In need of professionalism
Retirement funds need certified professional trustees
IN AN ERA OF INCREASING FOCUS ON individual savings and the amounts allocated to retirement funding, critics are beginning to turn their attention to the very trustees themselves.
Colin Bullen, head of specialised consulting at Lekana Employee Benefit Solutions, says: “In terms of a framework for the future, the biggest word we’re going to see is governance. We need to define what constitutes good corporate governance for a board of trustees.”
Bullen reckons one of the problems with the current system of lay trustees is that a thorough knowledge of the retirement fund industry as well as appropriate investments is often lacking, notwithstanding the credentials of the trustees themselves.
“Trustees can be top quality corporate individuals that may be extremely valuable to their companies but might not know anything about retirement funds,” he says.
“As far as I’m concerned, the days of having a board of lay trustees must disappear into the past. We need an age of professional trustees to take the helm of retirement funds and handle the complex investment decisions that this requires.”
Bullen says often people are elected to a board of trustees based on their perceived potential to represent certain stakeholder interests rather than their capability as trustees.
A good example would be when a wellliked colleague has been elected to represent the interests of his fellow workers but may not have the requisite education or expertise to make correct investment decisions.
“With all due respect to the average trustee, I don’t think it’s suitable for someone with little or no knowledge of investments to be sitting on a board of trustees,” he says.
Bullen says the ideal situation would be for the Financial Services Board (FSB) along with the Institute of Retirement Funds of SA (IRF) to implement a formal trustee qualification along with a formal trustee education programme and qualification, which would be a step towards creating professional trustees.
“The FSB could also introduce a requirement that you have to have at least one professional trustee on each board that would have to be suitably certified by the FSB and
have their performance monitored,” he says.
Bullen is also particularly keen to see PF130, the draft formal code of good governance, accepted and adopted as the standard to which a board of trustees must adhere.
“It’s standard practice and good corporate governance for a company to have non-executive directors who are paid for their skills and expertise. I do not see why retirement funds should be regarded differently,” says Bullen.
Stephan Grobler, principal officer at Medicover, says he’s in full agreement with Bullen and believes that professional trustees could also make a difference in the medical industry.
“I’m very much in favour of professional trustees, as that would be comparable with non-executive directors as indicated in the King 2 report on Corporate Governance.”
It’s recommended that at least 60% of a board consist of non-executive directors. These trustees must be knowledgeable on the industry, must have some proof of accreditation (similar to what directors get from the Institute of Directors) and should not be linked to the scheme they represent.
Grobler says they should also be required to attend regular training workshops as presented by the Board of Healthcare Funders of Southern Africa (BHF).
However, not everyone agrees with Bul- len’s seemingly sensible suggestion.
Shantha Padayachee, acting CEO and director of the IRF, says that professional trustees working for remuneration don’t necessarily act in a fund’s best interests. She also says that many of the so-called “independent” trustees are appointed by or have links to the services providers, thereby creating a direct conflict of interests.
Padayachee says trustee-training requirements or qualifications set up and funded by the FSB and Treasury could work provided the training did not become a barrier to entry for prospective trustees. “We believe that the training and qualification should be provided post-trusteeship,” she says.
The days of having a board of lay trustees must disappear into the past. Colin Bullen