What Happened Down Under

The Financial Planning Professional: Part 6 of 6

An account of an Australian financial adviser following the fee-for-no-service scandal.

I bought this business from the investment firm with a promise that if I were ever forced to sell, it would be on the same terms. Well now that promise has been broken and I’m facing ruin.

I don’t think there’s words that are strong enough.

To be sold something on one basis, and then to have that basis completely eroded by this much is reprehensible, in my opinion.

I bought clients from the investment firm several years ago, but it is now terminating me.

In effect, it means the investment firm can buy books back now for significantly less than what they sold it to us for.

In the paperwork that’s been put in front of me that I haven’t yet signed, if I don’t paint the investment firm in a glowing light they can remove all options that are currently available to me and essentially throw me on the street.

I feel like a complete failure and that I have let my family down, I am anxious and fearful for the future.

I have contemplated whether my life insurance is the better option for my family, for me. I have now had my will prepared so the investment firm can’t get a single dollar … I tell you this because I believe I’m not the only one thinking like this.

The investment firm is robbing us.

I’m not saying this lightly — a lot of people are on the edge of suicide.

I’m being thrown under the bus by them in response to their wrongdoing.

They offered us counselling.

They said they were worried about us, particularly our mental health.

They refer three or four of us a day to counselling support services.

Some of us have been advisers for a long time and have no other career options.

Some have been doing this for 30 or 40 years and this has been their life, and suddenly we have lost our business.

We are not sure if we are going to walk away with a loan. We are worried about our clients.

When we ask them whether they will forgive loans or ensure none of us will be left with a debt, they turn around and say, “We have a range of support measures available to practices.”

They said the changes to its buy-back program reflect “the significant economic changes that have occurred across the industry, including legislative change that will cease grandfathered commission, and other market disruptions.”

They say they had given us some choice about how we want to proceed.

“We wrote to a group of investment advisers indicating we did not believe their practice was viable and giving them a number of options to discuss with us, including their standard buy-out terms, an accelerated buy-out offer [expected to be within a timeframe of five-six months of electing this option] and merging with another practice.”

They said if we made no election by the deadline, our status as an authorised representative of the investment firm would end 180 days after the date of our letter.

There’s no doubt about it, the investment firm is in survival mode and I daresay they have decided that small, one-man practices like me do not now fit into their business model.

Even when I think I’m coping, I’m not.

I’m not making good decisions; I can’t think straight.

I’m so worried about my marriage, losing my home, how this will affect my family.

The counsellor called me. Said I’m not alone, there are people I can talk to and there are others in the same boat.

I think the investment firm has really tried to divide and conquer with what they are doing.

The termination letter from the investment firm gave us a short deadline to accept very unfair exit terms.

The terms vary, but generally we can either sell our business back to the investment firm for half of what we paid, despite what has previously been guaranteed full price by the them, or convince another investment adviser, who the investment firm wants to keep, to buy the business and take us on as an investment adviser.

The investment firm lent me hundreds of thousands of pounds to buy the business.

I will be left with substantial debts because of the investment firm forcing me out.

The deadline is less than three weeks away and I still don’t know how much the investment firm will pay for my business, still no answer on whether they will forgive any of the debt, or whether special consideration will be given if I am a genuine retiree.

If I fail to decide by the deadline, the investment firm may cancel my licence and take back my clients, with any loans remaining payable to them.

I am under significant stress knowing that by the deadline I will have no business, an unserviceable debt of about $400,000, and a five-year office lease I cannot get out of. And, I doubt I will be able to find another job given the state of the investment advice industry.

If you were to ask me, ‘Are you OK?’, the answer is no. Not anymore. And, neither is my wife. And neither is my family.

The investment firm has confidentiality clauses in its termination letters, which I fear will leave me with nothing if I speak out.

In the past, the investment firm encouraged us to take out loans to buy our businesses.

Many have loans that are bigger than what the investment firm has said it will now pay for those businesses.

So, by the deadline when the investment firm shuts them down, they will potentially all be left like me, with no income and a large loan.

The counsellors are inundated with calls from us all fearing for our futures.

People’s homes are definitely on the line. We know that many have got loans maybe several hundred thousand dollars, and the only way they are going to get it cleared is to sell their house.

But you’d like to think that the investment firm will do the right thing and make sure that doesn’t happen.

Until very recently, the investment firm was still encouraging investment advisers to take on extra debt to buy more clients and grow their business.

It’s not something they stopped doing three or four years ago; they were still encouraging people to borrow money, and probably still are encouraging people to borrow money.

I looked at applying to sell my business back to the investment firm before all this started, a process that normally takes 12 to 18 months.

When I applied, the investment firm was paying four times, but I have been told by my case worker that the investment firm will not hold to that agreement, and I will be paid about two-and-a-half-times my business’s annual income.

Instead of receiving about $500,000 for selling my business back to the investment firm, I will walk away with a sizeable loan, which I took out to buy the business in the first place.

They are using institutional power to walk all over the small guy … I don’t have the financial power to win court cases. And it’s scary.

I can join the other advisers and vote to pursue a class action.

I didn’t want to be aligned with the firm anymore as I watched the company implode in scandal after scandal.

I lost faith in whether they could provide what they needed to stay the same trustworthy company they once were.

Even where an investment adviser has been in the industry for many years and bought his book of clients from the investment firm “back when it was a respectable, good brand, with a good reputation”.

He may have worked hard in his community and brought many new clients to the business and serviced them on a fixed fee basis.

I’ve worked so hard to build the business and we don’t live rich; we get by on around $6,000 a month including the mortgage.

As I don’t have any employees, in our case it will just be me that loses his job, however the effect on our family is actually quite devastating.

Many people have little sympathy for us given what came out in the review, but the bad eggs were not the people the investment firm is getting rid of.

They are terminating those who don’t sell enough product, who don’t make enough money for them.

The smaller investment advisers like me that just charge for advice for clients who are not super rich, do a good job — that’s who the investment firm is terminating. I have never had one complaint or investigation into me.

I’m preparing to sell the family home and I’ve already pulled my children out of day care, meaning my parents have had to help.

My wife has been looking for work, but only found it in regional towns well away from the family.

The termination has left me in significant debt, a debt the investment firm says it will pursue.

I tried to contact the investment firm board to make sure it is aware of what is happening, but I’ve had no response.

I’m incredibly worried, incredibly worried about the investment advisers I’m speaking to.

The regulator said they were aware of the situation.

They said, “It appears that a lot of investment advisers have had unfair treatment related to contracts with the investment firm. This is a major issue and something that we are very keen to look into.”

“Those with concerns should get in contact with us, and this can be done anonymously.”

In a statement the investment firm said: “We care deeply about the welfare of our investment advisers and their families and have offered them a range of support options including counselling.”

This just seems all so wrong.

Contact us today to find out how the Academy of Life Planning can help you transition from Financial Intermediary to Non-Intermediating Financial Planning firm.

☎️ 07850 10 20 70
📧 steve@aolp.co
📲 Direct Message

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