Lee outlines examples of poor advice

• Tweet

Sharebroker and finance company adviser Chris Lee says in his latest newsletter that he has had a flood of correspondence from people who allege they have had poor advice over their investments.

Friday, September 7th 2007, 11:25AM

"The documented stories of investors would make you age prematurely," he says.

Most of the complaints relate to investments in the finance company sector.

"The level of complaints have filled the in-box of my computer and meant my time in the office has been dominated by telephone calls, not because I am organising class actions against planners (though I might) but because most investors did not know where to turn."

He says there are a number of common themes to the "dreadful advice" including:

• The adviser suggested a high percentage (say 20% or sometimes 100%!) of savings should go into Bridgecorp. The IFA has acknowledged in public that this is grounds for complaint.
• The adviser asked Bridgecorp not to repay the investor before maturity date because were Bridgecorp to do so, his brokerage would have to be refunded.
• The adviser has overcome investor concern about Bridgecorp by declaring superior "inside" knowledge that the company was in a good shape and that criticism was from "lightweights" who knew nothing. (The ASIC, NZX, Bridgecorp's own rating agency Risk Analysis, are lightweights?)
• The adviser stated that "even if Bridgecorp went broke, all investments are fully insured by Lloyds of London". (A straight out lie).
• The adviser arranged renewal or part renewal because the adviser was concerned that withdrawals might further damage Bridgecorp. (Using your money to save others' money?) The adviser charged a monitoring fee or an advisory fee from the client in return for the value of his special knowledge and professional skills. (Yet he did not know what so many could read in the newspapers).
• The adviser recommended removing money from investment grade companies (such as South Canterbury Finance) or other institutions (such as Southland Building Society) to put into Bridgecorp, worse still claiming that the SBS or SCF was not "as safe as you think". (Undeniably stupid or dishonest advice).
• The adviser said that Bridgecorp (with all the visible smoke billowing everywhere) was a sensible choice for an ultra-conservative or conservative investor. (What would then suit a high-risk investor?)
• The adviser claimed special knowledge by advertising or promoting himself as an especially qualified person such as adviser of the year. (Yet did not know what so many could read in the papers).
• The adviser behaved illegally, such as not following required protocols, like supplying a current investment statement, or failing to get clients to sign application forms, or, in the case of IFA members, failing to disclose brokerage/and or special incentives or benefits, such as personal use of Bridgecorp's yacht.

Lee says people who invested directly into Bridgecorp based on its advertisements may have grounds for legal action if the advertisements were based on a prospectus that did not honestly or fairly outline Bridgecorp's true position.

Lee says any errant advisers wanting to remain in the industry are unlikely to ignore the cost of being discredited, and may prefer to cough up, rather than face the spotlight.

Lee has invited a group of journalists to get access to the complaints he has received. Undoubtedly the news media will be full of anti-adviser stories as a result of this action.

« ASSET - Beyond Bridgecorp

Fund manager musical chairs »

Commenting is closed

 

Printable version

Email to a friend