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Article Contents (Estimated Reading Time - 4 mins 7 secs)

The Latest

The recent update from McGrathNicol has, for the first time in quite a while, left us with a much more encouraging outlook for the victims of the Brite Advisors and the Brite Platform collapse/liquidation.

This update has come sooner than expected, primarily due to pressure from the courts and the beneficiaries, who were seemingly unhappy with some of the previous updates provided by the Receivers. We were preparing to publish an article critical of several sections of that update, but we have now shelved that article, as many of our concerns have been addressed, particularly regarding the method of client assets repatriation.

A Court hearing was held on 22nd May in Australia to discuss some of the requests/actions mentioned in the update and to clarify details regarding the various investigations and the timeline for the redistribution of client assets. Whilst we watched the hearing, we will wait for published confirmation of the outcomes of that hearing and the follow-up hearing that was held on June 5th before sharing further updates.

Below is a summary of the main points from the latest update, along with our commentary. At the end, we provide information on the types of advisers offering to help Brite clients and considerations to keep in mind when assessing your options. We do not intend to name any firms or advisers, but aim to help categorise the types of firms, as many Brite clients have found it challenging to discern who is contacting them and what questions to ask.

We also recently received a set of insightful questions from a Brite Advisors client doing their due diligence on potential advisers. These questions could have potentially helped avoid the current situation and are the type of questions a financial planner should be prepared to answer thoroughly. We plan to turn these questions into a “FAQ/Cheat Sheet” to assist Brite Advisors clients during their due diligence. This will also help our advisers ensure they provide comprehensive and accurate information.

So please look out for that being published on our website in the not-too-distant future.

Now, onto the latest Receiver Updates:

Beneficiaries Entitlements/Claims to be Calculated

The Receivers are looking to set 13th December 2023 as the date for which they will utilise as the cut-off calculation date to ascertain how much money each beneficiary is entitled to.

They will work out what they believe the total amount to be, based on their investigations of the Brite systems, and will then look to get in contact directly with each of the beneficiaries to ask what they believe their entitlement to be, based on historical valuations/transaction history etc. We are not sure 100% how this will work, as most Brite clients have rather limited information on their portfolios, but the Receivers will be in touch (discussed below) to explain and ask for feedback.

This is good, as it is an indication that the Receivers are ready to start their reconciliation process, or are thereabouts, and there is no longer a moving target, we have a date, now we just need the values, and then any discrepancies can be investigated from there.

Distribution Method for Client Funds

The Receivers have now changed their tune from their previous update, to reflect that they now believe that a sell down of the portfolios on the platform and a full withdrawal back to the Trustees, or direct to the member in the case of direct platform members, is likely to be the most suitable option. They have left the door open for other options and have not said if there is a potential mix of strategies, but our view is that a cash distribution is all but certainly the best, if not only option, especially given how challenging IB Australia have been to deal with.

They will also look to liaise with the various Trustees involved, to help further formulate and confirm their distribution strategy, alongside consulting directly with the beneficiaries to hear their opinions on the matter.

One of the alternative methods they have suggested is the appointment of a Discretionary Fund Manager (DFM), to effectively “roll over” the funds onto their platform/service, without having to sell the funds and send them back to the Trustees/members. We could not wrap our heads around that, given all the various cross border issues, not to mention our rather strong belief that DFM’s are shockingly poor value for money for most clients situations (there are some unique circumstances where DFM’s can be all but necessary/add value, but those are not at play here with the Brite situation). All in all, and especially when reading the Affidavit that explained this idea in more detail, we just couldn’t understand how it wouldn’t cause more issues than it solves, so are glad it appears to have been shelved.

The Receivers do not want ad hoc feedback and have taken the sensible option of formalising the process, by drafting a survey that will be sent to the beneficiaries, for them to provide their feedback in an easy to collate and digest manner. This has been called a “Consultation Survey”.

We were, as those of you who have spoken to us recently will know, in the process of writing a rather strong rebuke of the previous statements from the Receivers made in regard to the asset distribution strategy, as some of the comments made around the perceived unsuitability of a sale and then cash distribution were rather bizarre to us.

