Edition: March - May 2015


Service to participating employers

I refer to your cover story on umbrella fund management committees, known as mancos, for participating employers (TT Dec ’14-Feb ’15) and would like to engage in this debate from a different perspective.

Most participating employers in umbrella funds are small and medium-sized enterprises (SMMEs). The current points of contact by umbrella funds with participating employers is either via their human resources or payroll offices. SMMEs do not have mancos for the reasons outlined in your article.

Unfortunately, in my experience, larger employers also do not have mancos for various reasons.

The industry needs to look at the servicing models currently in place for participating employers. At present there are two models:

  • The administrator of the umbrella fund provides a service directly to employers. This is normally governed by a service level agreement. It is normally only applicable to larger employers due to economies of scale. The fee for this service is usually included in the administration fee unless specifically negotiated separately with the employer. The service level agreement would determine the level of service provided within the fee. This will vary from service provider to service provider;
  • The administrator or fund delegates the frontoffice services to an intermediary/broker who earns commission from the administrator for providing these services. Normally the commission and administration fee, added together, would not be different from the admin fee mentioned in the first model.

I would suggest that any considered legislation must factor in the size of the employer. Possibly, legislation should only apply in broader terms to larger employers who have the resources for a manco. The focus of any legislation, I believe, needs to be focused on the expected service deliverables to an employer and the fund members. This will allow employers to decide whether a manco is required.

If legislation or guidelines are put in place, it will ensure that intermediaries deliver a value service for their commissions. It will also provide uniformity of services for employers. Smaller employers generate less commission. That the level of service delivered needs to be clear could be a debate on its own.

Unfortunately with umbrella funds, everyone can abdicate from responsibility to educate the members. The question is who pays the costs? Some funds/ brokers do provide some member-level education but it is not uniform and could be commission-driven. This area needs further clarification urgently. FAIS does not impede the education of members so long as the education is not product-specific.

The whole manco issue needs to be thought through carefully in terms of what needs to be achieved. Particularly requiring clarification are the needs and deliverables to the employer and member, and the role of service providers in delivering value for money.

– Ian Haigh CFP,
independent trustee to an umbrella fund (via email)..

Minute this

Having spent many years on the boards of various retirement funds, I have long had a concern about the quality of some board minutes. Minutes are too often viewed as a necessary and mundane evil. Little attention is paid to timeliness, accuracy and clarity, not to mention reasonable grammar and punctuation.

A boring subject it be, but all trustee board members and principal officers – who share the responsibility to ensure good-quality minutes for all meetings – need to appreciate that poorly constructed minutes can come back to bite them. Inadequate minutes can end up being costly in time and resources.

  • The minutes of a fund’s board are as important as the minutes of a JSE-listed company. They should be treated with the same degree of care and attention. They are a written record of the deliberations of the board at formal meetings, and may be the only record once current trustees have moved on. In any case, memory is notoriously unreliable;
  • The minutes should not be viewed as a bureaucratic liability that need to be cobbled together merely for purposes of compliance. They are, inter alia, an important governance tool for ensuring that issues get followed up and don’t get overlooked;
  • The minutes of formal trustee meetings, special trustee meetings and sub-committee meetings are significant legal documents and can be referred to in complaints to the Pension Funds Adjudicator, the Registrar of Pension Funds, an arbitrator and normal litigation in the courts;
  • It is therefore essential that minutes are written with a real understanding of the strategic and technical issues being discussed, the decisions/ conclusions made and the reasons they are made. If unsure how to record an item, the minute-taker should clarify this in the meeting itself. It can take longer to correct a poor set of minutes than to write from scratch;
  • While minutes do not need to be extremely detailed, discursive or verbatim, they do have to be accurate and complete in reflecting the discussions and conclusions (what was discussed, what was decided and why). Simple language and short sentences are recommended;
  • Because of their legal nature, minutes must be unambiguous. They should contain appropriate grammar and good spelling;
  • The minutes should also state who is responsible for taking a particular action, what action and by when;
  • As far as possible, for purposes of cross-reference the minutes should follow the agenda points and numbering. The agenda acts as a template for the minutes;
  • Due to the chairperson’s particular governance role, there is merit in the chair playing a leading role in the minute process both inside and outside the meetings;
  • Ideally, draft minutes should be sent to the chairperson within two working days of the meeting for initial comment/correction. They should then be distributed within five working days of the meeting (while the meeting is still fresh in the minds of participants) for any further comment, and returned to the drafter within another five working days. The final minutes will be ratified at the next trustees’ meeting;
  • Similar points apply to the writing and appropriate wording of board resolutions. They need to be complete, accurate and explain the reasons why the resolution was passed. If a resolution is passed by round robin (rules permitting), this should be in the wording of the resolution to be ratified and recorded at the next board meeting.

I would welcome other views on this subject.

– Roy Zazeraj,
independent trustee (via e-mail).