In July it emerged that self-licensed financial planning firm Chambers Investment Planners (CIP) was entering administration, with suggestions professional indemnity insurance issues relating to claims by former clients before the Financial Ombudsman Service sparked the move.
A former CIP client told ifa the advice they received was inappropriate, causing losses of as much as $200,000 – for which he is now seeking redress through FOS and seeking legal advice.
“These guys put me and countless other investors into failed MIS investments, continually referring to them as assets, and taking exorbitant commissions in the process,” the former client said.
“Instead of securing our financial future they have nearly ruined us; I want to see these [people] shut down and never stain the financial services industry again.”
In addition, two separate letters of complaint sent by legal representatives of former clients to CIP managing director George Takla in 2012 – obtained by ifa – allege that the statements of advice received by CIP clients recommended very similar “high risk” investments despite very different personal financial circumstances.
For example, at least two former CIP clients were advised to borrow money to invest in the Willmott Forests Project – an agribusiness investment scheme which collapsed in 2010 – among a number of other failed structured products.
“Investments in agribusiness schemes have a very high level of risk associated with them,” states one of the letters from lawyer David Huggins of Huggins Legal to Mr Takla.
“That derives from multiple sources – they are speculative investments that have a very high incidence of either total or partial failure to meet projected returns.”
Furthermore, both clients were advised to borrow to invest in the Macquarie Geared Equities Investment, a structured product described by the lawyer as representing an “excessive level of risk” for his clients’ particular situations.
The documents indicate that a highly similar investment strategy was recommended to both clients despite an income differential of more than $50,000 and quite different family and lifestyle circumstances.
Beyond claims of inappropriate advice, the documents allege the clients had been provided with an “unintelligible” fee disclosure section of the SOA and that fees may have been charged “in breach of legal duty”.
“It would appear that CIP was, in effect, charging my client substantial fee for service and, in addition, receiving commission payments – in circumstances where it was reasonably entitled to charge (receive) one or the other or not both,” Mr Huggins wrote.
In the case of the Willmott project, the lawyer alleges CIP received commissions of 17 per cent and 15 per cent from the two clients’ investments respectively.
“This is an extraordinarily high level of commission (I am not aware of any other financial product that had this level of commission payment associated with it),” the letter states.
Issuing a right of reply, Mr Takla told ifa he was “surprised” by Mr Huggins’ comments, claiming he had never seen the letters and that Mr Huggins, as a legal expert and not a financial planning expert, was not qualified to determine whether the financial advice received was appropriate for his clients.
“[We] strongly object to Mr Huggins providing his personal opinion about the standard of advice it provided to clients which he describes as very poor advice and we will seek legal advice in that regard,” Mr Takla said.
“The directors [of CIP] welcome any ASIC investigation,” he added.
Do you know more about this matter? aleks.vickovich@sterlingpublishing.com.au
Tax incentives were a great attraction for these. Having lost all my investments in these in the 80’s i was not willing to put clients in for even the deductions. Great S and others offered me 12% com which i was amazed at and felt this was extraordinary. Personally it raised a red flag and too me was inconsistent to what we should be compensated. I was offerred a lovely trip to perth with 5 star accom and trips into the plantation and of course the dinners. I completely declined all offers as was to busy doing what i thought to be real financial planning and assisting clients. Thank fully i never sold or tried to sell a MIS. Sadly it reflects on us all and those planners with conscious and life experiences are caught up is such a restrictive industry of compliance……….or was that financial planning?
I am not a financial planner, nor am I a client. My sister was put into abalone farms – and lost the lot with loans attached. A friend, a guy who built navy vessels, was put into plantations and lost the lot and is still paying back loans. My friend, the successful FP in my suburb works two days a week, and earns far more than me. My FP friend in Newcastle boasted years ago all his costs of running his practice were accounted for the first day of each year by trailing fees. Where is the expertise to deserve this level of largesse?
You want to do something planners – push the legislators to ban related party loans out of financial planning practices. It’s not your money guys! I am sure there are many good planners out there, but the biggest risk to my financial future is how to find one among the ordinary ones and the sharks. There are no penalties for financial planning crime so why should it stop? Change that and people like me might take a second look at your ‘profession’.
[quote name=”rod m”]
sadly all industries /businesses have bad apples in the barrel , no one is immune from people who are lacking in ethics and morals, please do not tar the whole FP industry with ome brush,,[/quote]
Rod M – the big problem is how does the average punter find who is good and who is not?
