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DATE: May 2019

Dear stakeholder

The ASISA Board has appointed Thabo Khojane, Managing Director of Investec Asset Management South Africa, as its new Chairman and Ian Kirk, Group Chief Executive of Sanlam, as the new Deputy Chairman.

The appointments effectively represent a swap of positions, which was approved unanimously by the Board. Ian Kirk had been serving as Chairman and Thabo Khojane as Deputy Chairman since September 2017.

We are extremely pleased that Thabo has agreed to step into the position of Chairman. On behalf of ASISA and the ASISA Board we would like to congratulate Thabo and Ian on their appointments.

The Board also welcomed Mila Mafanya, Afena Capital Interim CEO & Head of Equities, as a new Board member. He replaces Grant Cloete, former CEO of Afena Capital.

Global investment industry trends

The International Investment Funds Association (IIFA) held its annual Board and working committee meetings in Washington early in May.

The IIFA consists of investment funds associations from 40 jurisdictions around the world, representing assets under management of US$46.7 trillion as at the end of the fourth quarter of 2018.

ASISA is one of 15 associations holding tier one IIFA membership and has representation on most of the IIFA’s seven working committees: International Regulatory Affairs, Cybersecurity, Pensions, Investment Funds Accounting, Taxation, Statistics and Social Media. In addition, the IIFA Board is chaired by Leon Campher.

Preceding the IIFA meetings, the European Fund and Asset Management Association (EFAMA) and Investment Company Institute (ICI) held their joint annual meeting, also in Washington.

The IIFA meetings and the joint EFAMA/ICI meetings were attended by an ASISA delegation consisting of Leon Campher, Sunette Mulder and Johann van Tonder.

The following topics were high on the agenda:

  • The active versus passive fund debate. The consensus view internationally is that the “either or” narrative is misleading and that investors should be encouraged to include in their portfolios funds that best meet their needs, whether active or passive or a combination. There is also strong support for doing away with the “passive” label and referring only to index funds.
  • Conflicts of interest in distribution channels and meaningful and comparable cost disclosure. The success of the Retail Distribution Review (RDR) in the UK is being questioned, while associations around the world are grappling with cost disclosure. On this front South Africa has addressed many of the disclosure concerns with the ASISA Standard on Effective Annual Cost (EAC) considered a world first. ASISA has been approached by other domiciles for guidance on designing and implementing an EAC Standard.
  • New regulations and proper cost benefit analysis. Constituencies around the world report that the wave of new regulations is unrelenting and that the associated costs are immense. The view is that costs should be quantified and used in engagements with regulators to determine benefits versus costs.
  • Sustainability and Environmental, Social and Governance (ESG). The European Union (EU) has committed itself to ambitious climate and energy targets by 2030 and the financial services industry is expected to help deliver these targets.
  • Pan-European Pensions product. The EU is planning on introducing a Pan-European Pensions product from mid-2021. The product fee will be capped at 1%, benefit payments will not be guaranteed and due to the different tax regimes, harmonization is not possible. A lack of agreement on a suitable tax dispensation remains a stumbling block for this project.
  • MiFID II. The EUs Markets in Financial Instruments Directive II (MiFID) was introduced to protect consumers, but there are already concerns that consumers do not see the benefits. Given the high costs of implementation, the effectiveness of MiFID II is being questioned.
  • Cybersecurity. The IIFA’s Cybersecurity committee is proposing a minimum cybersecurity standard consisting of eight building blocks.

ASISA Retirement Fund Standard: EAC for Individual Fund Members

The new Retirement Fund Standard: Effective Annual Cost (EAC) for Individual Fund Members was approved by the ASISA Board of Directors. This means that ASISA member companies offering umbrella retirement fund solutions will start developing and implementing systems to enable broader cost disclosure at member level. Companies have until 1 October 2020 to complete implementation.

The Retirement Fund Standard: EAC for Individual Fund Members is modelled on the ASISA Retail EAC Standard, which came into effect on 1 October 2016. A world-first, the Retail EAC Standard enables consumers and advisers to compare charges and their estimated impact on investment returns in a meaningful way irrespective of whether the product is a unit trust, a living annuity, a retirement annuity or an endowment policy.

Together, the new Retirement Fund Standard: EAC for Individual Fund Members and the Retail EAC Standard provide individual investors with a complete overview of how charges impact on their investments.

Unclaimed assets

ASISA members united policyholders, beneficiaries, investors and heirs with unclaimed assets worth R8.1 billion in 2018. The forgotten assets were held in 71 233 risk policies, savings and investment policies, annuity polices and accounts in Collective Investment Scheme (CIS) portfolios.

It is estimated that unclaimed assets worth R17.1 billion held in 147 221 products still need to be reunited with their legal owners. ASISA members will honour claims on unclaimed policy benefits and investment proceeds no matter how long it takes for the policyholder, beneficiary, investor or heir to come forward.