However, we are relieved to see that the Receivers appear to have reconsidered their approach and acknowledged the complexities involved, especially considering the multitude of parties, countries, and schemes in play. It seems evident that there was significant pushback from Beneficiaries, Trustees, and others, leading to a reassessment of the strategy.

We appreciate that this may not be ideal for some of the direct Platform clients, so recommend you use the Survey as an opportunity to get your thoughts across to the Receivers, as they have not finalised this, and are still deliberating.

Trustee Concerns

Perhaps unsurprisingly with everything that has gone on, there have been many beneficiaries that have contacted the Receivers to air their concerns around the Trustees and their level of independence/connection with Brite and any other parties that may have been involved during the life of their advice experience with Brite Advisors.

The Receivers have taken this onboard and have therefore said they will expand their Consultation Survey, to include questions on how much involvement they should have with their Trustees.

Other than that, we know of the various concerns around Brite relationships, and just customer service in general, that Brite clients have brought up repeatedly in discussions with our advisers, so rather than venting, you can finally get your points across and perhaps create some action, by putting all of this into the answers you provide in the survey.

The Receivers are very much on the ball with the Trustees, and have done a lot of digging around connections and the level of independence, whilst also really taking onboard beneficiary feedback. There has also been some pushback from Trustees on the direct communication with Brite beneficiaries plan, which is what led to the need for a follow-up Court Hearing on June 5th, which was rather odd, but will await formal court declarations before commenting further.

Interactive Brokers (IB) & the Margin Loans

Buried in an Operational Updates section is the latest discussions and thought process with the margin loans that were taken out against the client funds on the platform, and their level of communication. Given how much of the shortfall appears to be related to the repayment of these loans, and how every lawyer/adviser/Brite client we have spoken with has still not wrapped their head around how they were approved in the first place, we believe this update requires its own expanded Commentary.

By all accounts, it all now looks like the Receivers and Courts have a much smaller tolerance for the lack of communications and transparency coming from IB, which could be a sign that there may be some challenges to the enforceability of the Loan repayments, given that the beneficiaries never gave permission to borrow against their assets in the first place. The tone taken in the report and the court hearing when discussing telling IB to stop taking repayments appears to emphasise that.

Again, we don’t want to speculate too much, but it looks like the loans perhaps are not a complete write-off like many had resigned themselves to believing, and we look forward to seeing how those investigations and contests ensue.

The Receivers have also struggled to gain access to the Interactive Brokers (IB) Platform, commenting that they have found IB to not be particularly helpful in responding to their queries/requests, which now appears to warrant them taking legal advice/consulting the courts. The main reason requiring the access is to help with automating/improving the regular withdrawal process, and to help set the stage for a fund manager to come in and rebalance the portfolios, but even such innocent sounding requests are going without response from IB.

Again, whilst this all could take a while to filter through the courts, we really do welcome this much more authoritative and less patient tone from the Receivers. The lack of response or forthcomingness from IB is rather perplexing, so we shall see if they keep it up whilst under pressure from the courts.

Other Operational Matters

The Receivers have provided updates on their efforts to gain full access to the various software systems used by Brite and the Platform:

Salesforce

Salesforce hosted the Brite Platform, and the Receivers have been in protracted negotiations with them to regain access to the Brite platform and obtain full oversight over the client assets.

Rather incredulously, after all those negotiations and an agreement finally being reached, Salesforce somehow managed to inadvertently delete the entire Brite organisations account on their system and are now trying to rebuild the accurate data from a backup version.

This really is just taking the biscuit at this point. Even when negotiations go well, there is still something that gets messed up that cause’s delays and additional hassle for Brite clients. We do not know how long it will take to rectify, but it is yet another unwanted operational setback.

AutoRek

AutoRek, which was effectively Brite’s internal client account database, has been the lynchpin of their investigation so far in terms of assessing client balances, and will be key now that they start this reconciliation process with the Brite clients. The access and communications are still strong with the various parties involved, so there seems to be little to worry about here.

Interim Fund Manager

The appointment and actioning of a fund manager to rebalance the Brite portfolios has been delayed by IB’s unresponsiveness, but the Receivers are optimistic that full access to the IB process should be granted shortly, to allow the fund manager to action those trades, and much of the prep work has already been completed, so it really is a “login and action the trades” task.