Solve this problem and the market is yours for the taking.
How do you convince someone – smooth bedside manner is not the answer as most con artists are skilled operators in bedside manners – it is their stock in trade.
No one on this site appears willing to take this challenge.
The alleged actions of Chambers sounds like something dodgey to me , they were obviously very greedy thinking they could get away with disgraceful fees of 15-17% and now have been caught out , the sooner these types of rogues are weeded out of business the better for all.
And Steve you are not the sharpest tool in the shed, sadly all industries /businesses have bad apples in the barrel , no one is immune from people who are lacking in ethics and morals, please do not tar the whole FP industry with ome brush,,
CAF is spot on. Many trusted the FP referred to above and expected a level of trust and expertise. Sadly many are still suffering the consequences.
Gerry – interesting. As a planner you appear to be saying to your clients ‘buyer beware’. Why would a client go to a FP if they are not able to have a level of trust in their advice?
Not sure I’m following your business model.
Talk about an over-reaction….bring back buyer beware and people getting second opinions before putting all their money in one basket… That’s what’s needed…not a bunch of lawsuits and extra compliance. Clearly compliance isn’t working and neither will FDS…..which just reminds me. A forestry or almond investment or whatever that paid commission upfront wouldn’t have required an FDS or an opt-in letter….OMG. The day this industry cops full blame for every market failure will be the day we cease to exist….feels like its coming already actually when you read this article and all the others. Now we hear about every dealer group that dies, every planner that’s banned, every investment that fails, every word that Whitely utters about financial planners. Aggrieved investors and their lawyers are feeding on this. Time everyone manned up and took some responsibility for their own actions. diversify diversify diversify…..it’s really not a hard concept.
The FP industry is filled with this type of advice & advisor.
They still operate, they still meet their education standard, they still do their continuing education & the still eet the compliance circus that serves no one but politicians & the fpa. All the while, this outfit & many others continued to do deal after deal without that Sleeping Giant ASIC knowing a thing. Of course the FPA stood by reaping in member fees all the while bleating on & on about standards but really doing NOTHING.
This industry needs a new body & a new regulator. While your sweeping out the cobwebs & stacking the dead wood, you can start by getting rid of dealer groups & have ONE licencee that knows what its doing & not focused on business growth or survival.
The FP industry is a joke in its current form A JOKE!
There is no way i would let anyone i cared for anywhere near a financial planner in this country. I would rather they trust google before seeing 80% of this industry for advice!!
The main problem is the one size fits all for risk profiling, clearly, if the report is correct, greed and not client best interests was the driver. lack of ethics or morals yes, poor asset allocation yes, another slap for planners yes. We, as planners do not need this adverse publicity, the sooner these cowboys exit the better AND hopefully made an example of for future cowboys. And Gerry, if you recommended trees etc, take a hit as well.
Gerry – oh dear, oh dear.
We are not talking about an investment that has gown down, we are talking about 15%+ earners on top of fess.
Do you defend this?
Sure thing CAF…throw the book at every planner who recommended equities to clients pre 2007 also, just as the market dumped 60%. Why dont we sue all brokers and fund managers who bought Centro shares and all the other collapsed entities. Some of these MIS entities were ASX100 market darlings. The govt also wanted investors to fulfill their 2020 plantation vision. Well, what happened there? A GFC perhaps? RIP forestry in Australia. We won’t own anything soon.
If it wast bad advice and a commission grab…not good. that comes down to ethics. Most people are born with it, some aren’t.
Here we go again–storm all over again. How do these (alleged) rouges get away with it. Obviously compliance breakdown and ASIC intervention breakdown. There is something major missing in the system that allows this to occur. Maybe -if self licenced-(sorry to the good guys who do behave) ASIC audits regularly to stop this rot and dish out the proper treatment to the guilty. Jail is a great deterrent, other punishment is a joke.
Financial Planners have an obligation to clearly disclose all fees, in built as well as additional fees payable to the planner. The problem is that some do not adequately or clearly disclose or do so in an ambiguous way which in my view does not meet ASICs requirements.
Chambers were renowned for being on the Aggressive side eg MIS and sadly many of these projects have failed
I would have thought that any ‘investment’ that pays 15/17% commission to the intermediary was, be definition, inappropriate for anyone.
To then charge a planning fee on top, takes the biscuit.
If true, and we really don’t know, then throw the book at every FP who sold these products – they bring the whole of the FP industry into disrepute.
Hands up the planners making a living out of these scams.