Innovate to accumulate
Sales and marketing director Aston Goodey says product innovation is at the core of the company’s retirement market ambitions. Rachael Adams reports
You might not expect the UK’s longest-registered company to have innovation as its main focus but that is what MGM Advantage sales and marketing director Aston Goodey sees as the company’s best asset. “We are seen as traditional but we also recognise the need for product innovation in the retirement market,” he says.
MGM is a relatively new player in the retirement market despite having been around for 158 years. It started life as a typical mutual that progressed into offering protection but 2007 saw a volte-face for MGM.
Goodey says: “We took a good, hard look at ourselves. Something we established quickly was that we wanted to focus on the retirement income market. With the baby boomers coming through thick and fast, we saw there was a real need for innovation.”
After stopping all its product lines and getting rid of its appointed representative division to distribute solely through advisers, MGM appointed its first key individual, current chief executive Chris Evans, formerly mana-ging director of Prudential Thailand. Ex-HBOS annuities specialist Craig Fazzini became head of MGM’s designs for retirement team and Lindsay Dickinson from Prudential was also brought in to run marketing. “We pretty much created a new board,” says Goodey.
This paved the way for MGM to launch the first of its two products, an enhanced annuity. Goodey says: “We started from a blank sheet of paper. We could just go to the market, take the best of everything and add to it.”
MGM appointed Partnership’s Eyeedul Haque to create its enhanced annuity proposition and Goodey says it has been a success. “I would say we are now the third market leader after Just Retirement and LV=,” he says.
Goodey: ’Keep it simple. I always say that if my parents would understand what I’m putting out to IFAs, then I’m a happy man. Products have to be able to be articulated to consumers’
MGM proceeded to partner with Aegon on its enhanced annuity offering and then moved on to its second product proposition. “Enhanced annuities made up the majority of the UK’s annuity sales because they are typically safer,” says Goodey. “But we knew that, over time, asset-backed annuities invested in a mixed asset basket outperform enhanced annuities. The problem was that this industry has a really bad reputation. We thought if we offered a product that looks and feels similar but with a different investment, that might work well.”
This led to Goodey, a former business development director at Prudential, being brought in to shape MGM’s new flexible income annuity, which came to market in February 2010. Goodey says: “We did a distribution deal with Openwork, which writes the third-biggest volume of UK annuity business. We also took on Openwork’s Justine Randall as head of partnerships because we were finding that more people wanted to work with us.”
MGM is now into its next generation of products. “There will be two new products hitting the market next January,” says Goodey. “All I can say now is that they will be in the same vein as what we are doing at the moment.”
Following the company’s theme of appointing industry experts to oversee product development, Standard Life’s Andrew Tully will be joining MGM on April 18. “He has been voted number five in the pension world,” says Goodey. “He is quite a catch.”
MGM’s knowledge of the industry’s top players also led to the company’s role in forming the Pension Income Choice Association with companies such as LV= and Hargreaves Lansdown. “We are one of the original forerunners of Pica,” says Goodey. “It has made huge progress in making the open market option compulsory but more does need to be done.”
Goodey does think the public is waking up to the necessity of engaging with the Omo, however. “I think people are realising they need to hedge against the risk of inflation eroding conventional annuities and that asset-backed products like ours are a good way of doing this.”
Goodey believes that the new drawdown rules offer another opportunity for MGM’s products to shine. He says: “The market was very polarised before, with low-risk individuals with small funds buying conventional annuities and higher-risk individuals with bigger funds going into drawdown. Now you have got products like ours, which occupy a middle space. They allow people to continue investing while in an annuity - which is a new concept - and those who like drawdown because they can retain control of their money and vary their income can also do that with our products.”
Goodey says the good thing about these changes is that it is forcing market innovation. “Other providers want to enter the space we are in,” he says. “I’m sure someone else will have a lightbulb moment and we will get a new generation of products.”
That is not to say MGM will not be focusing on having more of its own lightbulb moments this year. “Shaping our new products is the main focus,” says Goodey. “We are also going to employ more people and secure more partner-ships to strengthen our prop-ositions. I think the main reason for our success has been having industry experts on board and listening to the markets. And being nice to work with helps.”