On the Challenges for Brite Advisors Clients

I wanted to bring up some of the complications that surround many of the Brite Advisers clients, and why their options are potentially much more limited than even your typical ex-pat/non-UK resident, looking for advice.

There are two main reasons why many Brite Advisors clients, and especially those on the Brite Platform, are finding themselves struggling to find advice, and that centres on residency and the type of pension scheme they have.

The primary issue is around residency. Whilst there are many advisers in the countries for which Brite clients live, most of those advisers cannot help with non-local pensions and/or investments, which means the services of a firm who specialises in cross border financial advice has been required. The US especially is a country for which there are very few firms out there that can provide advice to US residents on non-US pension assets, which has meant that even those Brite clients with existing US Advisers have had to seek advice elsewhere. Many UK pension providers and platforms are also reluctant and/or unable (9/10 due to their Professional Indemnity Insurer not allowing them) to engage with non-UK residents, especially those who are US residents or connected persons, further limiting provider options, even more so than your typical British expat.

The other main area that has led to issues finding advice and is rather unique to this Brite situation, especially for the US Residents involved, is that many Brite Adviser clients are currently inside overseas pensions, known as QROPS (Qualifying Recognised Overseas Pension Scheme). QROPS are a rather niche area, and as many people that will have spoken to us will know, we had never even come across a US Resident who transferred into a QROPS until we met the widow of a Brite client last August who came to us for help, which actually caused us to have to expand our knowledge (as whilst experts in QROPS for UK/EU Residents, we weren’t for US Residents), and look for options on how to help US Residents with QROPS.

So, not only do you need an adviser who can provide advice to someone resident in your country, but they also need to be knowledgeable on overseas pensions, and have relationships with providers that can help facilitate more suitable solutions. It really is about as niche as it can get, and why we all know how frustrating it has been for many of you when trying to find someone who can help you.

The Four Main Types of Advisers working with Brite Clients

It is extremely uncommon, at Cameron James, for us to talk about or discuss other advisory firms, as we respect that each company is independent, and free to follow different strategies in attracting clients and marketing.

In the context of what has happened at Brite Advisors though, and the feedback we are currently receiving on a weekly basis from our existing Brite clients that have joined us or are considering joining us, we feel it is important to try to help put things in perspective for you.

As such, kindly find below the four broad types of Advisers we have seen and heard our clients mention to us. To quickly also caveat, not all advisers will fit neatly into these boxes, nor will all advice firms meet these criteria, it really is just the general types we have seen.

1. Independent advisers who adhere to strict regulation/best practice on obtaining new clients

Essentially, these are firms that do not engage in any sort of cold calling/emailing, buying leads, etc. These advisers attract clients by referrals, both from existing clients and professional contacts, and from producing content (writing articles, LinkedIn posts, podcasts, videos etc).

Their growth is what we would call organic. They expand by attracting new clients via contact on their website/phone, and often do not acquire client banks, nor look to buy data lists/stalk LinkedIn to approach clients, which could potentially also fall afoul of regulatory rules.

This is the type of firm Cameron James would be categorised as.

If you gave the advisers employed by Cameron James a phone and a spreadsheet of numbers and asked us to start dialling, well, it wouldn’t be anywhere near as smooth as Mr DiCaprio selling Aerotyne stock in the Wolf of Wall Street sounded, I can tell you that for one thing!

2. Independent (i.e. non-Brite) firms, who are less “modern” in their practice methods

These are the firms that might have no affiliation with Brite, nor any other potentially related parties, but do not obtain their clients via “modern” methods. Cold calling, buying data, buying leads, trawling LinkedIn, Facebook ads, are all the types of methods you see these types of firms utilise, although there is a large variation, with many methods not being any cause for doubts.

Whilst some of these firms may very well provide “proper” financial planning like Cameron James, their mode of obtaining clients does potentially raise some questions.

When you look at it objectively, even from just standard cold calling, the chances of finding a Brite Platform client incidentally are so remote, that you have to ask yourself how they got your contact details, as we can not think of a way that would not involve rather “murky” practices.

