What is the Status of my Brite Advisors Pension?

Brite Advisor’s and Australian Regulator Court Case

Written by: Eduardo F. Simoes (IFA) and Jonathan Laws (IFA)

Updates:

1. February 1st: The court-appointed receivers Linda Smith and Rob Kirman continue efforts to unravel Brite Advisors' financial discrepancies, with their investigation uncovering a $69.1 million variance in reported assets, questionable related party transactions, and potential misuse of client funds.
2. February 6th: The Federal Court ordered the liquidation of Brite Advisors on 6 February 2024, appointing receivers to wind down operations after an ASIC probe revealed a $69.1 million discrepancy in client assets. Click here to read more details on the liquidators' role and latest updates in overseeing the liquidation process.

The Federal Court of Australia has issued a significant order concerning Brite Advisors Pty Ltd, following the Australian Securities & Investments Commission's (ASIC) legal actions. This pivotal development in the Brite Advisors case involves appointing Corporate Receivers and Managers for Brite's assets, marking a potential critical juncture in the proceedings.

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Key aspects of the court order include:

• Appointment of Corporate Receivers and Managers: Linda Smith and Robert Kirman from McGrath Nicol have been appointed to take control of Brite Advisors Pty Ltd's assets. This move is designed to ensure a thorough investigation and secure the company's assets.
• Detailed Objectives: The Corporate Receivers and Managers are tasked with identifying, collecting, and securing Brite Advisors' assets. Their role includes assessing the financial positions of Brite's clients, determining the solvency of the company, and evaluating the likelihood of creditors/investors receiving returns in the event of a company wind-up.
• Asset Preservation Orders: The court has placed restrictions on Brite Advisors Pty Ltd. The company is restrained from activities like removing assets from Australia, engaging in transactions that impact the value of their assets, and incurring new liabilities.
• Compliance and Reporting Requirements: The Receivers and Managers must report their findings and actions back to the court and ASIC, ensuring transparency and accountability in this process.

This court order represents a crucial step in addressing the complexities surrounding Brite Advisors Pty Ltd and seeks to protect the interests of its clients and investors during this challenging period.

For clients affected by the shutdown of the Brite Advisor platform and the restricting of assets, this court development is significant. Receivership, the process now unfolding, involves appointed professionals (the Receivers and Managers) taking control of a company's assets to manage and protect them.

This is often a step towards restructuring or liquidating a troubled company. For clients, this phase is crucial as it aims to safeguard assets and potentially recover funds. The appointment of Corporate Receivers and Managers could bring more clarity and structure to the situation, offering a pathway towards resolving the complexities surrounding the frozen assets and the platform's future. This development is a vital step for clients looking for resolution and access to their investments.

Our Thoughts

Just a quick caveat, but this section is our own opinion on the matter, and should not be construed as any sort of opinion from a legal authority. Whilst we are very knowledgeable advisers, and many of us have professional qualifications, we aren’t lawyers! 

Many of you might read the above summary, and the actual regulatory announcements, and get very worried. But, in our opinion, this latest development is actually a positive. Whilst it does indicate that there are indeed issues with reconciling all the client assets, that is something that we, and most of the clients we have spoken with, anticipated. Hence, it is not a great shock.

We see it as a positive as it indicates that the regulator is being proactive, and is putting in place steps to secure your money. Long story short, it makes it likely that you are closer to a conclusion, one way or the other.

At this stage, the best approach is to carry on a normal advice process with a regulated financial adviser, especially until the Receivers complete their report. What will ultimately be the outcome is hard to know; but if we had to guess, it is likely some form of haircut to client funds once all funds reconciled, and loans settled etc. However, we can not know for sure, and that is just our “laymen” opinion based on similar situations that have occurred. Also, you never know, they might secure all the assets, and there is no loss, and all the panic and worry was for nought! 

