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Monday, December 1, 2008
All for one....

It is truly remarkable that four associations in the life assurance and investment sectors should even talk about merging, let alone go ahead with the idea. Yet, effective 1st October 2008, they achieved just that with the emergence of the Association for Savings and Investment South Africa (ASISA) (see Insurance Times & Investments Vol 21.10 November 2008 page 3).
The ACI and IMASA started exploring the creation of a new association a couple of years ago, and when they later set up a Joint Committee to consider integration along the lines of the UK and Australia models, a third association, LISPA joined in, bringing the major players in the investment sector together as the Three Musketeers. Clearly, they were looking for honour, loyalty, teamwork and justice in an industry under constant threat of further regulation and consumer opprobrium.
After a draft principle document had been ratified, the LOA joined the process because the heads of several of the big financial institutions believed their risk services should be part of the team. Perhaps it was a bit like D’Artagnan proving himself worthy of joining the Three Musketeers (see sidebar). In any case, ASISA is certainly focussed on creating One Voice for the whole life and investment services industry.
Comments ASISA chief executive officer Leon Campher, “In the past there were four associations representing industries that all share one common goal: to provide consumers with savings and investment options. The result was that regulators and policy makers had to engage with four different lobby groups, often on issues of common interest. With ASISA we have created the single body Government was looking for to engage with on policy issues.
So it may be ‘All for One’, but is it ‘One for All’? Can ASISA draw together the disparate energies and ideals of the four associations and their particular business models into one effective financial sector development and negotiating force?
“I would sincerely hope we could speak with one voice,” he says, adding that drawing up a new Ethical Code to which all members would be signatories was a singular priority.
To do this a full-time team has been appointed to draw together the agreements, ethical standards and general practices of the four associations into a single coherent ‘Code’. All parties will adhere to this ethical code with annex provisions for various separate business types. Campher is under pressure because they want to get the code finalised for adoption by mid-2009.
“Strategically, there are a lot of issues we are facing. From a technical point of view the founding associations were doing things pretty well. But we felt we needed to take a more holistic approach and drive the initiatives at a strategic level,” he explains.
The existing Codes are at, what he calls “the wrapper level”; that is, they have bias to, say, a particular class of products and sector. Instead, “what we are saying is we should look at everything strategically and evolve a code that is signed at group level by the management at the top.
There will no doubt be a lot of interest from Treasury and the FSB as regards the results of the association’s deliberations. “We will probably engage with the authorities along the route,” he adds. No doubt they will be looking to the association to align its Code with some of the requirements of legislation,  for example, FAIS, fit and proper, and so on, and also deal with issues such as conflict of interest, commissions and ‘gifting’, that is, grey area rewards.
Such a code will include ‘full disclosure’, which will in turn involve decisions about commissions, and general guidelines for sales rewards. Another area to sort out is how to lay down a common base for product comparisons, including costs, expenses and performance measures. For example, ACI members used TER (total expense ratio); LISPA firms a modified TER; while LOA members use RIY (reduction in yield). In any event, the consumer is not going to be happy with the use of any of these abstruse abbreviations.
There will be three levels of censure of members who do not adhere to the Ethical Code:
• A fine, payable to the association’s development/education fund (already in place in some of the previous member codes);
• Name and shame; and, finally,
• Suspension of membership or even termination.

