A recent training workshop for retirement fund trustees heard that many retirement fund trustees do not even so much as question the fees and performance of the funds they represent.

This astonishing admission, from a number of trustees themselves, came at the second 10X Investments Trustee Revelation Seminar, which was held at Bowmans’ office in Sandton, Johannesburg, on February 15.

It was one of the attendees who asked how often the other trustees “held a beauty parade or a tender process” to check on the costs and value of their fund. That prompted Hilan Berger, Head of Institutional Business at 10X Investments, to ask for a show of hands as to who never questioned the costs and value of their existing fund.

The shock in the room was palpable when a number of hands went up in the air. Steven Nathan, 10X Chief Executive Officer, said trustees should be doing at least an annual audit on retirement fund service providers.

The event was always going to be an eye-opener, with Rosemary Hunter, formerly Deputy-Registrar of Pension Funds and now partner at Fasken, and Teri Solomon, Head of the Financial and Professional division at Marsh & McLennan, as headline speakers.

Other hot topics at the event were the possibility of class action suits against fund trustees, and a regulatory inquiry into the local retirement savings industry. A trustee asked: “Could retirement funds and trustees in South Africa face class action lawsuits?

“Quite possibly,” was the answer given by Hunter, the respected lawyer and academic who came to public attention when she took on her own employer, the pension funds’ watchdog, in an effort to protect the interests of thousands of members and beneficiaries of dormant pension and provident funds, which had been deregistered without proper prior checks to see that the funds had no assets or liabilities.

She noted that in the context of state capture, regulatory capture and widespread greed and corruption it was more important than ever that trustees act with integrity and courage.

The risk of class-action suits was one of many topics that had trustees voicing their disquiet along the lines of: “Trustees are sitting ducks for all the vultures out there”, and, “We, as trustees, are like cannon fodder”. Yet a common thread from the experts at the event was: Trustees have the power, they should exercise it.

Berger told the trustees: “You cannot control the future market return, but you can control future costs. And as a trustee you are in an incredibly powerful position to change members’ lives.”

Nathan added: “If your fund manager and administrator says they can’t give you a proper breakdown of the costs, tell them you will find someone who will.”

After illustrating how excessively high costs can end up costing retirement fund members 60% of their savings, Berger urged trustees to empower themselves with the relevant information. He said they should start with having a good hard look at charges in their own fund and let 10X do a benchmarking exercise for their fund.

This article was first published by FANews on the 26th February 2019.