Financial Planning Association (FPA) deputy chair Sarah Brennan and industry consultant Tom Collins have spoken openly about their involvement with Westpoint Corporation, as Brennan steps down from her role with the FPA for unrelated personal reasons.
Brennan, who has left her post at the FPA to support a terminally ill relative, and Collins dealt with Westpoint through their own separate consultancies, and through the Private Collection, of which Westpoint was a founding member.
Both told Money Management last week that with hindsight, they would not have become involved with the failed property developer.
“At the time we did our due diligence there were other named consultants there … we believed [Westpoint was] financially sound and genuine in their desire to have properly ASIC [Australian Securities and Investments Commission] regulated products in the marketplace. And that’s what we worked on. We wish we knew then what we know now. We didn’t have the full picture,” Brennan said.
Along with KPMG and Freehills, Brennan and Collins, through their own consulting companies, provided consulting services to Westpoint on its ASIC regulated income product.
The Westpoint Income fund was designed to offer competitive returns to retirees and other fixed rate investors, with an indicative interest rate fixed at the time of investment, initially ranging from 9 per cent for a one year fixed term to 10 per cent per annum for a three year term.
Collins said this managed investment scheme offered advisers a maximum commission of 2.5 per cent.
Perth-based liquidators PPB took control of the scheme on February 9 this year after its responsible entity, Westpoint Management, was put into liquidation.
The liquidators on February 20 informed investors that the fund had raised approximately $11 million from 235 investors, with around $10.85 million of these funds invested in projects associated with Westpoint Corporation. The liquidators are acting to recover these funds on behalf of investors.
Brennan said the managed investment scheme fulfilled all ASIC requirements, with a product disclosure statement lodged with ASIC, accounts signed-off by KPMG, and a research report from PIR for example.
She said ASIC-regulated managed investment schemes contained in-built safeguards that were not necessarily available in products that are not regulated by ASIC.
Brennan and Collins consulted to Westpoint regarding the establishment of this managed investment scheme in early 2004.
They admit they were aware that Westpoint had previously raised funds through unregulated promissory notes, but claim they understood that by the time they were involved with the firm this unregulated fund raising had ceased.
Both claim they had no knowledge of any problems with the promissory notes or Westpoint as a company until ASIC took action to retrieve financial statements from Westpoint in December 2005.
In addition to receiving consulting services from Brennan and Collins, Westpoint was a founding member of The Private Collection (TPC), a company Brennan and Collins launched in February 2004, along with Krystyna Weston, who filled the role of chief executive officer.
TPC offered marketing services to boutique, institutional and international fund managers that do not have a retail presence in Australia.
Brennan said the relationship between TPC and Westpoint involved TPC providing the services of business development managers (BDMs) on an outsourced basis. The BDMs offered Westpoint’s ASIC-regulated managed investment scheme to financial advisers.
TPC received a flat fee for providing the services of its BDMs until the contract with Westpoint ended in late 2004. The relationship was completely wrapped-up by early 2005 following a handover to Westpoint staff.
“TPC works on a retainer basis and doesn’t receive or pay commissions,” Collins said.
The company’s business arrangements with Westpoint were distinct from the part of Westpoint’s business that paid wholesalers gross commissions to on-sell unregulated products to advisers.
On Sunday, Brennan released a statement giving further details of her decision to leave her post as FPA deputy chair to support her father, who is terminally ill.
She said she discussed her decision to step down with FPA chairman Corinna Dieters two weeks ago and cited the recruitment of a new chief executive officer for the FPA and the completion of the conflicts of interest principles, which were adopted two weeks ago, as the reasons for the timing of her departure.
