More train­ing needed but lit­tle is hap­pen­ing

Cost is one of the nu­mer­ous ob­sta­cles

Finweek English Edition - - Retirement fund trustees -

Fi­nally, the pa­per states that “trustees who lack ap­pro­pri­ate ex­per­tise must un­dergo train­ing at the ex­pense of their funds to ob­tain such ex­per­tise or seek the ad­vice of ap­pro­pri­ate ex­perts”.

But lit­tle of this seems to be hap­pen­ing on any sig­nif­i­cant scale. A sur­vey by Deloitte on Re­tire­ment Fund Gov­er­nance found that many com­plaints for­warded to the Pen­sion Fund Ad­ju­di­ca­tor could be linked to “in­ad­e­quate trustee train­ing and ex­pe­ri­ence”, but that less than 18% of funds had for­mal train­ing poli­cies and that, on av­er­age, trustees re­ceived just 15,5 hours of train­ing a year.

It con­cluded that “re­tire­ment fund gov­er­nance is not at ac­cept­able lev­els and con­se­quently funds, their mem­bers and trustees are ex­posed to un­ac­cept­able lev­els of risk”.

Michael-John Al­bert, a part­ner at the fi­nan­cial in­sti­tu­tions ser­vices team at Deloitte, says with the re­tire­ment in­dus­try be­com­ing more com­pli­cated, re­spon­si­bil­ity for trustees has never been greater. “My view is that the du­ties of trustees are more oner­ous than com­pany direc­tors’. They are of­ten look­ing af­ter mem­bers’ only source of in­come.”

On a per­sonal level, trustees also have far more at stake and can be found guilty of neg­li­gence. “Reg­u­la­tions now re­quire trustees to sign off fi­nan­cial state­ments. If there are prob­lems they do not un­der­stand or are ex­pe­ri­enced to deal with they are re­quired to seek ex­pert knowl­edge. Ig­no­rance is no defence here,” Al­bert says. THERE’S LIT­TLE DOUBT that the great­est need in the re­tire­ment fund in­dus­try is for in­creased train­ing of trustees. Rais­ing the level of knowl­edge on re­tire­ment fund mat­ters is es­sen­tial – but there are nu­mer­ous ob­sta­cles in the way.

One is costs. Trustee ed­u­ca­tion pro­grammes can be ex­pen­sive, and while it’s in the longer-term in­ter­ests of the fund and its mem­bers, the board may be re­luc­tant to spend large amounts on trustee train­ing.

Em­ploy­ers are also of­ten re­luc­tant to give trustees time off work to at­tend cour­ses. And trustee ap­a­thy plays a role. Some trustees sim­ply lack the mo­ti­va­tion to at­tend cour­ses.

Th­ese con­cerns were high­lighted in Na­tional Trea­sury’s dis­cus­sion pa­per on Re­tire­ment Fund Re­form. It noted “de­fi­cien­cies in the skills and ex­per­tise of some trustees, many of whom are re­spon­si­ble for the man­age­ment of bil­lions of rand of re­tire­ment fund as­sets”. It goes on to raise con­cerns about pos­si­ble non-dis­clo­sure from ser­vice providers try­ing to sell prod­ucts or ser­vices to a board of trustees, say­ing: “The Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Act will re­quire con­sul­tants to demon­strate that their ad­vice is ap­pro­pri­ate but, if the trustees them­selves are not knowl­edge­able and vig­i­lant, they are un­likely to chal­lenge the ad­vice they are given.”

A trea­sury dis­cus­sion pa­per noted de­fi­cien­cies in the skills and ex­per­tise

of some trustees.

This is just one new rea­son why trustee train­ing has be­come so im­por­tant. Al­bert says trustees must be in a po­si­tion to run their re­tire­ment fund “from day one”. But at the same time, he says not enough time and money are be­ing spent on trustee train­ing.

“I would like to see some sort of needs anal­y­sis done on trustees. We could then build on that, iden­ti­fy­ing the needs and ar­eas where train­ing is needed.”

But why is there not more train­ing tak­ing place? Al­bert be­lieves it’s be­cause of a com­bi­na­tion of fac­tors.

“There’s no doubt that trustee train­ing is ex­pen­sive. Boards need to de­velop a proper bud­get­ing process around that.” How­ever, Al­bert be­lieves the lack of rel­e­vant train­ing of­ten goes back to the trustees them­selves. “There’s of­ten re­luc­tance on the part of trustees to say they don’t un­der­stand some­thing.”

One sug­ges­tion Al­bert has is that new trustees serve a pe­riod as al­ter­na­tive trustees, build­ing up knowl­edge and ex­pe­ri­ence be­fore be­com­ing full trustees. He feels this could also deal with the con­cep­tual prob­lem some trustees seem to have, mis­tak­enly be­liev­ing they should serve the in­ter­ests of the con­stituency that voted them onto the board.

Un­der cur­rent re­tire­ment fund struc­ture, half the mem­bers of a board of trustees are elected by mem­bers and half ap­pointed by the com­pany. At times this can be­come like an ex­ten­sion of labour re­la­tions, with mem­ber trustees look­ing af­ter the in­ter­ests of the work­force and ap­pointed trustees look­ing af­ter the com­pany. “Trustees must re­alise it’s their re­spon­si­bil­ity to look af­ter the in­ter­ests of all stake­hold­ers, and that this in­cludes the em­ployer,” Al­bert says.

He be­lieves train­ing needs to take place on two lev­els. “There’s for­mal train­ing, where trustees learn about the Pen­sion Funds Act and other rel­e­vant leg­is­la­tion, about the fund it­self and re­lated ar­eas such as in­vest­ment re­turns and ad­min­is­tra­tion. But as im­por­tant is learn­ing how to work around the ta­ble in the board­room – like how to ask ques­tions and what ques­tions need to be asked. This can be con­ducted through on- the-job coach­ing and train­ing.”

He also be­lieves train­ing needs to be risk fo­cused, where trustees learn to iden­tify, un­der­stand and ac­tively man­age their fund’s risks.

The du­ties of trustees are more oner­ous than com­pany

direc­tors’. Michael-John

Al­bert

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