How consumer champion fought for you
Loved by the consumers he champions and hated by those whose wrongs he has exposed, Bruce Cameron has been editing and writing for Personal Finance since founding the publication in 1996.
Not only has Cameron ensured that, over the past 17 years, consumers have been educated about a variety of important financial issues; he has led various campaigns against bad practices in the financial services industry, warned against scams and called to account those who needed to be held accountable.
His writing has caught the eye of those regulating the industry, and reportedly the greatest fear of those who work in the industry is to feature in one of his articles for practices that do not stand up to public scrutiny.
Cameron’s bosses, who gave him eight weeks to prove that the publication would work, apparently had no inkling of the need it would fill.
Below are some of the noteworthy campaigns and issues Cameron has tackled over the years.
essentials of retirement fund membership
Without the Life with Cameron column, many Personal Finance readers would probably not know the difference between a defined benefit fund and a defined contribution fund, or how much they can contribute to an occupational fund or retirement annuity (RA). They’d probably still believe they had to agree to contribute to a RA until age 55 and would probably still be turning to life assurers for RA products, rather than unit trust companies. And they would be oblivious about net replacement ratios and the pressing need to save more for retirement. Many fewer would know the difference between guaranteed annuities, with-profit annuities and living annuities, and when and how to buy them.
Retirement reform is another issue consumers have been kept informed on thanks to Cameron’s inside track and keen interest in the government’s progress in overhauling the system.
policy lapses and surrenders
Not long after Personal Finance began, Cameron drew attention to the billions of rands policyholders were losing when they stopped or reduced premiums on their life assurance policies and RAs.
The matter finally came to a head in 2005, when the Pension Funds Adjudicator at the time, Vuyani Ngalwana, issued a number of rulings against funds applying these penalties.
At the end that year, Finance Minister Trevor Manual got the life assurers to agree to pay back about R3 billion to members of RAs and other policies to which surrender penalties had been applied when the members stopped or reduced their premiums.
high costs on retirement savings
Besides coining the phrase “confiscatory penalties”, Cameron has consistently tackled the high cost of retirement products over many years. When actuary Rob Rusconi’s paper on this issue appeared in 2004, Cameron was the only journalist reading Actuarial Society of South Africa papers, translating their important messages for the man in the street and broadcasting the message for those in high places to hear.
living annuity dangers
Over the years, Cameron has tirelessly highlighted the mis-selling of living annuities to pensioners who have too little retirement capital, the bad advice given on the underlying investments by both product providers and financial advisers, and the dangers of high drawdown rates.
With their attention drawn to problems with living annuities, regulators and service providers moved to make some amends: in 2007 the drawdown rates were amended; in 2008 the then Linked Investment Service Providers’ Association compiled a code of conduct for the sale of these products; and in 2010 the Association for Savings & Investment SA issued standards for selling annuities.
Nevertheless, Cameron has continued to highlight research into drawdown rates and how to keep annuities sustainable for life.
The living annuity issue also led Cameron to look into the linked investment services provider industry in 2001 and to uncover how providers put funds on their platforms on the basis of kickbacks paid, rather than the merits of a fund or the interests of investors.
Retirement fund surpluses
Cameron highlighted the need for the surplus legislation that was finally put in place in 2001, and he educated members on how surpluses in their funds would be distributed.
In 2005, Cameron broke the story about how Peter Ghavalas, the mastermind of a pension-stripping scam that took place in the 1990s involving, at the last tally, close to a billion rands, had been arrested.
Despite volumes of legal papers detailing a complex web of transactions, and legal and personal attacks, Cameron has kept the issue in the limelight, reporting on each success and setback for the curator of the affected funds, Tony Mostert. Recently, Cameron reported that Mostert had recovered some R755 million for about 15 500 pensioners and members of seven retirement funds.
Retirement fund bank account bulking
In 2006, Cameron shocked the financial services industry by revealing the findings of a six-month investigation: the country’s biggest retirement fund administrator, Alexander Forbes, had made secret profits by bulking the bank accounts of the funds it administered between 1996 and 2004. Forbes’s own lawyers had told the company the practice was “not lawful”.
Other administrators were found to be making secret profits in similar ways. Parliament held a hearing into the matter later that year and the Financial Services Board (FSB) conducted an investigation. Administrators were forced to pay back some R500 million to funds, with Alexander Forbes paying back some R368 million.
Long before the big story broke, Cameron’s suspicions were aroused and he was questioning Arthur Brown, the boss of a little-known Cape Town-based asset manager, Fidentia, about the source of the capital for the company’s buying spree.
In November 2006, Cameron was the first journalist to report on an FSB raid on Fidentia. It was only in February 2007, when the FSB applied for curatorship of the company, that the story hit national headlines. Billions of rands had been plundered from various entities including an umbrella trust company, leaving penniless thousands of widows and orphans of deceased members of the Mineworkers Provident Fund.
