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FISA Heritage Project – episode 7 – The changing nature of fiduciary practice

The changing nature of fiduciary practice           

The concept of a “board of executors”, that is a group of people entrusted with looking after the fiduciary needs of others, grew rapidly in the first half of the 20th century. Many smaller towns in the platteland had such boards, which often were not only authorised to undertake fiduciary work but also conducted deposit-taking/banking activities and mortgage schemes.

In the mid-1960s onwards “a wave of corporatisation” swept through the industry, with larger companies taking over and incorporating the business of the smaller boards of executors and trust companies. Thus, a rich fabric of names that had criss-crossed the country was subsumed into fewer umbrella structures.

According to Louis van Vuren, FISA CEO, after May 1968 with the promulgation of Regulation 910, anyone other than an attorney was prohibited from administering deceased estates. However, boards of executors and trust companies, amongst others, were exempted from this prohibition, as long as a bank did not acquire the shares in such entity. This precluded banks from taking over boards of executors or trust companies unless they took great care to ensure that the holding company of such a board of executors or trust company would not be the company in the group holding a banking licence. Jimmy Baigrie, honorary life member of FISA, confirms that the legislation immediately added a new exclusivity value to all existing trust companies, both active and dormant. Anyone wanting to start a new trust company with the right to administer deceased estates in its own name or under power of attorney, had to raise enough funds to buy a trust company which had been registered and in business as such on 27 October 1967.

This led to the 1970s “take-over trail” by Syfrets, BoE and the banks, such as Boland Bank. They sought to capture the increased market share of the lucrative trust administration and investment management business generated from the administration of deceased estates. Their first targets were the dozens of smaller, specially rural and locally-owned trust companies.”

“Economies of scale” was the buzzword and it coincided with the advent of computerized accounting, portfolio management and financial systems. Within scarcely a decade Nedbank had in its turn swallowed Syfrets and a little later BoE – thus capturing the many pre-1967 trust companies already taken over by these two giants.

As with most things, the corporatisation of trust companies had both positive and negative elements. On the one hand, the industry was growing, but on the other hand many people felt that fiduciary work – which had founded and led the growth of the industry – was being pushed into the background as a secondary activity. Many people felt that the traditional and very personal services and loyalty of trust companies to their family clients soon came to be seen less important than economies of scale and shareholder return on capital.

Colin Hickling, current holder of the FISA Chairman’s Award, a former ATC Chairman, former FISA Councillor and MD of Bloemfontein-based The Public Trustee and Trust Corporation, was saddened by the corporatisation of the industry, believing that not enough was done to preserve the heritage of entities such as The Bloemfontein Board of Executors and Trust Company Ltd (Bloemboard) which had been created in 1868 and which was taken over by Syfrets/Nedbank in 1994. Colin had spent his career with Bloemboard, starting as a clerk in 1963 and working his way up to MD (1976 – 1994) and Deputy Chairman by 1993. He managed to retain certain items of historical interest some of which may be housed in the FISA museum room to be created in Graaff Reinet.

According to Jimmy Baigrie,  around the turn of the century along came the “brands” boom on stock exchanges around the world, leading Nedbank and other banks and financial corporates to brand their now in-house trust companies under the bank’s or corporate’s brand name. In this way the 60-plus members of the Association of Trust Companies (ATC) in 1964 disappeared from public view and independent practice, leaving the ATC with a small membership of banks and hardly a handful of independent trust companies, counting around 18 members by 1988.

Nonetheless, corporatisation of the industry was a reality and led to better organisation and the ability to liaise with the authorities and regulate practices. As mentioned elsewhere in our heritage series, the ATC was founded in 1932 and had a long and illustrious track record of serving corporate members. In 2008, FISA was formed and, in 2011, corporate membership of FISA was done away with in favour of individual membership, which is having the effect of returning fiduciary to its rightful place as an important, highly skilled professional practice in its own right.

 

 

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