‘Mankind’s quest to live longer should not become a financial nightmare for people’

The chief executive officer of Axa Life Invest believes that investors need products (or “solutions”, as he prefers to call them) that can guarantee a minimum level of income for a longer retirement, as well as locking into any potential capital growth.

That is why the Frenchman hopped on an early Eurostar train to London to talk about unit-linked guarantees and why British advisers should be paying closer attention to them.

He said: “Following the financial crisis, we have really confirmed our commitment to this type of product for three reasons: it truly answers the needs of customers, advisers and distribution networks; we have invested a lot in the Axa global platform, the teams and the resources to manufacture this complex product; finally, we believe Axa demonstrates the financial strength necessary to make this work and to help clients trust us.”

Mr Robinet identified a number of key factors that could propel the popularity of unit-linked guarantees, not just in Britain, but across the world.

As the head of a global business, Mr Robinet was quick to recognise “aggressive” quantitative easing in key markets such as Japan, and how it has created a universal dilemma for savers.

“Low interest rates are a familiar story in Japan but there is more awareness of this in the US and the UK now. It has made people realise that their retirement income will not be enough unless they grow their capital during their working lives. In order to do this in real terms, adjusted for inflation, you need to invest in risky assets, not just bonds.

“In countries such as the US and the UK, risk appetite for equities has historically been a lot stronger than in Japan, Switzerland and France – the latter in particular is very fond of certainty. But we’ve had feedback from advisers and distribution partners that shows a growing acceptance of risk.”

Paradoxically, those same investors have become highly risk-averse following the financial crash, something Mr Robinet completely understood. “This is not only irrational fear. Investors have experienced one of the biggest crashes of all time. The need for protection and guarantee has never been as high as it is now.

“People can’t stand the kind of market volatility we’re seeing now. The goal of providers and products should be to eliminate this extreme volatility.”

Furthermore, Mr Robinet warned that many people are simply underestimating just how long they will live and may fail to save enough for their retirement as a result. “Retirement will be a very long, significant part of people’s lives, and their level of income may not be enough.”

The answer is a form of financial protection against a potentially toxic situation, Mr Robinet suggested. “Firstly, we would hope that markets pick up again so that investing in a fund would be sufficient.

However, we’ve seen markets performing badly in countries such as Japan over a long period of time. We just don’t know whether this will happen in the UK or not, it’s extremely hard to predict. Secondly, a person retiring at any point from now on may have to make their income last over a period of 20, 30 or even 40 years. Mankind’s quest to live longer should not become a financial nightmare for people.

“With the product that we design and distribute all over the world, we lock into any positive performance of the equity market, and this hopefully provides pensioners with a higher investment income in the long term. But if the market crashes at any point, they are protected.”

It sounds almost too good to be true, but protection does come at a cost. “If you think in a simplistic way, you have an investment fund and guarantee, which is like a long-term option, but we have to pay for this. There is also the considerable cost of capital on Axa’s balance sheet.”

The typical cost of the insurance is 90bps, or 1.4 per cent a year on assets, which could raise eyebrows among cost-conscious advisers. But Mr Robinet said it should be viewed in the same light as car insurance, which most consumers pay without hesitation because it makes good financial sense (although he did not mention the fact that it is also compulsory).

He added: “We’re protecting something more important than your car. Is it expensive to pay 1 per cent, 1.5 per cent to protect your wealth in the event of unexpected scenarios? I don’t think so.”

He understands the need to get out to the UK advisory market, where knowledge of unit-linked guarantees is better than in his native France, but still lags behind the US and Japan.

A long-time stalwart of Axa Life Invest, Mr Robinet started 20 years ago as assistant vice-president for treasury and finance at group level. In 1999, he became director of planning of the Axa Rosenberg Group, based in the US, and then chief executive officer. It was here that he learned about investing in equities with quantitative models – a “tremendous experience” he said.

But his experience in risk management began in earnest when he moved back to Paris and started building a transversal risk management function for the group. “Some businesses with Axa had their own risk management teams, but not all of them and it certainly was not done consistently. It was important to have a comprehensive view of risk and we built an overall risk management strategy while I was group chief risk officer. That was just before the financial crisis, and the fact that Axa wasn’t bailed out was all down to this dedicated risk management unit.”

However, Mr Robinet very kindly gave credit to Jean-Christophe Ménioux – who occupied the group chief risk officer role during that turbulent era – for creating that all-important stability. By then, Mr Robinet had moved back to the “risk-taking” side, as he called it, as chief investment officer for the Axa Group across a large swathe of Europe. But you get a feeling that risk – and how to mitigate it – will never be far away from the Frenchman’s mind.

Iona Bain is a news reporter for Financial Adviser

Mr Robinet’s Career Ladder

2011 Axa Life Invest

Chief executive officer

2008 Axa Northern, Central and Eastern Europe Region and Axa Bank Europe

Chief investment officer (including Belgium, Germany and Switzerland)

2003 Axa Group

Group chief risk officer

2001 Axa Rosenberg Group

Chief executive officer

1999 Axa Rosenberg Group

Director of planning

1994 Treasury & Finance

Group assistant vice-president