Issue: June/August 2008
Liberty Life

The trustworthy and trusted trustee

To be a fund trustee can be highly fulfilling and also a great honour. Jennifer Flagg, head of documentation at Liberty Life, offers pointers to being good and doing good in the job.

Flagg... show empathy with members

Since the law was changed in 1996 to make trustee boards compulsory on all registered retirement funds, the need for the right people to assume the role of trustees has been proven time and again. However, many people still embark on the venture reluctantly.

A good trustee is not simply a trustee who manages to attend the meetings when required and who operates by the book. To be a trusted trustee involves dedication and true empathy with the circumstances of fund members.

There are a multitude of rules, laws, guidelines and regulations governing the retirement funds industry. It is imperative that, as a first step, trustees ensure that funds abide by them. However, the truly successful trustee tends not to apply rules merely for the sake of their application. Rather, the rules are there to be applied for the greater good of the fund members.

Special attention

Issues that add value to the fund’s positive performance should be given special attention. This implies that smaller, seemingly less significant issues should make way for pertinent higher-impact issues that could affect members or the legal compliance of the fund. It is not to suggest that regulatory requirements may be neglected, but rather that trustees should spend most of their time on items that have the greatest effect on the security and growth of members’ benefits.

A genuine concern for the long-term benefit and welfare of fund members should always be the theme backing decisions made by trustees. Intention makes the difference in all actions, and the intention to ensure that a fund is managed so as to protect the members’ interests is the essential anchor of a trustee’s actions.

Real care

If a trustee applies this type of philosophy, and genuinely cares about the welfare of a fund’s members, trusteeship should be at least a little more pleasant for all concerned. At the same time, the vitally important goal of protecting and growing members’ benefits should be so much more readily attainable.

A good trustee understands the concept of being actively involved in the operation of the fund. It is imperative that trustees are continuously aware of the latest in fund-related trends as well as legislative developments. They must cultivate an active interest in fund investments and returns.

Providing members with fund information is a key part of being a trusted trustee. Members seem increasingly to be appreciative of a visible and present trustees who are contactable when necessary. This complements a board that, as a basic function, already reports accurately to members on issues affecting the fund.

But being a trustee is not without its risks. The potential for personal liability is becoming a heavier burden for boards of trustees. The prospect can generate trepidation in individual trustees, and sometimes results in inactivity for fear of negative repercussions. The able trustee sees past this concern, not focusing on the apprehension of an unsuccessful move but rather on the ultimate success of a well-run retirement fund.

Having said this, it is crucial for trustees to advise individual members on financial aspects and benefit choices only if they are accredited under the Financial Advisory & Intermediary Services (FAIS) Act. It is also mandatory to ensure that fidelity-guarantee insurance and professional-indemnity cover is taken out and that these policies are in force. With these risk-mitigating measures in place, a trustworthy trustee should feel free to make decisions, in the best interests of members, with little fear of facing personal-liability claims.

Also crucial is the relationship that trustees build with the fund’s administrators. All too often, administrators are seen as an enemy. There should be a well-balanced and symbiotic tripartite relationship between members, trustees and the fund’s administrators. Again, always keeping in mind the objective of a full-functioning, thriving and current fund, this should be a driving force behind trustee-related activities.

Oversight duty

Compliance issues regarding the rules, financials, surplus, valuations and foreign exchange are to be overseen by the trustees. However, should a fund be liquidated, these compliance aspects become the responsibility of the liquidator.

At this point, trustees must bear in mind that any issues which may have emerged or arisen prior to liquidation would still fall within their responsibility. Likewise, a trustee who has resigned from his or her post will still be responsible for decisions taken during his or her tenure, even after resignation.

On being elected as a trustee, an individual must acknowledge the enormous responsibility that has been bestowed. This responsibility, although in some ways burdensome, can be limited by the application of a compassionate philosophy. This should be evident in the operations of the fund and in implementing some prudent risk-mitigating measures.

To be a trustee is to be a custodian of a fund and its members’ benefits. It is thus an honour. If nurtured, it may well be the most rewarding position an individual can hold in the retirement fund industry.