DeVere provides advice on insurance, investments, and retirement planning, including KiwiSaver and UK pension transfers.

The FMA said in a notice earlier this month (3 July) that “the censure relates to issues concerning deVere’s conduct while advising clients on UK pension transfers”.

Following a complaint about deVere’s conduct, which it said “has now been resolved”, the FMA conducted a review of its client files.

The review found deVere:

• Had inadequate record keeping in relation to advice given to its clients
• Was unable to demonstrate that the recommendations made to clients were suitable
• Failed to ensure its clients understood the financial advice they received and any limitations of the advice
• Inappropriately limited the nature and scope of its advice and failed to clearly articulate those limitations to its clients
• Failed to exercise adequate care, diligence, and skill in providing advice to its clients.

In particular, the FMA found deVere’s advisers failed to adequately consider the client’s investing experience and financial product knowledge, their risk profile in their advice on pension transfers, and the investments they recommended to the client.

Some of the advised investment products were complex in nature and higher risk. The advisers did not consider the
suitability of the recommended products, including whether the customer was fully aware and understood the risks involved in these types of investment products.

In some cases, the recommended products were higher in risk than the clients’ risk tolerance.

DeVere accepted there was an absence of proper records, including no records that the adviser discussed the advantages, disadvantages, risks, and benefits of switching from their clients’ current plan to the platform and portfolio recommended with their clients.

There was no analysis or other documentation to show that deVere considered the comprehensive advice from a UK licensed adviser recommending the client not switch out of their current defined benefit pension plans, and demonstrating that the customer understood a number of disadvantages and risks in doing so, for example the loss of an income stream that a defined benefit scheme provides that the FMA would expect an adviser acting with care, diligence and skill to do so.

FMA’s director specialist supervision and response, Peter Taylor, said: “FAPs have a duty to comply with the standards of ethical behaviour, conduct and client care as set out in the code of conduct. When advice relates to switching one pension product to another, we would expect an appropriate analysis and comparison to be performed considering the complexity of the product.

“In respect of the pension products deVere advised upon, these decisions made by customers are crucial to their retirement. Significant customer harm may occur if the advice is not suitable, and the adviser has not taken reasonable steps to ensure the customer understands the advice and the risks associated with it. DeVere’s conduct falls short of the standards we expect and had the potential to cause harm to the client’s long-term future as it involved irreversible decisions about their retirement savings.

“The FMA acknowledges that deVere has taken significant steps to improve its compliance and to implement improved record keeping practices. Nevertheless, we consider deVere’s breaches warrant a public censure. Censures hold firms to account while serving as an important reminder of their obligations to their customers. I encourage all FAPs to take note of this censure and the FMA’s expectations that they meet the standards required.”

The regulator further said DeVere must submit an action plan to the FMA outlining the steps it will take, and by when, to remedy the breaches and ensure it does not breach its obligations in future.

The FMA acknowledged deVere’s cooperation to date, its desire to meet in full all its obligations, and its efforts to remedy the breaches. The FMA will monitor deVere’s compliance and completion of the action plan.

A spokesperson for deVere Group today (22 July) told Investment International: “As the FMA has said in its statement, we have fully cooperated with the regulator with a desire to fully meet its obligations. We have made appropriate admissions, there is no evidence of loss, and we have taken significant steps to implement improved record-keeping practices.

“We value our relationships with our clients and committed to ensuring the best levels of service are maintained; and we value the relationship with the regulator and will continue to work with the FMA to ensure best practice for the whole market.”

In the video Green discusses the Brite Advisors scandal, deVere’s new extensive investment operation in Mauritius and hits back at critics as he steadfastly defends the company’s track record on best practice and international advice.

Please subscribe and sign up on II using this link to be able to view one of the must-watch videos of the year.

Part one is premiered on II on Tuesday June 4 at 9am. Part two will be revealed the following day at the same time Wednesday June 5 at 9am, exclusively for II and IA readers.

