February 6, 2010
 By Bruce Cameron
Finally Alexander Forbes has come to its senses and, for the first time, has genuinely attempted to put its sordid past behind it. It is a puzzle why it has taken it so long to do what Edward Kieswetter, its new chief executive, says is "the right thing to do" .
It has been absolutely disgraceful that the company has been prepared to drag this on. In doing so, often in the most unacceptable and immoral manner, it has caused unnecessary suffering to pensioners, many of whom are now very old or have died.
Many millions of rands must have been wasted in legal fees to fruitlessly fight the surplus-stripping case, as well as in the amount of time senior management has devoted to the issue.
Kieswetter and Alexander Forbes chairman Sello Moloko deserve medals for having the determination to tackle the issue head on.
They and the doggedly persistent Tony Mostert, curator of the retirement funds, which were stripped of their surpluses in the 1990s, with their powerful legal teams, have been locked in endless rounds of highly complex negotiations for the past few weeks.
Kieswetter, who in his former capacity as deputy commissioner for the South African Revenue Service played a major role in improving tax morality, has been determined to get a fair settlement.
Alexander Forbes has not been convicted in any court of law for the sordid extravagances of the 1990s. However, in the court of public opinion it has been found guilty as an absolute rotter on a number of issues, exacerbated by the failure to quickly settle the surplus-stripping matter.
This reputational disaster was a great shame, because having shed itself slowly of most of those who were involved in the scandalous behaviour of the 1990s, Alexander Forbes had attracted some of the best minds in South Africa's retirement fund industry.
These people are making a significant contribution in many ways, including contributing to the government retirement reform process.
Some of the best retirement planning research in recent years has come out of Alexander Forbes. This research has not only made a significant contribution to the reform debate but has helped enormously in educating ordinary people about the need to plan carefully for and in retirement and how to do it to their best advantage.
The problem is that when a company's reputation is so badly tainted, so is the information it provides, no matter how sound or valuable.
This happened to the extent that, when Personal Finance published the information, acknowledging the source, in your best interests, some of you thought we had lost our collective mind.
The financial services industry as a whole has a lot to learn from this sorry saga. The industry does not sell baked beans. It should be a carer, a carer of the hard-earned savings of the broader public.
The public places its trust in the industry, often a blind trust, as most do not understand the complex ways of financial markets and products.
In return, the industry has a duty not only to be moral, but in law, to be diligent and careful in handling our money.
Too often, as in this case, companies forget that they are custodians and not the owners of our savings. They then whip out battalions of over-smart lawyers to escape their moral duty. It becomes particularly abhorrent when it involves the aged.
That it is not just a legal game, but a moral and ethical issue, is what Kieswetter clearly impressed upon Alexander Forbes.
There are two simple questions the industry participants must continually ask themselves:
Did our customers get less than their due?
Did the company or its associates get more than their due?
If the answer is yes to either question then those adversely affected must be repaid immediately.
An increasing number of companies are accepting this approach. And I am pleased to say that Alexander Forbes has joined this list in my dealings with it in resolving some other recent problematic cases.
However, there are others, including major players, who still do not understand this.
If the Alexander Forbes offer is confirmed by Mostert it will:
Come as a lifeline to thousands of the very needy affected pensioners.
Allow Alexander Forbes to start afresh as a company that Kieswetter has now publicly committed to doing the right thing. This means it will act as the custodian of our retirement savings, not as a plunderer.
Now rapidly focus the minds of all the other parties involved in this awful surplus-stripping saga. Number one must be Sanlam. Other financial services companies such as Nedcor, Wynne Jones, and Jacques Malan must also come to the party to meet their liabilities.
Finally, well done to both the Financial Services Board (FSB), led by the very capable and principled Dube Tshidi, and curator Tony Mostert for the way they have stuck to their guns. Without their stubborn persistence the danger was that big companies like Alexander Forbes and Sanlam would continue to believe that they can treat us and our retirement savings with contempt.
This saga will be a lesson to those who still believe that our savings are their personal slush funds.
Doing the wrong thing
On the subject of morality, financial services company Glenrand MIB has again shown it has little appreciation of what is the right thing to do. It is now trying to have itself listed as a creditor in the subsidiary retirement fund administration company, Glenrand MIB Benefit Services, it placed in liquidation last year.
This is to the detriment of more than 200 retirement funds Glenrand left stranded and facing significant costs. The move could further reduce the retirement benefits of about 80 000 members.
Last year, Glenrand MIB placed its wholly owned and controlled subsidiary, Glenrand MIB Benefit Services, in liquidation to avoid taking responsibility for the administrative chaos the subsidiary had created for the 200 funds it was administering. In February 2008, before the liquidation application, Glenrand, in agreement with the FSB, tried to rectify the nightmare by outsourcing the administration of the 200 retirement funds to Absa Actuaries and Consultants.
The outsourcing to Absa was a compromise offered by Glenrand to the FSB so that the board would call off a full-scale inspection of Glenrand MIB Benefit Services. This followed a routine inspection by an FSB pensions surveillance team in late 2007, when the chaos was discovered. Some of the problems created by Glenrand's maladministration stretched back to 1999.
In a sudden about-turn, despite the agreement with the FSB, budgeting R44 million and giving Absa 24 months to sort out the mess, Glenrand Holdings decided to apply for the liquidation of its subsidiary. This, in effect, gave preference to the future profits of Glenrand over the retirement benefits of the 80 000 fund members.
The outsourcing contract with Absa was cancelled on April 5 last year, two days before the liquidation application. The liquidation effectively allows Glenrand Holdings to escape any responsibility for clearing up the administrative mess and the costs.
Glenrand has also effectively turned its back on a number of settlements - including two court-endorsed ones - it had reached with the retirement funds to put their books in order and to refund them their fees, while walking away from complaints currently before the Pension Funds Adjudicator.
Now, instead of any remaining assets being limited to a division among the affected retirement funds, Glenrand wants repayment of loans it, as co-creditor, gave to Glenrand MIB Benefit Services. This is not the right thing to do.
  
 
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