Managed account provider responds to ASIC fine
Boutique managed account and platform provider Wealth Within has responded to two infringement notices handed down by the corporate regulator.
The two $10,200 infringement notices, obtained by ifa sister title InvestorDaily, relate to the manner in which Wealth Within advertised the performance of its Direct Equity Managed Account Service.
The Wealth Within advertisement listed average annual returns for its Blue Chip and Growth portfolios of 14.56 per cent and 23.35 per cent, respectively, over the eight years since inception to 6 April 2011.
The returns were audited by PKF Chartered Accountants (now BDO) and were accompanied by the qualifying statement: ‘Wealth Within manages individual accounts, so each account may display different results’.
ASIC said the figures listed in the advertisement were “false and misleading” because they failed to take into account the returns on the cash holdings in each portfolio.
The regulator also took exception to the average annual returns, which were calculated using an arithmetic average of the eight year total return for each portfolio.
“This method of calculation did not take into account the compounding effect of each year of investment in a portfolio, meaning that the published average annual return overstated the true average annual return for each portfolio,” said ASIC.
The second infringement notice related to the use the use of the word ‘may’ in the advertisement’s qualifying statement.
“The representation contained in [the advertisement], and the qualifying statement itself, were false or misleading as it was certain or highly likely that the performance of an investor’s account would differ from the performance of the Growth Mandate,” said ASIC.
ASIC said a number of factors would result in an investor holding different stocks to the Growth Mandate, including: the timing of the opening of an investor’s account, their ability to nominate stocks they did not wish to hold, and the ability of the investor to transact on the account.
Speaking to InvestorDaily, Wealth Within co-founder and chief analyst Dale Gillham said Wealth Within had accepted ASIC’s decision – but the firm “doesn’t necessarily believe it’s justified”.
“There’s no way we can fight it because we’re too small. It would send us broke. You need half a million dollars to fight ASIC in the courts,” he said.
Mr Gillham said he was disappointed about the process ASIC had put Wealth Within through.
“ASIC claim they don’t have any money and they’re under-resourced, but yet they put lawyers on and [initiate] a huge process,” he said.
The regulator has gone to a lot of time and effort for two $10,200 fines, said Mr Gillham.
“Why did we go through [all of] that? Why didn’t [ASIC] pick up the phone and say: ‘We’re a bit concerned about this, can we fix this?” he said.
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