I last wrote about Fairheads’ investment strategy in late 2010 when the global financial crisis had taken effect. Today the crisis continues although local equities have recovered significantly.

It is important to regularly test one’s assumptions and strategies to ensure that the chosen investment strategy continues to fulfil its objective. We believe that the appropriate tailored investment strategy, together with the best managers, plays a vital role in matching the risk and return expectations of our members. In these difficult times it is easy to be misled and chase returns at unacceptable risk levels. Our bespoke Investment Policy Statement gets us through these rough seas in a stable and consistent way. The question is, is it working and if not, what do we need to do about it?

It is now over two years since we enhanced our asset allocation model at member level and we are able to evaluate the results. The life-stage model is sophisticated but essentially takes into account the monthly cash flow needs of a member, the age of the member and the amount of funds available.

In normal market conditions, not that we have had these for some time, we would expect equities with a higher risk profile to outperform income / bond funds and finally low-risk cash respectively. Life-stage investment models are based on these assumptions. Our members at an individual level are accordingly blended between three investment vehicles, namely cash, income fund and balanced fund to achieve this objective, i.e. younger members with a larger amount of funds and longer time horizon will have more equity exposure whilst older members will have none or very little equity exposure.

With the partial recovery of our markets, over the past two years our model has provided members with the desired results, i.e.. those with more equity exposure have achieved higher returns, whilst those with cash and income strategies have achieved lower returns commensurate with the risk taken, but at the same time outperformed inflation.

Given these results, we believe that the investment model is robust and appropriate for the membership profile. The trustees continue to monitor the model with the assistance of Riscura, our appointed asset consultants. We have also enhanced the model with an annual reblend at member level to ensure that members’ investments remain within the asset allocation parameters.

After the investment strategy the next important task is to choose the appropriate mandate and investment managers. Our approach is best of breed and as a consequence we currently have three different managers for each mandate: Cash – Standard Bank Institutional Money Market Proposition; income fund - Prescient Income Provider Fund; and balanced fund – Allan Gray Balanced Fund. The managers are monitored on a regular basis by the trustees with the assistance of Riscura.

Through our annual guardian/member roadshows we continue to receive valuable feedback. Families are feeling the cash squeeze and we receive many requests for higher income payments for monthly survival. We meet this need wherever we can, as there is no point in protecting capital while families are not making ends meet. But, together with difficult investment markets, this puts pressure on the investment strategy. We constantly have to balance members’ short-term needs (daily living expenses) against the longer-term needs of education (including tertiary). In certain cases there is no choice but to erode the capital on a managed basis to achieve the member’s daily needs. This is often done in consultation with the guardian. Many guardians are reluctant to erode capital at the expense of education. The trustees constantly monitor the fund’s income policy and will address the income needs where appropriate.

We believe that our unique investment model together with the best managers goes a long way to achieving members’ needs in both the short and the long term.

From August to November this year Fairheads will go on a national roadshow to explain face to face to members and guardians how beneficiary funds and umbrella trusts work. In the process, we hope to help lift general levels of financial literacy in our country.

This is the third year running that we have undertaken this huge logistical exercise, covering some 30 venues across 11 regions. We have learnt from our experiences and as a result can be more strategic in our approach. For example, based on feedback from guardians last year, as well as our updated contact database, we know in which centres to hold workshops so that transport costs from outlying areas are kept as low as possible. In Lesotho for example it may be easier for certain guardians to travel across the border to the Free State instead of navigating the roads to Maseru within the mountain kingdom. In Mozambique, we will conduct two additional workshops in order to cover the geography better. The Eastern Cape, with its far-flung rural areas, also needs to be approached strategically in order to meet as many guardians as possible.

We select our teams for these roadshows carefully, as presenters and consultants need to be skilled in their work and fluent in the language of the specific region, as well as sensitive to the cultural issues of that region. It is important for instance to remember that common African courtesy requires some initial exchange of information about families and health.

Guardians are often the grandmothers of minor children and may not be financially literate. It takes patience and understanding to explain concepts to them, sometimes several times. Would you know, for example, how to explain a certificate of existence, an estate late account or letters of authority in Xhosa when the equivalent terms do not even exist in that language? That is why face to face contact is so vital. In this way, with input from other guardians in the room, we can describe concepts and often finalise documentation there and then. It makes all the difference and the feedback we are getting from guardians confirms this.

The Fairheads Benefit Services call centre has progressed rapidly since its inception in 2008. The strategic operational efficiencies we have implemented have improved the service to guardians and beneficiaries and have led to our call centre being rated one of the best in the market.

The first major steps we took were to procure a state-of-the-art call centre solution and to develop an in-house customer data system. We then integrated these solutions, for example by allocating specific languages to our contact numbers in the database, so that when a member calls in, the contact number is recognised and the caller is automatically routed to an agent who deals with the query in the member’s mother tongue. Postintegration, immediate changes were evident in key performance metrics within our call centre. This allowed us to proactively and effectively measure and manage staff performance and overall service levels.

Staff training is another factor that has had a major influence on the increased service levels. All our new agents follow extensive training plans which include spending a minimum of two months in the administration teams. In addition, they also attend a number of soft skills training courses. Our training plans are reviewed and updated annually.

In 2011, our call centre participated in its first survey, The Global Contact Centre Benchmarking Survey conducted by Dimension Data. The aim of our participation was to measure the performance of our centre with that of our industry peers and others in the service industry. The results of this survey were positive for Fairheads. We performed extremely well in a number of categories including the number of languages we offer. Currently we are able to service our clients in all 11 official languages of South Africa.

One of our strategic goals is to expand the service offering to guardians and beneficiaries and in doing so, further increase the service levels. One such offering is currently being piloted in our call centre. For the month of May, our call centre was open on Saturday mornings from 08h00 to 13h00. Although the call volumes were low, clients were extremely happy to be able to reach us on the weekend.

Some interesting statistics:

 * The percentage of total calls answered within 15 seconds and dealt with by an agent.