JOHANNESBURG – Are you happy to accept the current standards of fiduciary practice in South Africa? Are you comfortable enough to suggest that executors are sufficiently regulated?
Are you at ease that Executors always act in the best interests of their clients and their beneficiaries, and that the relevant parties are continuously held accountable?
At Capital Legacy, we’re not.
The term “Fiduciary Duty” indicates a legal obligation of one party to act on behalf of and in the best interest of someone else. This implies a certain amount of ‘trust’ and ‘confidence’ should be expected when someone performs this legal obligation. After all, the Latin term “fiducia” is defined as “the ability to trust or believe in someone’s abilities” - the expectation of trust and confidence is innate to the word.
A huge issue South Africans face is that the executor services industry is lagging in terms of reform and modernisation, compared to other professional services in the broader financial industry. Insurance administrators, financial advisors, estate agents, and stockbrokers have all reformed through legislation that improved the quality of the professional service. This has had a direct impact on increasing clients’ trust and making the relevant industries and people in it accountable.
Why have executor services not come under the spotlight? Our current laws limit who can be an executor to only those companies that have a Board of Executors licence or are lawyers or accountants.
At face value, it is a sound assumption that attorneys and accountants - who are already well governed by their own professional bodies and specific legislation - should wind up estates. However, what if they do not have the administrative ability or do not survive their clients who have appointed them? What if they do not perform satisfactorily in the eyes of the heirs, yet break no code of ethics nor laws? It doesn’t matter, according to our current laws. The heirs cannot replace the executors or hold them accountable for poor service.
An even bigger problem is that for a company to be appointed as an executor, the company needs a Board of Executors licence. These licences are no longer issued. Instead they are traded through corporate buyouts, with no control of who the licence holder is, how they operate and whom they employ.
There is a solution, though. Let’s draw inspiration and learn from the highly successful Financial Intermediary & Advisory Act (FAIS), which has done much to help an industry improve itself - and ensure the interests of customers are not just met but emboldened in all aspects of the professional service.
What if we could have a similar licensing mechanism to FAIS, and a set of new laws and regulations for executor companies, to deal with:
- The indemnity and fidelity insurances they must hold
- Their financial soundness
- The necessary qualifications of the people they employ
- The code of ethics and principles they must adhere to
- The systems they must have and use
- Operational ability and business continuity
- Creating accountable key people in their personal capacities
- Easing the burden on the Master’s Offices through independent compliance audits
- Enabling heirs to switch executors if they are unhappy with performance
- Allowing new entrants to foster healthy competition
- Enforcing much needed transformation initiatives
- The setup and funding of an industry-specific ombudsman
- The remuneration and timing of payment of fees
This legislation could incorporate attorneys and accountants who wish to render executor services, and in the process, we could create a single, trusted and accountable profession with the same standards.
Capital Legacy has taken a stand to push for change in an attempt to reform the executor services profession and their requirements for practice.
We believe that educating people on the importance of this matter is the first and most important step needed to effect change on the current standards of the fiduciary practice in South Africa.
Alex Simeonides is the chief executive and founder of Capital Legacy. The views expressed here are his own.
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