International advisory business deVere has hit back over claims that did not act correctly, after it reportedly acknowledged that it did not disclose all of the commissions it earned on a number of investments recommended to some of its South African clients.
The company, has, according to African financial website Moneyweb, made the admission in several emails that it says that it has seen between deVere Acuma (formerly deVere Investments SA) and former clients that are trying to recoup costs that they claim they were never told about.
Although deVere said that it has since adopted a new approach of full commission disclosure, it says that it acted on legal advice at the time and denies that its conduct was unlawful. The company added that other financial advisory companies in the region are still operating under the old commission disclosure structure.
A spokesperson for deVere said that deVere Acuma “discloses all of the commissions it charges, and has done for some time”.
“We have a policy of full transparency regarding commissions and fees,” said the spokesperson. “We are amongst those leading the industry in South Africa in this regard.”
In the emails that Moneyweb has published, the clients request that deVere provide details of all the commissions it received on their investments, and how much of this was actually disclosed by their advisers. These clients are, it is understood, being assisted by a former deVere employee who is currently in dispute with it over unfair labour practices.
DeVere’s replies to the emails, in the majority of cases seen by Moneyweb, confirmed that undisclosed commissions outstripped those that clients were actually told about. In one case, the emails shows that a client paid £80,650.37 in commissions to the company between 2010 and 2014, but only £16,296.24 of that was actually disclosed. In other words, the client paid £64,354.13 over this period in commissions that he was not made aware of.
Guernsey offshore trusts
However, while deVere acknowledges that these commissions were undisclosed, it argues that it was not obliged to tell the clients about them because they had invested through offshore trusts in Guernsey.
“Where we show fees undisclosed in their entirety, you were of course informed we received commissions,” Moneyweb reported that the emails stated. “Please bear in mind that as you chose the trust route, it is in fact the trustees who are the clients, not yourself. The trustees are offshore, so the investment advice was given outside South Africa. Therefore we do not accept that we were under a duty to disclose these commissions to you.”
The deVere spokesperson hit back, stating that the article refers “solely to historical conduct of former advisers”.
“In addition, the disputed disclosure practice related to commissions received at time of inception only and they don’t recur,” the deVere spokesperson said. “We are now working alongside the Financial Services Board (FSB), which has not determined that the earlier approach was not lawful. Indeed, we believe it was – and for many advisory companies in SA it remains their standard practice. This is now not the case with deVere.”
The under-fire global advisory company, which says it has more than 80,000 clients, added that it must also be highlighted that this story originates from “one of the aforementioned advisers, whose contract we terminated, and who since has set up a rival firm,” the spokesperson said.
“All of the complaints mentioned in this article are from clients who were clients of the said former employee, during the period when he was their advisor in our company, before having his contract terminated by us.”
‘Fake’ South African websites
DeVere is dealing with a number of issues globally including investigations into its practices. As reported, the company’s founder and chief executive Nigel Green, pictured above’ recently called that it was “under attack” in South Arica and took an unprecedented step to release a statement distancing his company with links to what it called a series of ‘fake’ financial services websites in the region.
And last Friday the company also confirmed, as reported, that it will no longer provide overseas financial services advice in the UK. This came after it was revealed that the UK regulator the Financial Conduct Authority had issued deVere with a section 166 (or skilled person review )as it looks to conduct a detail review into company’s activities.