Leon Greyling, COO of ICTS Legal Services

Following on from my recent article on the role of a Manco, I have also listed below some questions that Manco members should be asking in fulfilling their role, as well as what to keep an eye out for.

Key questions a manco should be asking

To fulfil their role effectively, mitigate liabilities, and uphold their responsibility for hiring and firing the umbrella fund, Mancos should ask probing and strategic questions. These include:

1. Fund Performance and Investments:

• • Are the fund’s investment returns competitive compared to industry benchmarks and peers?
  • Is the default investment portfolio suitable for your employees’ risk profiles and retirement goals?
  • How are investment risks managed in volatile markets?
  • Are the fund’s investment options diversified enough for your workforce?

2. Costs and Fee Transparency:

• • Are all fees (administration, investment, performance, and third-party charges) fully disclosed and transparent?
  • How do the fees compare to other umbrella funds, and are they justified by the value provided?
  • Are there any hidden or undisclosed costs that could erode member savings?
  • What processes are in place to ensure ongoing transparency of all fees charged to the fund?

3. Conflicts of Interest:

• • Are there any relationships between the fund sponsor, trustees, administrators, or investment managers that could create conflicts of interest?
  • How are potential conflicts of interest identified, disclosed, and managed within the fund?
  • Are trustees or service providers receiving incentives or benefits that could influence their decisions?
  • What safeguards are in place to ensure decisions prioritise member interests over those of service providers?

4. Administration and Service Quality:

• • Is the fund’s administration efficient, accurate, and timely in handling contributions, benefit payments, and record-keeping?
  • Are members receiving clear, regular, and understandable communication about their savings?
  • How are complaints or errors resolved, and what is the turnaround time?

5. Risk Benefits:

• • Are the risk benefits (e.g., life cover, disability insurance) appropriate for your employees’ needs?
  • How competitive are the premiums for these benefits compared to other providers?
  • Are there any exclusions or limitations in the risk benefits that members should know about?

6. Governance and Compliance:

• • Is the umbrella fund compliant with the Pension Funds Act and FSCA guidelines?
  • Are the trustees fulfilling their fiduciary duties effectively and transparently?
  • How are conflicts of interest among trustees or service providers disclosed and mitigated?

7. Member Outcomes:

• • Are contributions being paid regularly and on time?
  • Are members achieving adequate retirement outcomes based on contribution levels and investment performance?
  • What measures are in place to educate members about their retirement savings and options?
  • Are there initiatives to improve member engagement, such as financial wellness programs?

8. Suitability and Strategic Fit:

• • Does the umbrella fund align with our employees’ demographic and financial needs?
  • Are there better alternatives in the market offering superior value, service, or transparency?
  • What are the costs, benefits, and disruptions associated with switching to another umbrella fund if the current one is deemed unsuitable?
  • How does the fund’s performance and governance justify its continued appointment?

9. Trustee Performance:

• • How experienced and qualified are the umbrella fund’s trustees?
  • Are they responsive to feedback or concerns raised by the Manco or members?
  • What processes ensure the trustees act in members’ best interests?

10. Future-Proofing:

• • How is the fund adapting to regulatory changes, such as the two-pot retirement system introduced in 2024 or Joint Standard 2 of 2024?
  • What technology or innovations is the fund adopting to enhance member experience?
  • How is the fund preparing for long-term challenges, such as economic uncertainty or demographic shifts?

Beware the “Independent Broker”

Sometimes an umbrella fund may allocate to, or provide the opportunity for, a Manco to be serviced by a broker/advisor who claims to be independent to the Fund.  This is not always the case.  Often these so called “independent brokers” are tied agents of the Fund and won’t provide you with an impartial view.  Always ask your broker which funds he/she is licensed to/has a contract in place with, and whether those contracts carry equal or similar remuneration.  If they claim to be able to advise on all possible funds, ask them to share their research on the funds that they claim to know.

Additional Considerations

• Training and Expertise: Manco members should receive training on their role, the retirement fund industry, and governance principles, including how to identify and address conflicts of interest and ensure fee transparency.
• Documentation: Mancos should maintain detailed records of their discussions, decisions, and actions (e.g., questioning fees or conflicts) to demonstrate due diligence, especially given their responsibility for hiring and firing decisions.
• Engagement with Trustees: Mancos should seek to build a direct line of communication with the umbrella fund’s trustees to ensure they are able to provide feedback and that any major concerns are addressed promptly.
• Independent Advice: Mancos may seek independent financial or legal advice when evaluating the fund’s suitability, fee structures, or conflicts of interest, particularly when considering hiring or firing a fund.
• Hiring and Firing Process: When deciding to hire or fire an umbrella fund, Mancos should follow a robust due diligence process, including competitive analysis of alternative funds, member impact assessments, and consultation with stakeholders.
• Preparation for COFI: Given the impending COFI Act, Mancos should monitor FSCA communications and consider proactive steps, such as reviewing conduct policies, to align with anticipated standards on transparency, fairness, and governance.

Conclusion

The Manco should play a critical role in overseeing the umbrella fund, ensuring it serves the best interests of the employer’s employees while maintaining transparency and accountability. By demanding full transparency of fees, actively monitoring and questioning conflicts of interest, and exercising their responsibility to hire or fire the umbrella fund, Mancos safeguard member outcomes and mitigate potential liabilities. The forthcoming COFI Act will likely intensify these duties by introducing unified conduct standards, further emphasizing member protection and regulatory compliance – making it essential for Mancos to prepare in advance. Asking strategic questions about performance, costs, governance, and suitability ensures the fund remains a competitive and effective retirement savings vehicle. Failure to address issues like opaque fees or conflicts of interest could expose Mancos to reputational or legal risks, underscoring the importance of their oversight role.

End