18-65 should be abandoned, and replaced with a new 5-95 ‘life model’. A key concept in that model is the idea of a ‘legacy career’ which follows the regular working career. As a result, the need for the negative ‘retirement’ word disappears. Instead, the positive ‘legacy career’ term articulates how post working career people intend to spend their time.
• On the health side, an aging population means age-related afflictions (e.g. dementia) will become an increasingly important factor in health care provision.
• On the habitation side, locations with high densities of older residents form naturally. This collective ‘aging in place’ presents the opportunity to cost-effectively scale up the delivery of personal care, habitation maintenance, and health care services. This concept has been named Naturally Occurring Retirement Community, or NORC for short. Toronto’s University Health Network (UHN) has launched an initiative to implement the NORC concept in Toronto, and eventually beyond. Progress to date has been impressive.

In short, there is no shortage of ‘aging’-related ideas to understand, discuss, and possibly champion in the years to come. We intend to participate in that process.

Keith Ambachtsheer

KPA Advisory Services is pleased to share this edition of The Ambachtsheer Letter with all readers; if you wish to become a KPA Advisory Client/gain access to ALL Letters, please see the Services page on our website.

The information herein has been obtained from sources which we believe to be reliable, but do not guarantee its accuracy or completeness.