Strong net inflows for local CIS industry

The local Collective Investment Schemes (CIS) industry reported strong net inflows of R52.8 billion in the first quarter of this year; the third highest quarterly net inflows recorded in five years.

According to the CIS industry statistics for the quarter and year ended March 2019, this brings to R143.3 billion the total net inflows for the preceding 12 months.  At the end of March 2019 total assets stood at R2.38 trillion, compared to R2.18 trillion at the end of March last year and R2.24 trillion at the end of 2018. At the end of March 2019, South African investors had a choice of 1 599 portfolios.

Tax Updates

  • The South African Revenue Service (SARS) issued new draft Common Reporting Standards Regulations on 21 May 2019. The draft regulations relate to changes to the Organisation for Economic Co-operation and Development (OECD) Standard for Automatic Exchange of Financial Account information in tax matters. The deadline for comment is 24 June 2019. The ASISA Tax Compliance working group will meet to discuss and ASISA will co-ordinate and submit member comments.
  • ASISA continues to engage with SARS to clear hurdles causing the backlog of outstanding Recognition of Transfer (ROT) documents. Various submissions by ASISA, supported by the Institute of Retirement Funds Africa (IRFA), have been made to SARS during May. SARS agreed to start providing certain ROT01 and ROT02 taxpayer information that they have on record to fund administrators and insurers to help in this regard.
  • We are waiting for National Treasury to set a date for a stakeholder meeting to consult on capital versus revenue in portfolios. In the meantime, we continue to finalize the ASISA commissioned PwC report on how other jurisdictions seek to deal with this as well as portfolio turnover statistics based on comments received from members on the initial drafts.

Updated ASISA Standards

  • Retail Effective Annual Cost Disclosure Standard

The ASISA Board ratified changes to the Standard catering for with-profit annuities. The updated Standard is available on the ASISA website

  • Standard on the Calculation and Disclosure of Total Expense Ratios (TER) and Transaction Costs (TC)

The updated Standard now also applies to hedge funds. In addition an annexure was included to provide guidance to members in respect of the calculation methodologies for reasonable best estimate Transaction Costs as required in the Standard. The amendments were ratified by the ASISA Board and the updated version of the Standard is available on the ASISA website.

Competition Law Compliance

It is ASISA policy to comply with South African competition laws. ASISA therefore expects its employees, directors and other representatives, as well as representatives of members who participate in ASISA committees and working group structures to comply with competition laws.

ASISA members are therefore urged to familiarise themselves with the ASISA Competition Law Compliance Policy, Guidelines and Procedures available on the ASISA website.

CPD for Key Individuals

The ASISA Academy’s Investment Management Ethics Workshop became the third Academy workshop to be recognised by the Financial Planning Institute of Southern Africa (FPI) for Continuous Professional Development (CPD). This is good news for anyone working in the investment management environment, including Key Individuals, wanting a refresher on investment management ethics and needing CPD points.

This provocative three-hour workshop, which the Academy has presented to over 1000 investment professionals and actuaries over the past decade, can be customised and is presented on demand by experienced investment practitioners from the ASISA Academy. The workshop engages delegates on issues of ethics and includes interactive group case studies based on real events.

Retirement Fund Trustee Education

The ASISA Academy presented seven retirement fund trustee education workshops during May to trustees of retirement funds in Johannesburg, Pretoria, Cape Town and Port Elizabeth.

The workshops are funded by the ASISA Foundation from pooled industry grants, which makes it possible to offer the workshops on a fully-funded basis, but independent of the sponsors of the ASISA Foundation.

Since May 2014, the Academy has delivered in excess of 170 workshops to more than 2 000 delegates from over 50 retirement funds.

One of the funds that had requested training for its trustees in May was the UNISA Pension Fund in Pretoria. We received the following feedback from the principal officer on the conclusion of the Death Benefits workshop: “I would like to thank you for the workshop you facilitated for us. We are grateful and you really helped us, as it was always difficult to decide on death benefits allocation…We are a better Board now.”

ASISA Foundation

The ASISA Foundation was invited to participate in the 2019 International Conference on Financial Education, which was co-hosted in Cape Town on 23 and 24 May by the Financial Sector Conduct Authority (FSCA) and the Organisation for Economic Co-operation and Development (OECD).

More than 185 delegates from 50 countries attended the conference under the theme “Financial Education of the Future”.

Ruth Benjamin-Swales, CEO of the ASISA Foundation, participated in a panel discussion, which focused on “‘Trial and error’: Lessons learnt from programme implementation and how these lessons have improved future projects”. In her presentation, Ruth shared practical lessons learnt from implementing the Foundation’s programmes for young adults, workers and micro-enterprise owners and distilled these into 10 key factors for successful programme implementation.

Reflection on the content presented at the conference and feedback received from delegates indicates that the Foundation’s programmes and methodologies are aligned to and even leading international best practise in financial education.

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