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Sanlam continues to innovate with umbrella fund administration

31 October 2006 Sanlam

Sanlam Umbrella Fund Administrators (SUFA) is starting to see the results, following actions it took to address some of the key criticisms levelled against umbrella funds: Improved communication, good independent advice and creating high levels of independence have positioned SUFA as a significant and trusted player in the market.

This is evident from the type of feedback that SUFA is receiving from its members and employers, says Derek Smorenburg, SUFAs chief executive.  "A year or so ago, the umbrella fund industry was given a wake-up call when criticisms against it included poor communication to members of fund benefits and members' rights, a lack of independent advice and concerns over independence."

Smorenburg says SUFA was established to address these pressing issues and it responded by establishing a Trustee Mandated Agenda (TMA) - a communication forum for members, through its representatives, to understand their rights, benefits and responsibilities regarding the fund.  These representatives are elected by members of the fund and are usually able to communicate in more than one language - which enables them to effectively report back to fellow members.

"Feedback on the TMA from members, participating employers and contracted financial advisors have been extremely positive. Several members have indicated that it was the first time ever that someone from their provident or pension fund has interacted with them. Another significant comment was that before this forum was established, they did not understand what their rights and benefits were, or how the fund operates."

The TMA meetings are held biennially and chaired by a formally appointed Board of Trustees Representative. Member representatives attend all the TMA meetings and are required to elect their own trustees from a panel of qualified independent trustees, including trade union persons who hold 50% of the positions on the Trustees Board.

Smorenburg confirms that this was indeed a direct response to a concern raised about the Pension Funds Act that gave members the right to elect 50% of the trustees - a safeguard which many umbrella funds used to bypass. It also addresses a concern that members of open umbrella funds, sponsored by the financial sector, did not have the right to elect their own representatives/trustees in the past.

To improve the scenario with regard to independent investment advice, the trustees of the SUFA funds have also appointed external independent investment consultants to advise them on investment strategy.  

According to Smorenburg, SUFA encourages all members to use the funds financial advisor to help them plan for their financial future - at no costs.  In addition, members who want to invest in individually designed investment solutions have to complete a financial needs and risk analysis through their fund's financial adviser before SUFA will agree to transfer the retirement fund investment.

Furthermore, SUFA has entrenched its umbrella fund independence status by:

* Allowing trustees to place, on behalf of members, the Group Risk Benefits (life and disability) with the best available rates - meaning that no in-house investment service is involved.
* Placing Group Risk Cover on a net administration and commission basis at low-cost to members.
* Contracting the services of a financial adviser to attend the TMA meetings and provide financial and retirement planning advice to attendees.
* Providing members who have internet access to view their monthly updated benefits statements.
* Providing a service of dedicated senior and assistant administrators to each participating employers fund as opposed to 'call centre' services.

Sanlam believes that it offers real value through SUFA. The trick, says Smorenburg, is for business owners to look very closely at what they are getting from their umbrella fund - and to carefully analyse exactly what they are paying for.

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