In 2008 Fidentia director and auditor Graham Maddock was sentenced to seven years in jail after he pleaded guilty to fraud and forgery relating to the Fidentia saga. He was also fined R6.3 million.
In 2009, Steve Goodwin, believed to be a founder of Fidentia with Brown, was sentenced to 10 years in jail for fraud, corruption and money laundering. Years later, Brown is still fighting charges against him and has even attempted to sue Cameron for defamation.
With an increasing number of small- to mid-sized employers being advised to provide retirement fund benefits by way of umbrella funds, Cameron took a hard look at how these were being run. He found severe conflicts of interest among companies sponsoring umbrella funds and a lack of member representation.
He gave the issues a good airing, which, no doubt, prompted regulatory scrutiny, but unfortunately draft legislation to deal with some of the issues was shelved in favour of the yet-to-happen greater retirement reform.
Over the years, many readers wrote to Cameron about their disappointment when life assurance investments performed dismally compared with what they had been promised by eager sales people. In Cameron’s words, the “phoney” benefit illustrations “illustrated the potential maturity values of policies based on high returns, high inflation rates and a fictitious cost structure”.
In 2005, the life industry announced it was scrapping its benefit illustrations in favour of a code of conduct on policy quotations.
In 2007, the industry announced it was scrapping the policy quotations, because financial advisers governed by the Financial Advisory and Intermediary Services (FAIS) Act then became obliged to draw up proper financial plans for investors.
They love him or hate him because, for many years, Cameron has been the bearer of the message that many of them needed to change their ways. Some advisers have challenged and threatened Cameron, but there is no doubt many more consumers would have been victims of bad advice if it wasn’t for the spotlight on issues such as advisers’ skills, the need for them to do due diligence on products they recommend, perverse incentives, commissions and conflicts of interest.
Cameron highlighted the need for advisers to up their skills and outlined the benefits of the FAIS Act. Without his articles, the public would probably have heard only about how the Act made life so much more difficult for advisers. Instead, consumers were made aware of how the Act would ensure they got good advice, and many have used the services of the Ombud for Financial Services Providers to seek compensation for bad advice whereas previously they may have suffered in silence.
commissions, incentives and conflicts of interest
As long as he has been editor, Cameron has campaigned against excessive commissions and non-cash incentives offered to sales people, and the consequent conflicts of interest that result in consumers and retirement fund members receiving advice and services that aren’t in their best interests.
Initially, he outlined the problems caused by product providers rewarding advisers with luxury overseas trips for selling their products.
He consistently highlighted the problems of conflicts of interest, and finally, in 2010, this issue was dealt with by a code under the FAIS Act.
More recently Cameron has focused on the generous sign-on packages, including cash and share options, for financial advisers who agree to tough sales targets. This has encouraged mis-selling and the churning of products as advisers jump from one company to another.
In 2007, Cameron exposed how Regent Life side-stepped various laws to pay excessive commissions to Imperial car dealerships. Consumers were being charged an upfront lump sum for credit life assurance on their vehicle finance, and were incurring excessive interest charges.
The life industry reacted by appointing retired Supreme Court judge Peet Nienaber to investigate, and Regent was fined R1 million for contravening the Long Term Insurance Act.
From the start of Personal Finance, Cameron published warnings about the dangers of property syndications. As the property market soared in the few years before the 2008 sub-prime crisis, property syndications became an increasingly popular sell.
Cameron warned again about the structural defects in these investments. In 2006, he published a feature in Personal Finance magazine warning of how syndications were using complex unlisted company structures in which investors had little legitimate claim to the syndicate’s assets. In addition, he found there were often huge differences between the price at which properties were purchased and the values they were accorded within the syndicate.
Published returns too were often based on unfounded assumptions, he wrote.
Not long after that, property syndicates collapsed like dominoes.
In 2000, Satrix launched South Africa’s first exchange traded fund (ETF). Cameron has written many column centimetres on the merits of investing in these low-cost products versus those managed by skilled, high-cost fund managers.
He has kept readers up to date on exchange traded product developments and published his valuable original research into the costs of investing through ETF investment plans.
He has also highlighted the benefits of investing in RSA Retail Bonds, which were launched by the government in 2004.
Hedge funds, structured products, smoothed bonus policies, black hole policies, back-to-back structures, mortgage-linked endowment policies: the list of issues Cameron has demystified for readers goes on and on. So too the list of dubious “product” providers: the Jack Milnes, the Cash Managed Funds, the Dynamic Wealths of the financial services industry.
No doubt, there are still more dragons to slay, but Cameron’s writings have made everyone that much more aware and alive to what is right and wrong in the industry that offers to help us with our personal finances.