I recently had a most disturbing (if not revealing) conversation with a board member of ASISA (the association for savings and investments in South Africa). But before I proceed, a bit of background and history on ASISA. The following is taken directly from the ASISA website www.asisa.co.za. (If you already know all of this then scroll down to “At the beginning of July…”)
ASISA was formed in 2008 by members of the Association of Collective Investments (ACI), the Investment 
Management Association of South Africa (IMASA), the Linked Investment Service Providers Association (LISPA) and the Life Offices’ Association (LOA). These associations have disbanded and their staff, assets and activities have been transferred to ASISA. ASISA was created to help facilitate an environment that promotes a culture of savings and investment in South Africa by unifying some of the key industries active in this space. The aim of this new single association is to:
• Work towards greater level playing fields. • Create an environment enabling of more holistic regulation. • Become more consumer focused. • Collectively engage with Government on policy issues. ASISA will work towards promoting a culture of savings and investment in South Africa by playing a significant role in the development of the social, economic and regulatory framework in which our members operate, thereby assisting members to serve their customers better.
As part of its mission ASISA aims to: • Actively promote a transformed, vibrant, and globally competitive financial sector that reflects the South African demographics. • Develop and actively participate in education, transformation and social development projects. • Continue to build a strong national economy by encouraging and incentivising South Africans to save. • Promote transparency and disclosure. • Endeavour to ensure ethical and equitable behaviour by members by applying a code of ethics and standards. • Help create a simple and efficient regulatory framework that promotes savings and investment. • Engage with Government to ensure the creation of level playing fields for all members while at the same time promoting healthy competition.
At the beginning of July this year, I wrote an article entitled “The Future of the entire unit trust industry hangs in the balance” http://www.thefinancialcoach.co.za/ovation-updates/ . In it I made the assertion that if Ovation investors lose money as a result of the Fidentia curators accessing their unit trust funds, then the unit trust industry as we know it is finished. The so-called legislative protection would have ceased to exist. About 2 weeks after the post, I received a letter from Leon Campher, head of ASISA, in which he expressed an opinion that unit holder’s funds are “safe”. When the Ovation court date was postponed again, I replied to his letter with a series of questions and statements. Almost 6 weeks have past since I wrote to him, but we have still not received any reply from him or anyone else at ASISA (for the record, Bruce Cameron from Personal Finance was copied in on the correspondence from and to Mr Campher – and he has also failed to take up any of the issues on behalf of the investors).
Back to the conversation…I asked the board member (in the light of their mission and aims to promote savings and investments in SA and to promote ethics and transparency etc) what ASISA was doing about Ovation and the fact that there are so many issues that appear not to be being addressed, either by ASISA or by the FSB.
His response was alarming! According to him, the bottom line is that ASISA exists to serve their member’s interests and they “do not care” about a little company called Ovation. At this stage I pointed out to him that as a LISP (linked investment service provider) Ovation would in fact have been a member of ASISA. I also pointed out to him that if investors could lose money from unit trust funds then unit trusts were no longer safe…and here the conversation got really scary. His responses were along the following lines:
• Where else could people invest i.e. was there anything else that was “better” than unit trust funds, banks nor insurance companies were not safe either?
• Ovation investors (and by implication anyone else invested via a LISP) were not actually invested into unit trusts…they were somehow indirectly invested into unit trusts and as a result don’t really have the protection offered to those who are invested directly (it would be interesting to hear LISPA’s views on this).
• Ovation was a small company and as a result it was not really on the ASISA agenda – by implication, ASISA did not really care about it as it is not a significant player.
• It was my fault for investing in a small and rotten company and despite the fact that unit trust companies, 
LISPS and insurance companies are legislated and regulated by the FSB we could not abdicate our responsibility and as such we are “liable” for investing into this “rotten apple”.
• At this stage I pointed out to him that Ovation was not always “rotten” and that legislation had in fact prohibited us from moving some of the money anywhere else. He had no response to this.
• He was also of the view that as financial planners and advisors we have a duty to investigate every single company where we invest and that we can not rely on the fact that they are “approved” by the FSB. He could not, however, advise on the frequency of the investigation that is needed. When I pointed out to him that this would have to be every time we invested money because a good company today could be a bad company tomorrow he had no reply.
• Ironically too, he is the CEO of a relatively new and relatively small asset management company…just like Ovation once was. His comments about size and new companies obviously do not apply to his operation.
What was overwhelmingly clear from the conversation is that Ovation has not really been on the ASISA agenda. It is too small and they are too busy protecting their own interests to spend time on this matter which is probably also a bit too “difficult” to address. The board members will get back into their Porsches, Mercs and Beemers and drive away to their security estates while the little old ladies eat cat food again! 
The little guy (investor) is probably going to get screwed again – unlucky for him!
While ASISA might well exist to protect their member’s interests, what they fail to grasp is that without financial planners and investors, they will not have members to protect. It is critical that the integrity of the unit trust industry is maintained and it is critical that ASISA start pro-actively addressing the Ovation issue (if it is not already too late). Failure to act will forever change the way that unit trusts are seen and will change the way the people invest. The future of the LISP industry is also at stake.