Tensions in the Middle East and North Africa have led oil prices to approach $79 a barrel for Brent Crude and around $73 for West Texas Intermediate, which Green warned will have broader economic implications on individual sectors within investor’s portfolios.

“Global investors need to take seriously the volatility in oil prices due to their direct influence on inflation, as rising oil prices can lead to increased production costs across various industries, affecting corporate profitability and economic growth,” Green said.

“Additionally, oil price fluctuations can create market volatility, influencing the performance of energy-related stocks and sectors, making it crucial for investors to monitor and perhaps adjust their portfolios in response to these changes,” he added.

Given that tensions in the Middle East introduce geopolitical risks that can significantly impact market sentiment, Green said investors often respond by reassessing risk tolerance and adjusting asset allocations.

“Safe haven assets, such as gold and government bonds, could experience increased demand as investors seek refuge from market volatility,” he said.

In terms of equity exposure, Green noted currency fluctuations and emerging market vulnerabilities will also be in sharp focus.

“Rising oil prices can contribute to currency fluctuations, particularly affecting economies heavily dependent on oil exports,” he said.

“For investors with exposure to emerging markets, currency devaluations may pose risks to their portfolios,” he added. “Countries with large external debt denominated in foreign currencies may face challenges servicing their debt obligations, potentially impacting the performance of assets tied to these economies.”

However, while the Tribunal has the authority to ‘set aside’ the penalty decision, it “does not have the same competence in relation to the debarment order”, according to the decision document. As such, the “debarment ‘matter’ is remitted to the Authority” to reconsider.

Green’s case formed part of a broader investigation by the country’s Financial Sector Conduct Authority (FSCA) into DeVere Investments South Africa and DeVere SA Acuma between February 2010 and August 2015.  

The core issue related to the marketing of foreign collective investments schemes that the regulator said were not approved by the Registrar of Collective Investments Schemes. 

The companies, which were sold to Brite Advisors in November 2019, were fined ZAR 10m after being found to have “contravened various financial sector laws”.

In light of his role as a director of the businesses, the FSCA concluded Green ‘caused or permitted the contraventions’.  

When the initial decision was announced in May 2022, a spokesperson for DeVere said they were “shocked and disappointed” and confirmed an appeal would be lodged.

Section A or B?

At the Tribunal, Green’s representative argued that the South African regulator had acted without regard to the facts of the law and that his client had not broken the law.

There was some confusion relating to the specific charges levelled at Green, with the FSCA citing section 2(a) of the Financial Institutions (Protection of Funds) Act in its initial correspondence with the DeVere Group chief executive in 2019, but later admitted it should have referenced section 2(b).

Section 2 states a financial insitution or director ‘who invests, holds, keeps in safe custody, controls, administers or alienates any funds of the financial institution or any trust property –

(a) must, with regard to such funds, observe the utmost good faith and exercise proper care and diligence;

(b) must, with regard to the trust property and the terms of the instrument or agreement by which the trust of agency in questions has been created, observe the utmost good faith and exercise the care and diligence required of a trustee in the exercise or discharge of his or her powers and duties’.

Presiding over the tribunal, judge Harms concluded, without stating a specific clause, that Green ‘did not contravene section 2 of the Financial Institutions (Protection of Funds) Act, during the period he had been a director of DeVere SA’.

According to the decision document, Green’s representative also argued that the FSCA did not have jurisdiction to impose any administrative penalty on or take any other administrative action against him because he was not living in the jurisdiction of the court.  

The Tribunal agreed: “We do not believe that Mr Green’s assistance with the investigation and submitting to a summons to give evidence and giving evidence already during 2016 on a general compliance topic of DeVere SA amounted to his personal submission to jurisdiction for purposes of the imposition of administrative penalties and action.”  

‘Failing to understand its own laws’

Following the publication of the Tribunal’s decision, Green said: “All accusations and charges that were made against me in South Africa by the regulator have been dropped. The file is now closed. Whilst we were surprised by the FSCA’s initial decision, we are not surprised by the Tribunal’s ruling. 