There is no question the new association has started out on the right foot. Unlike the associations it replaces there are to be no nominated representatives from sundry divisions and departments on the main board. So either your top executive is physically there or you are not represented, it is as simple as that. For the first term of office to end-2009 there are 14 company executives appointed to the ASISA Main Board from a range of life, investment and risk fields.
This is very significant because it means that no matter how many sectors a company is involved in it has to speak with one voice. For those members that transact, say, life assurance, unit trust, and asset management business, for example, they must sort out their story first, agree on a co-ordinated stance and only then come to the board with a clear defined representation of the issues at hand. In this way, the association will be able to fast track effective self-regulation and promote direct accountability.
Of course, the association is neither a legal body, nor a complaints resolution office. But as a representative body of the product providers in the financial services industry it will need to work closely with the regulators wanting assurances that the nation’s savings are fairly and effectively managed. ASISA will no doubt also be reading determinations of the Ombudsmen (of which there are now six – two statutory and four voluntary) from time to time for pointers as to how to make that ‘One Voice’ become trusted.
The Main Board is to decide on major issues to be considered during the year and these will be delegated down to the agenda items on the Board Committees (see diagram). There are seven such committees and they will be tasked with considering technical issues and appoint and refer as appropriate matters to standing committees. These will comprise both members and non-members, technical experts, research assistants and so on.
<crosshead>The Academy
<text>A really exciting part of ASISA and which, indeed, is already hard at work is the ASISA Academy. “It was an IMASA initiative,” explains Campher, “which had a problem with new recruits from varsity who could not cope with the difference between theory at university and the practicality of the industry.”
The theme of the Academy  is ‘Roots Growing into Trees’, and it currently has eight candidates completing the year’s Investment Management course, considered tough enough to be termed a ‘mini MBA’.
“We are subsequently giving CFA support to all people in the industry. Next year we will launch IMAC, which is for middle and back office providing two learnerships at NQF Level 7, so candidates will get the appropriate Seta points. This will start with 20 candidates.” He adds that the association is also looking at ‘compliance modules’ to provide skills development of potential compliance officers in terms of FAIS.
Now that the pilot phase of the Investment Management Programme has been completed the intake for 2009 will be upped to 16 candidates. Campher explains they will start with an intensive two-week induction course, then attend one day a week, and otherwise be at their workplaces. The middle of the year will see another full week ‘burst’ for the candidates; then from November to graduation the following March, candidates wrap up their min-MBA with a once a month attendance at the Academy.
“We are now looking at a matrix at how we can expand the activities of the Academy even further,” he explains, “to suit a wider audience.” This may include modules for those in Treasury and the FSB, as well as for the financial press.
Campher points out that while the courses may be couched in academic terms they are more tailored toward the practical side with simulations. Candidates run imaginary portfolios and attend simulated meetings, for example.
The opportunity to learn and improve skills will be invaluable, considering the Academy has appointed no less than 83 highly skilled senior investment and life assurance lecturers from within the industry.  They have agreed to give of their valuable time to provide detailed insights into their practical experiences, and fully mentor each candidate.

Under the association’s ‘Transformation, Skills, Development and Education’ it also wants to promote consumer education “to make financial services more relevant to the consumer.”
Campher admits it won’t be easy. “Certainly we do not expect to solve problems overnight.” He adds that initiatives will be thrashed out in consultation with various parties, especially the Financial Services Board. Clearly, if the ASISA-centred industry operates in a more consumer-friendly fashion generally it will go a long way toward a better understanding on all sides. For example, if more assertive guidelines on investment strategy were publicised it might help clients grasp better the importance of long-term savings and of avoiding knee-jerk reactions to market volatility or to unduly persuasive regular performance comparisons. Campher comments in the accompanying article on what many wrong-footed investors are getting up to.
“We are not sure on what front we are going to deal with consumer issues,” he remarks. “Part of the process is, of course, disclosure. Then there are some consumer education initiatives our members are embarking on, including experts writing for the press; and we will also become involved in that area too as a collective
“The fact is we are going to deal with it.”
He points out that every member of the industry signed up for the Financial Sector Charter, and part of that goes to the heart of consumer education, so there are already a number of projects underway (see Insurance Times & Investments Vol 17.3 June 2004 p19 and Vol 20.9 October 2007 page 7).
“We are also working with the FSB in that respect.” By Nigel Benetton

Copyright © Insurance Times and Investments® Vol:21.11 1st December, 2008
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