3. Firms Hiring Ex-Brite Advisers to Target Former Clients and Ex-Colleagues’ Clients

This has been a common occurrence and is often brought up when we discuss options with Brite clients. Many firms, especially larger ones, have decided that the best approach isn’t to help Brite clients by providing completely unaffiliated advice; instead, they employ or offer contractual terms to an ex-Brite adviser. The idea is that the ex-Brite adviser would try to get their old clients, and perhaps those of their ex-colleagues, to move over with them to their new advice firm.

While we understand the commercial rationale behind this decision, at Cameron James, we have chosen not to pursue this route. We aim to avoid any association with Brite and prioritise advisers who have consistently operated within highly regulated and transparent environments, such as under FCA scrutiny, which is why our advisers are all mainly UK based.

We are also aware of data breaches that have occurred, including an incident in the UAE with Brite clients we have spoken with. The whole setup is rather disconcerting. Clients are often “owned” by the firm, not the individual adviser, and ex-employees are often not allowed, due to data protection rules and/or contractual terms, to retain that client data.Again, every jurisdiction is different, and we are by all means not data protection experts, but it just all seems rather the wrong way to go about it, in our opinion.

4. Ex-Brite advisers who have set up their own firms

This is a rather new development, as many Brite Advisors had already left the firms and found employment elsewhere, with only a handful, particularly in the US, staying on to the very end. We don’t know too much about these firms, as by all accounts most of the advisers stayed on with their Brite firm to the very end, so have still been in recent contact with their former/technically still existing clients, but in reality it likely isn’t a million miles away from being the same type of process, and same types of concerns raised by the firms that hired ex-Brite advisers, as mentioned above.

We would also mention that it is very apparent when talking to Brite clients, that their ongoing service from their Brite adviser often provided little discernible value. Typically, it consisted of little more than an annual catch-up to discuss generic investment performance over the past year, although there were exceptions. Many Brite clients did not receive ongoing value-added financial planning. We therefore advise questioning advisers, and this goes for all prospective advisers, including Cameron James, what ongoing services they will provide, should you choose them as your adviser.

What to do now?

Had we published our previous article we were drafting then the answer to this question might have been a bit of Groundhog day for those who have read our previous articles and watched our YouTube videos, but we truly believe both the content and the tone of this update are positive, and that things are moving forward in a quicker and more productive manner than we were expecting this time last month, after the Receivers previous, rather deflating, update.

The first course of action is of course to wait for this Consultation Survey and provide your honest feedback and commentary on what you think is the best way to return the funds to you and allow you to draw a line under this situation, at least for now. That is expected imminently, so keep yourself on the lookout for that from the Receivers. Please also use that as an opportunity to communicate your thoughts with the Receivers around your Trustee concerns, if any, and any other matters you would like to get off your proverbial chest.

Then, the next step is to, if not already done so, start ramping up your due diligence process, and doing your homework on prospective advisers. As mentioned above, there are four main categories of adviser options out there that can help, from our perspective, and whilst we think we are the best thing since sliced bread, that is of course not exactly objective, and we don’t want to unduly influence your decision, we just want to provide as much information as possible for you to make an informed and comfortable decision.

Given the delays that can occur with getting information from schemes, sorting out changes of agencies, and providing fully compliant and regulated advice in general, there is definitely more sense of urgency now, although that is very relative. If any advice process were to start today, with the best of efforts, it would still likely take at least 4-6 weeks to go from fact-finding through to advice and then to appointing a new adviser for your pension.

Whilst you do not want to rush and make an uninformed decision, there definitely is more of a rationale to start up the advice process sooner than we were expecting this time last month, as by all indications the Receivers are being pushed by the courts to not hang about any longer than required to get the funds back to the beneficiaries.

As always, please feel free to book in to speak with one of our advisers on the link below, and stay posted for our quick update on the Court hearing, and subscribe to our YouTube channel, where we will have a few videos, long and short (thank you to those of you who took the time to watch myself and Dominic “waffle” about pensions for 40 minutes, as another similarly long video is on the way!) being posted shortly.

Author

Jonathan Laws

My journey at Cameron James has been exceptional. I am something of a sponge for knowledge, which has made me extremely well suited to the complexities and constantly evolving UK Pension Transfer system. This in-depth knowledge and experience of Final Salary Pension Transfers allows me to be at the very top of my game and protect my client’s best interests.

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