Profile: MP Richard Graham on buying into pension freedoms

Conservative MP and former asset manager Richard Graham bemoans regulation that he says is holding back much needed innovation.

Scrutinising the finer points of UK pensions law is probably not where Richard Graham expected to find himself during his 30 years working and travelling in the Far East.

But his experiences – which at times sound like the diary entries of a Victorian explorer – have stood him in good stead for debating the revolutionary changes birthed by the Chancellor in last March’s Budget.

Graham was first elected as the Conservative member for Gloucester in 2010, with one of the biggest swings, 8.9 per cent away from Labour, of the election. Entering parliament at 52, he is about as far from a career politician as you can imagine (no roles at the National Union of Students here) and has the attitude of someone more interested in trying his hand at politics than climbing the greasy pole.

He was briefly on the Work and Pensions select committee and is chair of the all party parliamentary group on pensions. While he supports the thrust of the Government’s liberalising pensions reforms, he worries savers who choose to draw down their savings after April will find a dearth of appropriate investments.

He says: “There are going to be human issues which need everyone to understand the risk and reward of different decisions and it probably is going to be the most important financial decision of their lives apart from buying a house. Those issues have always been around but there are now more opportunities and more risks.

“All of this implies an understanding of finances. That’s ok for a relatively small number of people, but a real challenge for many others.”

Graham thinks new products based on investing in infrastructure assets could deliver the right kind of returns for pensioners, as well as give them a tangible, local project to get behind.

He says: “This is where I think there’s a real role for some providers – particularly insurers – to create infrastructure investments that are readily understandable to large numbers of people because they invest in things that relate to daily lives.

“For example, I’ve had discussions with insurers about investing in new and expanding social housing companies, where you get fairly predictable rates of return – better than corporate bond returns with quasi government risk – and you can invest in things like solar panels for primary schools.”

Investment is an area Graham knows something about. Prior to being elected he spent 17 years at Barings, where he helped launch the Baring Dynamic Asset Allocation fund and ended up as institutional business director dealing with pension funds and their trustees. He worries that increasing regulatory pressures have stunted product development, creating a gap that could be exposed once savers have more control.

“A lot of product design has disappeared in the last 15 years; a lot of resource got put into regulatory compliance”, he says.

“Design was slimmed down and the hurdles to success increased a bit – you now have to have a lot of scale to be commercially viable. Development in the diversified growth fund space at the start of this century has proved quite effective and very popular, we need the same sort of people doing the same sort of thinking in this case for different types of consumer needs.”

But asset management was not Graham’s first trade. After studying history at Oxford he joined Swire & Sons based in the Far East, eventually rising to be a general manager of subsidiary Cathay Pacific Airways at just 24 years old.

He then joined the Foreign Office and was posted to Kenya as the First Secretary in the British High Commission, where he hosted Margaret Thatcher and Geoffrey Howe on their visits in the 1980s. Graham, who speaks the native Swahili as well as four other languages, spent his early childhood in the country, where his father ran East African Breweries from Nairobi.

Then it was back to Asia as British Trade Commissioner to China from Hong Kong, arriving days after the Tiananmen Square protests where “there were still bullet mark on the flats”.

Before returning to the UK he worked on the first listing of a British company on the Shanghai stock exchange, fathered the first British baby born in mainland China since the 1949 communist revolution and completed the first known crossing of 800 mile wide Taklamakan desert. He developed amoebic dysentery and nearly died during the expedition, weighing less than seven stone by the end.

His colourful CV may soon have another addition following May’s general election. His Cotswolds constituency is a bellwether seat and a prime target for Labour as it looks to return to power.

Graham says it would be “an enormous mistake” if a Labour government tried to reverse the Budget reforms.

He says: “They’ll have to philosophically buy into the freedoms associated with most of the reforms and then make sure the safety harnesses around it – the guidance and the FCA – are robust enough to make sure there aren’t a significant number of consumers being misled. That’s going to be the issue.”

Whatever the makeup of the next Government, Graham says it must focus on implementing the changes the Coalition has introduced, rather than adding further reform.

“Traditionally implementation has been less the work of legislators, more of civil servants. But we’re going to need political leadership to make sure we’ve got the right resources focussed on achieving the right goals at the right time and quick at responding to challenges as and when they come back.”

As the run-in to May begins in earnest, the journeyman politician is coy about his “very sophisticated” political strategy: “Work like hell, love the place to bits and hope for the best.” The next occupant of Steve Webb’s office at the DWP could do a lot worse than adopting that approach.

Five questions

What’s the best bit of advice you’ve received in your career?

From my father – find something you enjoy doing and try to do it to your absolute best.

What keeps you awake at night?

The thought of having let down a constituent in real trouble.

What has had the most significant impact on financial advice in the past year?

The big changes on annuitisation and greater freedoms completely changes the scope of asset management for IFAs and consumer alike.

If I was put in charge of the FCA for a day I would…

Call in all the providers of guidance and spend a day working out with them as many different scenarios as possible to ensure as many people as possible get the best possible guidance.

Any advice for new advisers?

Nothing is ever completely new but history rarely repeats itself precisely, so the challenge is to work out what’s different this time and what’s the same.

CV

  • 2010 – present: Conservative MP for Gloucester
  • 1995-2010: Institutional business director, Baring Asset Management
  • 1993-1995: Chief representative for China, Barings Plc
  • 1986-1993: Civil servant, British High Commission
  • 1980-1986: Various roles, Swire & Sons

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