“It’s clear that the case was overturned on the basis of both factual inaccuracies in the FSCA’s case against me and an incorrect application of laws. 

“As per the Tribunal’s final ruling, it was found that I did not contravene the law and, therefore, that regulator was wrong to consider any action against me.” 

He continued: “In addition, the FSCA was criticised by the judge at the Tribunal for changing the alleged offences of which I was accused on several occasions – even up to two weeks before the case was heard – and for failing to understand its own laws. By doing this, the regulator was shown to be on a mission to discredit me, come what may.” 

Green added: “The Tribunal has come to the only sensible decision. In this case, the South African financial regulator appears to have lost the objectivity and impartiality expected of a public body discharging a public function.” 

The business will be run by chief executive Jonathan Hives and managing directors Ben Barratt and Toby Band. The trio have worked together for almost seven years during their time at Arlo International and DeVere Group.

First Sentinel Wealth will offer a range of financial advice services to clients across the UK, as well as high net worth private clients internationally.

Hives told International Adviser: “We have worked together for almost seven years. We had a tremendous three and a half years at Arlo International, but we have decided to have our own business and run a company how we’d like to run it.

“We know the First Sentinel Corporate Finance team well. We had some discussions which led us to becoming the appointed rep of First Sentinel Corporate Finance. First Sentinel Corporate Finance has a lot of M&A action, and also help companies that have gone from a private firm to a public firm. As those companies grow in the UK, these companies have or require pension schemes. Instead of referring these clients to a different IFA, we can now provide financial advice in-house.

“Also, they’re dealing with entrepreneurial clients. These individuals have got shares in a newly public business, leading to a wealth creation event. We’ve now got the wealth management arm to offer advice and tax planning all under one roof – which makes it a very powerful brand and business.

“On the flip side, we have some entrepreneurial clients, who actually may be relevant for the corporate finance side of the business. The synergy between the businesses is hopefully something that will continue to grow.”

UK growth

The trio are keeping their feet on the ground and are not planning an over-ambitious expansion across the UK.

Hives said: “We don’t want to be getting too far ahead of ourselves to begin with. While we’re very confident of our work, our client bank, our skill set and the potential clients, the reality is it’s more about taking on advisers that have the right work ethic and experience, and ethical mindset.

“We certainly are not closed to an acquisition spree. But for now, let’s just grow with like-minded people.”

Barratt added: “For now our focus is on building the foundations of the business and getting the right people in. This is a new business and borrowing is expensive, so perhaps in slightly further down the line it is something we will consider more seriously, but not at this stage.”

The firm may be based in London – but it will not stop the business targeting clients all across the UK.

Band said: “London is the epicentre of our offering. There are nine million people in London, and some of those people still need advice, even though there’s a lot of competition here. But likewise, we’ve got clients across the UK in the Midlands, Scotland, Chester, Leeds, and places outside of London.

“Our marketing and advertising strategy isn’t solely London-based. We’ve done a couple of years of flying here, there and everywhere all over Europe to meet clients. To take a train up north to meet a client isn’t going to stop us from getting business all over the UK.”

UK resident non-doms

One area of specialism that the advice firm will be looking at is UK resident non-domiciled clients.

Clients with non-dom status are those who live and are tax resident in the UK but have their permanent home outside the country. Those who are registered as non-domiciled with HM Revenue and Customs (HMRC) are tax resident in the UK, but do not have to pay UK tax on income and capital gains earned overseas.

Hives said: “We also believe UK resident non-domicile is a massive client area for us. I think it’s 42% of Londoners are actually non-dom. That’s a massive target market there. What we’ve found in recent times is a lot of IFAs only tend to focus on UK resident UK domicile.

“We’ve got some great tax advisers as connections within our network that will be able to help these high net worth individuals.”

Barratt added: “It is a massive opportunity to plug a hole that needs filling. I think the demand for advice is higher than it’s ever been before. The people that come over from places like Europe to the UK have the more complex situations and the bigger requirements for that kind of expertise and advice.

