Illustration: Colin Daniel

In the reporting on the recent placing under provisional curatorship of the Rockland Targeted Development Investment Fund (TDIF), it became clear that financial services company Riscura often places itself and the retirement funds to which it provides services in positions that give rise to conflicts of interest.

Riscura provides numerous services to retirement funds and asset managers.

TDIF invested R518 million from six retirement funds mainly in barren sand dunes, which were valued at an amazing R848 million, based on a claim that the property had the potential to be developed as a mini-city and mined for building sand.

The conflicts of interest revealed in the Rockland affair are shocking, but there are even more serious conflicts of interest that have nothing to do with Rockland.

For example, Riscura serves as an asset management consultant to three of the retirement funds that were invested in TDIF. It also provides, at an additional fee, asset allocation advice, selects and advises on asset managers, negotiates mandates with other asset managers and manages the transition of assets from one asset manager to another. In addition, it earns fees from many of the asset managers for various services.

The three funds are the Telkom Retirement Fund and two mining funds: the Sentinel Retirement Fund and the Mine Employees Pension Fund.

These conflicts of interest and their dangers were the main point of discussion at a meeting, initiated by Riscura, between me and the company’s chief executive, Jarred Glansbeek. We dealt with the questions I had sent Glansbeek, focusing on allegations and claims by numerous people, including current and former Riscura employees, competitors and retirement fund trustees, as well as with Glansbeek’s pre-publication viewing of my column last week, which included comments on the Riscura conflicts of interest.

Consequent to the meeting, Glansbeek sent me an email that left me gobsmacked (see “Email from Jarred Glansbeek”, below).

In my view, particularly as a trustee of a retirement fund, a retirement fund’s board of trustees should never use the same company to provide more than one general service. In other words, each service provider should be limited to providing a single function, such as asset consultant, asset manager or administrator.

The main fiduciary duty and function of retirement fund trustees is to avoid (not justify) conflicts of interest. But a fund’s asset management consultant also has a fiduciary duty to point out to the trustees when and where conflicts of interest may and do occur.

The Financial Advisory and Intermediary Services (FAIS) Act requires those that provide financial advice and sell financial products to be registered. This would include a company such as Riscura, particularly because it provides more than just advice. Riscura is registered as a financial services provider (FSP).

The FAIS Act’s general code of conduct places a fiduciary duty on FSPs to act with due skill, care and diligence. In 2010, the Financial Services Board (FSB) strengthened the code of conduct. The amendment states that “a provider and a representative must avoid and, where this is not possible, mitigate any conflict of interest between the provider and a client ...”

The code has numerous requirements, such as a document, which must be available publicly, that details all possible conflicts of interest. (Incidentally, I picked up all the brochures relating to Riscura’s products and services at the company’s stand at the recent Institute of Retirement Funds convention. Not one said anything about conflicts of interest.)

A conflict of interest is defined in the code as any situation in which an FSP has an actual or a potential interest that “may” (note: not “will”) influence the objective performance of the service provider.

Then there are the Pension Funds Act and, in particular, the FSB’s guidance note, PF 130, which are important in addressing conflicts of interest in the retirement fund environment.

The Act places a fiduciary duty on both trustees and fund service providers. In simple terms, the Act requires both parties to act with greater care than they would when managing their own personal finances. I would suggest this includes avoiding conflicts of interest.

There is ample evidence that uncontrolled conflicts of interests in the provision of services to retirement funds have created enormous problems – Personal Finance has reported on many of them over the past 17 years. Conflicts of interest have been a feature of nearly every case where retirement fund savings have been mismanaged, let alone stolen.

PF 130, although only a guidance note, goes even further than the Pension Funds Act in admonishing trustees to avoid conflicts of interest. Quite clearly, the note does allow for some circumstances where conflicts are unavoidable.

The one area in which it is totally possible, and necessary, to avoid a conflict of interest is where a service provider is a fund’s asset management consultant. That role is to play policeman to the fund’s other service providers – and nothing else.

The conflict of interest issues are not “difficult” as Glansbeek claims. The issues are quite simple: conflicts of interest should be avoided at all times in the best interests of retirement fund members, who have worked exceedingly hard for their savings, often making sacrifices to do so.

“Avoid” means exactly that.

You, as a member of a retirement fund, should be asking your trustees whether any conflicts of interest exist and, if they do, why.


We just want to reiterate that we agree with you: the conflict management/avoidance debate is incredibly important. It has been a great source of debate in our business in designing and offering product where, despite the value and protection added for members of funds, the issues can be thorny and have resulted in us having an approach where we place heavy emphasis on providing disclosure and transparency – eg the example of disclosure I shared with you which indicated that for a conflictedproduct, that trustees should avoidthe product if indeed they don’t understand the product, and, just as importantly, if they are uncomfortable with our involvement in the product.

Nevertheless, the issues are difficult, and we agree with you. The issues need a lot more debate, even regulation, to either define management or indeed regulate for complete conflict avoidance.

We also want to remind you that we have engaged with the FSB [Financial Services Board] and will meet them later on in September to ensure that they are comfortable with our principles and that these issues are being dealt with as required by FAIS [the Financial Advisory and Intermediary Services Act].