Fairheads accredits intermediaries for trust products

Giselle Gould, MD of Fairheads Trust Consultancy, says: “In the past, pension benefit or death benefit trust companies were never subject to the requirements of the Policyholder Protection Rules. Pension fund consultants and trustees simply dealt with tr

“FAIS has changed all this. The General Code of Conduct requires information to be provided about the product provider and the financial service offered,” says Gould.

For this reason, Fairheads Umbrella Trusts is embarking on an accreditation process to ensure that:

· all intermediaries they deal with have the appropriate license to market trust products; and

· they have sufficient information and knowledge to market trust products to clients.

Product providers need to have their own FAIS license(s), adequate fidelity cover, complaints resolution policies, internal rule in terms of FICA, an approved compliance officer, and all other good corporate governance policies.

Gould says the training and accreditation process is predominantly available in electronic format. Remuneration for products sold to clients is payable only to accredited financial advisers.

If you are interested you can contact Odile Pearce at Fairfund on (021) 410 7800 or [email protected]

Why use an umbrella trust?

In short, pension fund proceeds can be paid into an umbrella trust, mainly for minor dependants or legally disabled majors, upon the death of a retirement fund member. Umbrella trusts have to be registered with the Master of the High Court. This is a cost saving for the client as no further registration is required for subsequent sub-trusts. A sub-trust per deceased is set up under the umbrella trust with sub-accounts for each beneficiary as vesting has taken place.

There is no need for an intermediary to conduct a needs analysis as required by the General Code of Conduct as this is the responsibility of retirement fund trustees when they investigate the dependants of the deceased and thereby determine what the needs of the dependants were in relation to the deceased.

The underlying investment of a trust is structured according to the monthly income needs of beneficiaries and, where possible, depending on the size and term of the trust, capital growth. Thus each beneficiary’s portion is invested according to his/her needs, and the investments are reblended regularly as income is paid and capital reduced when other needs of the beneficiary are met.