I will be writing to each member of the ASISA board individually to ask them for their response to the Ovation issue. If we receive any replies, I will publish them on this site.
Related posts:
- The future of the entire unit trust industry hangs in the balance.
- 5 Aug 2009
- Medical aid or glorified hospital insurance?
- Minimum investments
- What’s worse?
3 Responses to “Let them eat cat food!”
Gregg
Good blog, but I am afraid Ovation appears to be yesterdays news, I bet you would get the same reaction if it were a Fidentia issue – it appears as if the regulator is in such a mess that they cannot bring any matter with any complexity to finality. I have no faith in the FSB and much the same as Home Affairs, Eskom, SABC, CIPRO etc I think the FSB is a rotten apple waiting for a big scandal.
What did work in the past was the self regulation of the UT industry by the ACI where there were committed people who struck a balance between the interests of the members and those of the investor public/ investment industry. Sadly the ASISA merger appears to be more about corporate and political power and less about the tenets which the ACI held and for that matter the route the LOA was on when Vuyani Ngalwana (sp)was caning Gerhard Joubert – the effect was that they began to get their house in order.
Now sadly both the regulator and the self regulating body appear to be either in a mess or playing corporate games.
As for Bruce Cameron he also picks his topics – his independence is based upon his newspaper sales and if it weren’t for the property industry paying for his Sat paper he might actually take a deeper look at the estate agents comm structure.
Not a pretty picture I’m afraid.
A few points:
1. Personal Finance has dealt in a great deal of detail with Ovation. One of the issues that has not been settled is why financial advisers used the Ovation platform, particularly after it jumped into bed with Fidentia. And how many checked to see whether Common Cents was not a registered money market fund before giving the money of their cloients to Angue Cruikshank on a platter? I would suggest that anyone whose money was placed in Common Cents should be asked their adviser some serious questions.
2. The High Court has ruled that the Fidentia curators cannot claim any money from Ovation clients.
3. On Philip’s comment: Personal Finance derives no income from the property section of the Argus. Personal Finance has dealt with estate agent commissions on a number of occasions
Bruce Cameron
Hi Bruce
Been thinking about writing a letter to you since you recently wrote about Ovation and “blamed” advisors for using Ovation in the first place. I guess there could be some merit in that argument, in some cases, but not in all cases.
We had used Ovation for many years, in fact, since it was launched – mostly because of its independence (as it turns out this has been its thorn in the flesh). But the history of Ovation is long and initially it was owned by listed entity Trematon Investment Trust (as I am sure you are aware). When Trematon was not granted a banking license, they sold off Ovation – Metropolitan was one of its owners until it was eventually sold to Mr Yazbek who sold it to Cruikshank. We had no say in this process.
You also need to remember that any retirement money that was invested via Ovation was not easily moved and as far as preservation fund money was concerned we were in fact prohibited (by law) from moving it (those restrictions re participating employers have recently been removed). So once it was in we were stuck. To move RA money is also an incredibly onerous and timeous process.
When we became concerned about Ovation and its alleged involvement with Fidentia (towards the end of 2006), we wrote to the FSB asking them about the link between the 2 companies. More than a month after we wrote to them we received a written reply stating that there was no link between the 2 companies (as far as the FSB was concerned). This was eventually corrected by them when we were told that there was a 25% ownership by Fidentia. We had already started the process of moving RA money away from Ovation but unfortunately nothing was moved before the company was put into curatorship.
At no stage did we use anything other than unit trust funds – we had no money in any common cents funds and none of our investors have lost any money – other than the levies that the curators have applied. We also cut our advice fees to 0% for about 8 months of the curatorship and are still not earning any advice fees on some of the funds to try to compensate our clients. We have communicated regularly with them and have written often to the Curators and also to the FSB and ASISA (I dont think I have made any friends in the process).
The real stories behind this issue have still to come out (in my opinion). These include:
How did the FSB grant a license to Fidentia and to Common Sense (and Ovation) if there was so much wrong (almost everyone I know knew that there was something vrot with Fidentia?
What was the role of the Ovation directors?
What was the role of the Ovation trustees?
How did the trustees/FSB decide on Intervest – it is the same as Ovation – a privately held company?
Why, if the court ruled that Fidentia et al have no claim to investors funds, did they rule that the curators could help themselves to investors funds?
Why has there been so little transparency with respect to what the curators have been earning and charging for “professional” services?
Why did the curators decline the offer of help from so many of the mancos’? This would have reduced the cost of the exerise significantly.
Why has the FSB and ASISA taken so long to put the issue of Curatorships onto their agendas, especially in the light of the massive conflict of interest that exists with respect to curators fees and how they are levied? Our attempts to question this were met with contempt by the FSB.
I guess I could go on but that’s enough for now. I have no wish to pick a fight with you (or anyone else) and also want to put it on record that we have never received anything from Ovation other than the fees that were paid from our clients funds to us – no incentive trips or anything like that.
That’s enough for now.
Gregg