Dover's Closure - Latest News
Speculation is rife as to the reason for Dover's closure as the fallout from the shock announcement last Friday continues. The latest reports indicate Dover is calling for immediate payments of debts that it originally agreed with advisers to postpone – in some cases for a year or more.
The fallout from the shock announcement regarding Dover Financial Group last Friday continues, with the latest reports indicating Dover is calling for immediate payments of debts that it originally agreed with advisers to postpone – in some cases for a year or more.
This latest development comes after more than 400 advisers licensed by Dover were sent an email from the head of Dover, Terry McMaster, who famously collapsed in the dock while giving evidence at the royal commission in April. The email, sent last Friday at 4pm, notified Advisers that Dover had agreed with ASIC on an "orderly" way to remove the company's licence and that advisers could not offer new advice from Friday June 8 and that all service must cease by July 6, less than a month later.
ASIC had previously told the company it's licence was likely to be suspended or cancelled and rejected requests from McMaster to delay the cancelation till the end of the year, prompting the dramatic closure by McMaster which leaves 400 adviser scrambling for an alternative licensee and around 20,000 or more clients potentially unadvised within a month.
Advisers Debt
According to reports, deferred payment of fees was one on the "appealing aspects" of working under the company's licence. The so-called "deferred licence fee" arrangement, enabled new planners to push back the more than $20,000 they paid in fees each year to the firm, for 365 days from their starting date – in some cases even longer.
Adviser Ratings modelling suggests that up to 40% of Dover planners could owe up to $2.5 million to the group. These figures are based on the rapid recent growth of Dover adviser numbers that show around 150 advisers are new to, or have recently transferred to Dover.
The extraordinary collapse of Dover has led some advisers to contemplate legal action against the group, with the managing director of law firm Hamilton Blackstone confirming they are "investigating potential legal action on behalf of affected clients".
Heightened Oversight
Dover advisers trying to find a new licensee were also confronted with the news that ASIC will have heightened oversight for licensees taking on ex-dover planners and said it would "vet all advice" given by these planners for a period of time. Dover advisers face the obvious problem of guilt by association and a potential licensee may fear their brand would be tarnished by taking on a Dover adviser. This is understandable, although at this stage it would appear that the issue ASIC has is not with advisers en-masse at Dover, rather the particular processes Dover had in place with their advisers.
Why Was The License Cancelled?
Speculation is rife as to the reason for Dover's closure. One theory doing the rounds is that McMaster simply pulled the pin because he was not prepared to accede to the regulatory demands ASIC required. It has been said that every SOA produced by a Dover adviser was checked by three managers, including McMaster himself. On the surface this would seem to be improbable, just through sheer weight of numbers and this point was actually made to McMaster when he was giving evidence to the royal commission. If one runs the numbers, assuming each Dover adviser did 10-15 SOA's a year, and assuming a 40 hour working week for the managers checking the SOA's, each manager would spend their entire working life on SOA validation (around 15 minutes per SOA), allowing no time for any other work such as servicing personal clients, other administration or just generally running a business.
If this were the case and ASIC directed Dover to engage in a more robust procedural method that it was not prepared to participate in, there would have been little alternative to cancelling Dover's license.
Whatever the issue – that will come out in the wash – affected advisers are telling us, it is what it is, and are concentrating their efforts on next steps, namely getting licensed or putting arrangements in place to help ensure their clients are looked after as best they can in these difficult times.
"John, I think you are being harsh. A little compassion wouldn't go astray. What about for example young advisers starting out looking for a competitive fee offering to get started. It's not their fault, they could be amazing advisers focusing on looking after their clients and now be shocked to be suddenly out of work. These are real people out there hurting, a little support may be more helpful. Hindsite is beautiful thing....."
Darren 17:33 on 14 Jun 18
"John, $20K isn't peanuts when you consider that software is extra, aka midwinters stupidly high fees per month. the key issue here is they took all and every dodgy planner plus the one that maybe good but wanted an easy compliance system. There is much more going on here i feel and i would say this was not as sudden for head office as it was for the advisers, i would say head office was aware this may/would happen for some time. lets see what comes out in time. Wouldn't trust Terry to do anything that didn't help his own interest..... bet he will go the outstanding deferred fees, or the administrator will as they should given its in the contract they signed. they should have known better as under TSAA we all had to complete studies for corporate law (contracts) oh thats right most would just join an association to get the tick here instead of actually learning their jobs. enter AFA:)"
Craig 20:08 on 13 Jun 18
"Graham, many accountants are not qualified/competent to make these financial decisions, just because you are an accountant doesn't mean you can give financial advice... there is nothing wrong with charging a percentage based fee, the more money our clients make the more we get paid - it's in our interest to do the best by them. How many accountants charging an "hourly" rate have lost their clients money based on recommendation for tax effective trees etc... how amount of these accountants were involved in Guvera?? You guys aren't all good so don't go preaching. "
Liam 18:41 on 13 Jun 18
"Dover was considered the bottom of the barrel in the financial planning industry. Planners who were sacked elsewhere were given a licence at Dover without any reference checks. One particular 'planner' was rejected by 5 other groups before landing a role at Dover. He should never have been allowed to remain in the industry. It is just what the industry needed - for starters anyway. And to the accountant who suggested accountants should be able to give investment advice, you are dreaming."
It's a start 18:26 on 13 Jun 18
"I think we should not comment on events that led to the closure of Dover as we are not aware of all the facts. I was with Dover for two years of my planning life which commenced in 1993. We need to look to the future and make all efforts to restore some calm to the planning industry and the clients who are wondering what happened and make all efforts to restore their confidence in financial planning."
Wijay Bandara 17:42 on 13 Jun 18
"Agree with you Rob, I wonder how many clients are sitting at home tonight feeling that their interests have been put first? "
Rob D 17:37 on 13 Jun 18
"What is lost here is that there is 20,000 plus clients that are affected. Yes it is tough on the advisors , but what about the clients that are concerned for their situation. I hope we are all prepared to act in their best interests if the need arises."
Rob 17:33 on 13 Jun 18
"MAYBE THESE FINANCIAL PROBLEMS WERE CAUSED BY ACCOUNTANTS AND ESPECIALLY TAX ACCOUNTANTS BEING PREVENTED FROM ADVISING CLIENT/FAMILY MEMBERS FROM INVESTING IN PROPERTY,SHARES, TERM DEPOSITS,CASH , A SMSF. MANY ACCOUNTANTS WOULD HAVE CHARGED AN HOURLY FEE FOR SERVICE , NOT A FUNDS UNDER MANAGEMENT FEE."
GRAHAM WILKINSON 17:26 on 13 Jun 18
"In regards to johns comment. You are an idiot."
Greg Maguire 16:41 on 13 Jun 18
"It is an absolute disgrace that 400-odd advisers will be out of a job - not to mention their staff and clients who are now without advice. You can't tell me that all 400 advisers deserved to effectively get sacked. Particularly the newer advisers who may have been attracted to the "generous" terms re fee payments. What would happen if 400 people were sacked en masse from any other industry - there would be an outrage!"
Adam P 16:37 on 13 Jun 18
"I've yet to here a good account for the revocation of the license. If it is just that McMaster couldn't be bothered complying when he was told he had to, well I wonder if all those Dover promoters still imagine him to be a "switched on" guy?"
Dover is Over 16:29 on 13 Jun 18
"Every dodgy planner went to Dover. ASIC was right to close them. "
John 16:27 on 13 Jun 18
"As they say, you pay peanuts, you get monkeys."