A Finance Egghead In Distant Shores

07 Sep 2013

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Dr. Momodu Omamegbe

He could easily have built a career in the medical profession but circumstances beyond his control conspired to derail his childhood fascination with the profession. Perhaps he could also have made a successful career in basketball or even track and field standing at over six feet. But what these career options lost in him, the financial world has gained. Now a director in Fidelity Investment group in the United States, Dr. Momodu Omamegbe studied accountancy at the University of Nigeria Nsukka,  before proceeding to the United States in the fall of 1999 where he obtained an MBA from Texas A&M University, Commerce and a PhD in Public Affairs from the School of Economic, Political and Policy Sciences at the University of Texas at Dallas. Omamegbe’s robust experience in the financial services industry spanning almost 20 years entailed immense responsibilities across multiple products and roles. Omamegbe loves to read creative writing and play chess when he is not poring over financial details or debating policy. He spoke with SHAKA MOMODU recently at his United States base

How has it been, academic and career wise?

I was born in Oleh, Delta State in Nigeria to Edo State parents. I attended elementary school at Momoh Primary School in Auchi, Edo State, high school at Our Lady of Fatima College also in Auchi, and college at the University of Nigeria, Nsukka majoring in Accounting. I left for the United States to pursue graduate studies in the Fall of 1999 where I obtained an MBA from Texas A&M University, Commerce and a PhD in Public Affairs from the School of Economic, Political and Policy Sciences at the University of Texas at Dallas. I hold the Financial Industry Regulatory Authority (FINRA) Series 7 and Series 63 Securities licenses. I am married and blessed with two daughters.

Over the span of my career, I have gained valuable experience in financial services and financial markets with proven strengths in strategic planning, relationship management, retirement planning (strategy and execution), product management, investments and portfolio design. For instance, I designed and  led the strategic initiatives of a startup retirement business currently adding positive cash flows to the business. I also designed and implemented a change management strategy that led to double digits increase in both customer satisfaction scores and employee retention rates in defined contribution and tax exempt retirement markets, managed a book of business of over $1 billion in mutual fund assets. Other accomplishments include: acting as a change agent in driving client investment education initiative that addressed fiduciary concerns in workplace investing relationship management; managed the merger/transfer of over $100m in donor advised and pooled income funds from a National Donor Advised Fund to the Fidelity Charitable Gift Fund; Worked with a cross functional team to design the firm’s future IT Architecture for Finance; Subject Matter Expert in the restatement of over 10,000 retirement plan documents (over $3billion in assets) to meet the United States Department of Labor compliance requirements for Prototype retirement plans

Which profession fascinated you the most growing up?

In my early teens, I was fascinated by the medical profession and was a science major in high school. However, fate and my beloved uncle who is an accountant “conspired” to steer me towards accounting and finance.  I cannot thank them enough – it has been an incredible journey and I have enjoyed every step of the way.

Were you discouraged from studying medicine?

No, I was not discouraged from reading Medicine but was encouraged to look at other options when my attempts were derailed by factors outside my control. Admitted to the University of Ilorin but received my admission letter late and request for deferral of admission was denied.

Any regrets not studying medicine?

No regrets. It turned out to be a blessing in disguise

You worked at Citibank in Nigeria before travelling to the USA; what inspired your traveling to the USA?

Immediately after college graduation, I worked for Citibank Nigeria. The time at Citibank was especially rewarding both personally and professionally. I was influenced by a positive and merit driven work environment where hard work was encouraged and rewarded. I benefited immensely from a culture of excellence and meritocracy that permeated the organization. I have been driven ever since by the tremendous influence this culture continues to have on both my personal and professional life. The goal of traveling to the United States was motivated by a couple of factors – first to pursue graduate studies and an opportunity to conduct research. Secondly, to facilitate exposure to complex financial products and markets, stock markets dynamics, and the ever changing innovative landscape that characterizes the United States financial services industry. I am glad to submit that these goals have been achieved. I have been able to acquire a deep and thorough understanding of the financial services industry, gained valuable insights on the markets and products, continue to contribute to the development of the industry here in the states and hopefully, in the not too distant future, a catalyst for innovation back home in Nigeria.

