Issue: June 2012 / August 2012
Much more is expected of trustees now than in the past. Muitheri Wahome, head of technical solutions at Investment Solutions, points out where skilled professionals can help.
SA’s retirement fund industry has moved beyond a philosophical dialogue on the impact of legislation. Instead, businesses are now making real decisions with legislation in mind. This significantly alters the way the industry manages itself and will perform in future.
The trend to more stringent legislation was driven by the 2008 financial crisis and the subsequent losses suffered by investors globally. The result is that retirement fund trustees are now expected to address many important issues and risks beyond what was previously expected of them.
This shift from discussion to active compliance has immediate implications for:
So it is all the more important that trustee boards regularly update each intermediary’s duties to avoid confusion and the risk of falling short of new regulatory requirements. New issues affecting trustees include:
The impact of legislation is also increasing investment in performance and compliance systems, along with the bolstering of compliance and risk teams by asset managers. This in turn has fostered the trend, which began in the last decade, of outsourcing non-investment related activities such as compliance, investment administration and performance reporting.
A broader long-term implication of these changes is that, inevitably, asset manager and intermediary businesses will have to be of a certain size to deliver within legislative requirements. The days of the single-person managed fund are probably over, in SA at least.
The intentions of these legislative changes are good and will lead to funds being better managed, with increased protection for savers and retirees. But from now on trustees will need to work much more closely with skilled professionals, ensuring that robust processes are in place to monitor the assets for which they’re responsible.