“We don’t feel that it’s much more complicated than your standard UK advice, but perhaps that’s just a function of the fact that we’ve been overseas. We’ve done it for ourselves as well and experienced it first-hand.

“We just see that as a big opportunity in the market, that’s not being picked up by a lot of advisers. I think, in part, that’s down to the fact that people are a little bit scared of the added complexity. But for us, the added complexity gives us the opportunity to add even more value.”

Repatriation

The firm said that its UK domestic business will be its “forte” but it does have some that “are working and living internationally”.

Another area of interest for the trio will be offering repatriation advice to UK expats looking to return back to Britain.

Band said: “We have the benefit of experience working internationally. We understand different jurisdictions, different products and the importance of not getting the restructuring done when you land in the UK, but getting it done before you arrive. Compared to a typical British IFA, they’re asleep at the wheel for repatriation.”

Hives added: “I think also what you’ve got from someone who lives and works internationally, there’s a variety of different products compared to what a UK IFA may be used to. A lot of the time when we sat down with clients, we found out that they’ve been told by a different IFA that they maybe shouldn’t have a Qrops and it needs moving back to a Sipp, or they should be surrendering that policy.

“It’s not always the case because the clients could be paying high surrender fees. In many instances, the products are absolutely fine. We understand the international products and when they need to be tweaked when clients become a UK resident. We’re very comfortable with that.”

US-connected clients

The international offering will also see First Sentinel Wealth look at clients that are connected to the United States.

These clients are sometimes overlooked due to the complexities of the US financial system.

Hives said: “I lived in the US for a couple of years. I was advising expats out in the US, so I’ve got my series 65 exam. I’d like to think I understand not only the UK pension market in the US, but also the 401K/ 403B market.

“The repatriation package to the UK can be daunting for clients. Last year, I got referred several clients from international brokers that had clients that were based in the US that then moved back to the UK. These clients have come back to the UK with a variety of US retirement plans.

“There’s not many IFAs that would know where to start with that type of advice. In addition to the financial planning, if they are a true US-connected individual, they’re still going to have filing requirements with the IRS.

“We’ve partnered up with three or four different US/UK specialist tax firms. We can focus on the financial planning to ensure it’s compliant in the eyes of the HMRC and the IRS and also introduce clients to specialist tax firms. One thing that clients don’t want to be doing is filing their own taxes in the US if they are a non-resident.

“We’ve seen some horror stories, so we always encourage clients to partner up with a highly qualified tax firm. Then, we can run the investment management side along with some of our SEC-registered partners.”

Technology

Offering the best advice is sometimes hard to do if a firm’s technological processes are not up to scratch.

In today’s tech-heavy world, advisers and clients need to be dealing with the best systems for a smooth interaction.

Barratt said: “I think from a business growth perspective, one of the key areas that we’re focused on is the technology.

“The average age of an adviser in the UK is 57 years old. I’m 29 and Toby [Band] is 28. There are a few dinosaurs in the industry that aren’t using technology to improve their offering. We’ve been working hard in the background to invest as a business to make sure that we’re improving the technology that we offer to our clients and improving that user experience effectively.

“Our primary focus is, of course, to ensure that our clients’ money is being looked after, but a close second is to provide a high-quality service that provides a transparent and streamlined experience. We can’t control whether there’s an inflation crisis or a pandemic, but we can control what we deliver in terms of user interface and how clients interact with us.

“I think [this is] something that can separate ourselves from other businesses in this industry.”

Targets

Lastly, the trio were asked whether they have set targets for the business?

Hives said: “There is not a monetary value target that we have. I guess anyone would like the sound of a £1bn ($1.11bn, €1.14bn) in AuM. But that’s not going to obviously happen overnight.

“In terms of advisers, it’s not about a number as that can be a bit dangerous because if we have a target to reach by a certain point, you could force yourself to take on the numbers to hit your target. We would much rather concentrate on the quality of the personnel that we recruit.”