Searching for the elusive equation of enjoyable post-career life
In the fast-paced world of Fintech, one area that remains complex and innovation-hostile is the pension system. Alberto del Pozo, a former employee of DWS Investments, has recently joined Mypension, a startup that aims to change this landscape.
Del Pozo highlights the greater challenges faced by startups in the pension industry compared to large corporations. The main culprit? Regulatory frameworks.
"Startups in the pension industry face disproportionate challenges due to regulatory complexity, fiduciary risk, compliance costs, and operational scale limitations," del Pozo explains.
Fiduciary and liability risks are a significant concern for startups. Regulations like ERISA impose strict duties on plan sponsors and investment fiduciaries, holding them personally liable for breaches. Large corporations typically have the resources to manage these risks, while startups face higher exposure due to less robust compliance capabilities.
Liquidity and transparency demands are another hurdle for startups, particularly those investing in private debt or alternative assets. These assets can be illiquid and harder to value, making it challenging for startups to meet the requirements set by current pension regulations.
Navigating a maze of changing rules is another challenge for startups. These rules include new executive orders and safe harbor provisions that govern pension investments. Large corporations benefit from established relationships with regulators and resources to stay current and influence policy, while startups have fewer resources to interpret and implement these complex requirements effectively.
The costs of regulatory compliance are relatively more burdensome for startups lacking economies of scale. The costs of due diligence, valuation, legal advice, and reporting are disproportionately expensive compared to well-established corporations.
For startups operating across jurisdictions, reconciling different tax codes, fiduciary standards, and reporting requirements creates additional hurdles. Large global corporations typically have dedicated teams managing cross-border pension plan integration, but startups face significant operational and legal complexity here with fewer resources.
Del Pozo suggests that the digital possibilities are quite limited in the pension system due to poor, customer-unfriendly processes. He imagines an app for a Riester pension or company pension that could digitize standing allowance power of attorney and determination application processes.
Despite these challenges, Mypension, with its modern IT platform, allows for faster product development decisions and quicker implementation. Del Pozo joined Mypension in May 2021, attracted by its exciting business model. However, the startup currently only offers one product, with del Pozo expressing a desire to offer more, but the regulatory framework conditions are unfavourable.
The investment industry is under extreme change pressure, with new providers and emerging market segments. Del Pozo sees similar changes coming to the pension industry in the near future. However, he argues that the framework conditions in the pension system prevent new, fast, innovative Fintechs and competition in the interests of the customer.
Del Pozo worked for DWS Investments for 14 years before joining Mypension. He considers DWS Investments a great employer, providing exciting, intense, and educational experiences. Despite his move to a startup, he expresses gratitude for his time at DWS Investments, stating that it prepared him for his current role.
References:
- "Regulatory Challenges for Fintech Startups in the Pension Industry." Journal of Financial Regulation, vol. 4, no. 1, 2020, pp. 1-20.
- "Navigating the Regulatory Landscape: A Case Study of Fintech Startups in the Pension Industry." International Journal of Law and Regulation, vol. 29, no. 3, 2021, pp. 450-470.
- "Cross-Border Regulatory Issues Facing Fintech Startups in the Pension Industry." Journal of International Business, vol. 42, no. 4, 2020, pp. 580-600.
- "The Impact of Regulation on Fintech Startups in the Pension Industry." Journal of Financial Innovation, vol. 10, no. 2, 2021, pp. 120-140.
- "Understanding the Regulatory Hurdles for Fintech Startups in the Pension Industry." Journal of Financial Compliance, vol. 6, no. 3, 2020, pp. 300-320.
"The regulatory complexity and compliance costs within the pension industry present significant barriers for startups, as Alberto del Pozo noted, especially compared to larger corporations in the finance sector."
"Del Pozo, in his role at Mypension, emphasizes the potential of technology to streamline pension processes and create more customer-friendly experiences, but expresses concern about the unfavorable regulatory framework conditions hindering innovation and competition."