You seem to have diverse experience in banking, finance and pension management. Which of these areas do you find most fascinating?

My experience in the financial services industry spans almost 20 years of increasing responsibility across multiple products and roles. I have held leadership roles in Investment Management specifically in mutual fund sales and distribution, Financial Planning and Asset Allocation portfolios, Mutual Fund investments vehicles for both retail and institutional clients, Relationship Management, Retirement Planning communication and education, Retirement Plan design, Change Management, Product management and the US Department of Labor regulations on Defined Contribution Plans and Strategic Planning among others. I have found these roles very fascinating and intriguing as each area presented an opportunity to explore and embrace new challenges, gain unique insights and offer actionable solutions that improved client outcomes while growing the firm’s share of wallet and consequently contributing to year over year profitability and growth.

Tell me about your role in Fidelity Investment and what it feels like working there?

Fidelity Investments is one of the world’s largest providers of financial services. Founded in 1946, the firm is a leading provider of investment management, retirement planning,  portfolio guidance, brokerage, benefits outsourcing and many other financial products and  services to more than 20 million individuals and institutions, as well as through 5,000 financial  intermediary firms. Fidelity has $3.9 trillion in assets under administration, including managed  assets of $1.7 trillion, as of December 31, 2012. I have held multiple roles at Fidelity Investments. I currently run Strategy for an arm of our retirement business. In this role, I lead the strategic planning process including developing strategic recommendations on how to optimize near term growth. My responsibilities include leading the identification, prioritization, and management of key strategic opportunities of the business including quarterly business plan reviews, identifying risks and opportunities and development of plans to mitigate potential losses while ensuring the right financial bets are made.

It has been a great and fulfilling experience working at Fidelity Investments. At Fidelity, there exist opportunities to grow your career, acquire domain and cross functional knowledge, thrive in a team based, result driven and collegial environment where individual initiative and drive are encouraged and rewarded. I have worked on teams, led multiple teams and have been asked to lead critical initiatives that added value to the business. It has been a truly fulfilling and worthwhile experience.

How will you compare the pension scheme in USA with what we have now considering that the Nigeria Pension Scheme really took off a few years ago with the re-enactment of Pension Reform Act?

There are multiple retirement savings vehicles in the US – from Individual Retirement Accounts to various employer and government sponsored retirement plans. The most predominant retirement plan vehicles are Defined Benefit, Defined Contribution plans and Individual Retirement Accounts. Other vehicles include Profit Sharing, Stock Bonus plans and Employee Stock Ownership plans. In the private sector, defined benefit plans (Pensions plans) are generally required to be funded by the plan sponsors, usually employers and the benefits are typically guaranteed and annuitized over the life of the employee. However, some plans may allow lump sum cash payment on retirement.  The US government offers the Social Security system – a defined benefit scheme funded by a payroll tax paid by both employees and employers. Benefit payments from social security made on retirement are based on certain pre-determined criteria. There is an efficient system in place to ensure payments from both employees and employers into the fund are made, benefits are paid timely and provisions of the Act setting up the fund are adhered to.

However, retirement planning in the United States has its own challenges – declining contribution rates, the gradual demise of defined benefit plans in the private sector as rising pension funding obligations and liabilities are driving pension plan closures or limiting coverage, Social Security benefits shortfall, low participation rates in defined contribution plans, financial literacy, etc are among some of the many hurdles.   Despite these challenges, the system operates mostly as designed and continually undergoes regulatory and other reforms to help address working America’s retirement challenge.

The current Nigerian Pension Scheme is a right step in the right direction. It is a contributory system similar in many aspects to the US Social Security plan. Though not an expert in the specifics of the plan, the Nigerian Scheme as presently constituted avoids the many pitfalls of the Pay as you Go system that preceded it. However, more work needs to be done. The current scheme provides an initial framework to build multiple levers to grow and execute a comprehensive retirement plan. The United States system offer valuable lessons and insights we can leverage as the current Nigerian system gain more traction and evolve, taking into account our own peculiar circumstances and macro-economic realities. 

