Making pensions the future

Given an economically active workforce of around 21 million, of whom just eight million are signed up to the independent savings regime, the pensions industry in Colombia has huge potential for future growth.

No wonder one of the leading players calls itself Porvenir – the Spanish word for future – and has a sunrise as its logo.

The company is part of Grupo Aval, the most important financial institution in the country, and is a shareholder in the Bogotà, Occidente and AV Villas banks, as well as having a big stake in Leasing Occidente.

In the 15 years since it was founded, Porvenir has consolidated itself as the fund with the largest capitalisation and most client affiliations, as well as having the biggest workforce of with which to service its clients.

It’s a young but highly experienced team, with 916 administrative employees and a 1,029 strong sales force and an average age of 33. They work in 33 offices and 10 service modules, located across the country’s most important cities. Moreover, the company also networks with the more than 1,000 offices of Grupo Aval.

“Until now there has not really been a savings culture in this country,” observes Porvenir’s Vice President of Commercial Andrés Vásquez Restrepo. “It took the institution of a compulsory government system to get most people to provide for their future.

“A lot of our marketing effort goes into persuading the general public of the wisdom of making provision. We have instituted a ‘Learning Together For A Better Future’ programme to further this educational process so that ordinary people understand better what’s involved and get to understand the wisdom of making proper pension provision.”

At present the compulsory state pension scheme – administered by ISS (the Social Security Institute) accounts for 79.7 percent of Colombia’s total pension, though private pension funds are fast gaining momentum.

There are few corporate schemes and these mainly involve state-owned organisations.

As it stands, many people work as self-employed labour. According to DANE figures for the first quarter of 2010, the country had 4,617,000 of these, against 4,339,000 in formalised jobs. Of the former, only 502,000 had any social security cover.

There are also some 2,511,000 currently registered as unemployed and millions more operating within the black economy:
“If these figures cones down and more people enter the formal employment system, then that affords considerable added room for the pensions industry to grow,” says Andrés Vásquez Restrepo.

To capitalise on this vast market potential, Porvenir has a carefully planned differential marketing strategy in place.

“Our sales force has the benefit of a geo-referenced portfolio that allows them to provide a customised service to companies and individual pension holders,” adds Andrés Vásquez Restrepo.

“We have the benefit of highly advanced PDAS technology which facilitates instant round-the-clock information to be accessed by our advisers and their clientele and which allows the processes to be carried out quickly and efficiently on-line.

“Important investments have been made into the modernisation of both our internal and external processes.

“For enhanced client convenience, we have installed Quick Service Points – self-service machines where affiliates can easily consult their balances and movements and can print certificates quickly and easily.”

Constant innovation is a keynote: “The search for better ways of servicing our affiliates’ needs and the constant improvement of our internal and external control mechanisms have kept us in the forefront of technology and have also helped us alert ourselves to new market opportunities.”

Transparency and corporate governance have been given high priority, leading to triple AAA ratings and ISO 9001 status: “To guarantee full independence in decision making, an ethical code of behaviour, transparency and adequate risks control, we strive to act far beyond the legal requirements when it comes to corporate governance.

“Our Code of Good Governance was created for this purpose and the policies and best practices laid down in it are applied in a mandatory way to the shareholders, directors and all employees of the company.

“The internal and external control mechanisms we have developed guarantee that we have a cautious business model, driven by ethical behaviour principles, good governance and total transparency.

The company’s focus on the clarity and transparency of its processes, along with its demonstrably high levels of professionalism have led to the recognition of its work by the various risk rating agencies and by Icontec, which awarded Porvenir ISO 9001/2000 certification for the quality of its sales and operations services and for its investments of the various voluntary, mandatory and severance funds that it administers. This recognition has been renewed down the years.

The BRC Investor Services SA stock rating company granted AAA certification to Porvenir for its quality of fund management. Through periodic revisions, Porvenir has also continued to hold AAA Counterparty Risk, AAA Portfolios Management, AAA/2+BRC 1+ Mandatory Pension Fund and AAA1 2 BRC 1+ Severance Fund ratings.

Porvenir benefits from a high and very positive profile in its market. According to a Gallup Colombia poll carried out in April for Dinero magazine, the company is the most recognised brand in its country, and is the port of first call for Colombians planning to save for their retirement.

In May, a survey of 1,100 employers, carried out by Datexco for the Portfolio business daily, rated Porvenir as the company that provides the best level of customer service in its market.

A rating as one of Colombia’s most respected companies has a lot to do with those transparency principles under which Porvenir operates: “We have laid down clear and complete corporate governance policies, as well as having proper risk control and a long term business vision,” explains Andrés Vásquez Restrepo.
“We take social responsibility very seriously and support sport events at both school and national levels. Through our Porvenir Athletes team we give Colombian sportspeople the opportunity to compete on the international stage.”

Porvenir is also working hard with others to seek positive changes within the pensions industry and is a key member of Asofondos (the Pension Fund Association).

They also support studies being carried out through Fedesarrollo (the  Foundation for Higher Education and Development) to find ways of achieving reforms that will assure a far wider coverage of pension scheme provision for Colombians.

“We are also constantly advising the government for changes in the pension system aimed at benefitting the most vulnerable sections of the population.”

Of course, achieving all these aims rests on having the right investment process and exercising a responsible approach to risk returns ratio.

By judicious examination and monitoring of the organisation’s governance, operations and information systems, an internal auditor constantly evaluates the efficiency of Porvenir’s systems and also its exposure to risk. The dealing desk processes are ruled by the regulations of the nation’s Financial Superintendence system and it follows the procedures laid down by AMV, the Colombian stock market regulator.

More than 84 percent of the portfolio of the Porvenir fund currently goes into supporting the development of the Colombian economy. Investments are made in both the public and private sectors. The current rations are: 43.61 percent  Colombian private company debt and capital; 40.46 per cent Colombian government investments; 8.13 percent international private company funding; 3.85 percent to international government and 3.94 percent other investments.

Porvenir also invests in human capital and claims to have the best qualified workforce in the sector. As evidence of this, some 75 per cent of the directive team’s members have completed post-graduate studies. Additionally, the organisation has created Porvenir University as an educational project for its employees. This innovative programme seeks to steer the human team towards the achievement of individual organisational goals.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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