We may also explore tax deferral techniques in other retirement plan types. A key element of defined contribution and traditional IRAs in the US is a provision for tax deferred contributions and in some plans like the Roth IRAs, tax free withdrawals. Tax deferred growth have proven to be a great incentive for individuals to participate in these plans as contributions are not taxed until benefits are distributed. Numerous studies have concluded that the tax deferral provision is a key driver to growing participation rates among different income classes and active participation plays a major role in the successful retirement planning and ensures that employees are able to live comfortably while in retirement.

Your vast experience in strategic planning in pension management and investment in the USA will be of great benefit to Nigeria Pension Scheme? Have you considered coming back to help?

I have been in the USA for almost 15 years. Over this period I have maintained close ties with my extended family, friends and former colleagues with a keen interest on events back home. I am willing and open to the possibility of returning home to contribute in some way to the growth of the financial services industry in either the private sector or in government. My experience in senior leadership roles in financial markets, investments, retirement planning strategy and execution, research in governmental organizations and public administration will no doubt be critical in articulating a vision and designing need based solutions to complement current efforts and initiatives back home.

How long does it take for a worker who has just retired after years of working to get his pension benefit?

Generally, in the US, federal law stipulates guidelines for when pension plans must start paying benefits. The guidelines usually require payment to commence at: the later of retirement age in the plan document or age 65, or completion of  10 years of service or Termination of employment. The plan may allow benefits to be paid sooner based on the provisions in the plan document. To access benefits, a claim must be filed. The plan must start paying benefits after the eligibility criteria are met as soon as administratively feasible typically within 60 days after the plan year end following the filing of a claim.

As the Nigerian system evolves, a mechanism should be put in place to ensure eligibility criteria for pension distributions clearly defined by legislation are vigorously enforced. Pension beneficiaries should be provided with a summary plan description highlighting plan provisions, features and benefits while those charged with administration should facilitate timely processing of distribution requests based on plan guidelines and applicable regulations.

What role does the government play in the Pension Scheme here in the US?

The federal government through the Department of Labour enacted The Employee Retirement Income Security Act (ERISA) of 1974. This law primarily seeks to protect the assets of millions of working Americans to ensure that retirement plan contributions made during their working lives are available to them when they retire. This act requires plans to provide participants with important information including information about plan features, benefits, funding and distribution requirements. Changes in the plan document and other relevant information must be communicated regularly.

It sets guidelines and standards for participation, vesting, benefit accrual and funding. Also, plan employment eligibility requirements, vesting guidelines and rights to benefits. Funding rules by plan sponsors and timing of plan contribution are also clearly outlines. Also, it defines plan fiduciaries and their responsibilities including accountability for plan assets; Provides plan participants the right to sue for benefits under the plan and in situations of breaches of fiduciary duty; and established the Pension Benefit Guaranty Corporation which is a federal agency with an insurance program to pay the benefits of a pension plan within the limits stipulated by the law when a plan terminates with insufficient assets to pay all benefits. The Employee Benefits Security Administration (EBSA) develops regulations and enforcement of applicable laws, drives participant, employee and plan sponsor education on retirement provisions. Essentially, the federal government through the EBSA sets rules and guidelines for retirement plan administration, efficient oversight of the industry to ensure retirement plan assets are safeguarded and accrued benefits are available to plan participants on retirement.

The money collected from workers as pension remittance is usually large. Do gains derived from the invested funds go to the pensioners?

Pension Plans usually promises a specific monthly benefit during retirement. This benefit is typically guaranteed and thus transfers investment risks to the employer for employer funded plans and in cases of government sponsored plans, investment risk is borne by the government. Since beneficiaries are guaranteed a predetermined benefit, they are only entitled to the benefit amount as stated in the plan document. Investment gains accruable from pension assets are used in meeting plan obligations and expenses. In defined contribution plans, participants are not promised a specific benefit amount at retirement. Consequently, they bear the investment risks for the underlying investments and are rewarded with any accrued gains.

Who are your real life heroes?

Mahatma Gandhi, Mohammed Ali. More recently, I’m  influenced by the work of the economist, Paul Krugman.

What are your hobbies
Reading, creative writing, chess and running.

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