We would also, as we always do, preach patience. Whilst the regulators have been very swift so far, it would not surprise us if this drags on for months and months, perhaps even until 2025 and beyond. However, gauging from how swift the Australian Regulator has moved, and given that the US SEC is involved, and thus there is now their significant authority, financial, and man power involved, that hopefully it won’t drag out that long, but do want to set out expectations, as a speedy resolution is not likely.

Staying on top of the proceedings, which we will also endeavour to do via regular updates such as this, and going through a proper advice process with a Regulated Financial Adviser is the best strategy at this stage.

Transferring Out of Brite Advisors Pension & Platform

Currently, it does not appear possible to transfer out of the Brite Advisors platform due to the restrictions imposed by the Australian regulator. With the SEC looking to terminate Brite’s regulatory permissions, a transfer in the future seems increasingly likely, but will likely require the resolution of legal proceedings, especially those occurring in Australia. We have written an article on this previously, which you can read about through the following link.

For now, the best course of action is to undergo a thorough advice process. This preparation ensures that you are ready to make a swift and informed transition when the opportunity arises.

Whilst we only provide advice specific to each individual, what we can say is that at Cameron James, our preference is for FCA-regulated platforms, known for their high level of asset protection. This approach applies even when managing a Maltese QROPS; we will in the majority of cases opt for an FCA-regulated platform within it, prioritising the safeguarding of assets over the use of offshore bonds, even if they can be a lower cost overall, especially for larger pensions. This strategy is central to our commitment to providing secure and reliable financial solutions for our clients. Sometimes a premium is well worth the security and peace of mind it provides.

STM as Trustee & Appointing New IFA

STM, a QROPS Trustee in Malta and Gibraltar, has recently updated some Brite clients we are in contact with about the situation with Brite Advisors. The main point is that the Australian regulator has put a hold on all Brite’s assets, including the funds belonging to customers. This step is likely temporary and is part of a detailed financial review. While this restriction is in place, you can still withdraw regular money from your accounts, but you'll need approval from the Australian regulator first, and this seems to be taking a long time to process. STM hasn't specified any special conditions or how long these withdrawals might take. It is also worth nothing that STM is not the only Trustee involved, or though it does appear to be one of the main Trustees for Brite USA clients. 

Also, if you're considering moving your money to a different company, scheme, or financial advisor, STM has said that this is okay. You have the option to transfer your funds, but just remember that any transfer will need to meet the standard regulatory rules and requirements.

Again, it might very well be the case that the best advice is to keep your existing scheme, but that can not be confirmed until you go through the advice process and obtain formal regulated advice.

Seeking a New Adviser or IFA

For clients whose pensions are managed through the Brite Platform, actively seeking a new financial adviser is likely to be a prudent step towards securing your future financial stability. The ongoing regulatory interventions and asset restrictions associated with the Brite Platform indicate that an immediate transfer may currently be unfeasible. Nevertheless, forward planning is crucial in this scenario. Being prepared for eventual changes in the platform's operations is not just advisable; it's essential for maintaining control over your financial future.

Given these uncertainties, it's wise to explore and evaluate potential advisers now. This proactive approach ensures you're not caught off guard should a swift transition become necessary. It allows you to make informed decisions based on a comprehensive understanding of your options, rather than hurried choices under pressure. By preparing in advance, you position yourself to respond effectively to changes, safeguarding your pension and ensuring continuity in your financial planning.

Other Financial Advisers

Be wary of financial advisers getting in contact with you directly, especially unsolicited. Whilst it is banned to cold call people about their UK pensions, there are some loopholes that can make it possible for overseas advisers to contact you in a certain manner within an interesting interpretation of the rules, it is still not a client finding technique that inspires confidence.

At Cameron James, we do not cold call. All our clients come to us through our website or referrals. We consider cold calling to be a remnant of a bygone era, an era that needs to end sooner rather than later. With recent calls from the FCA to ban all cold calling in regard to UK financial services, that era might be ending sooner rather than later.

Also, be wary of any sort of offers to “bulk” transfer or provide or accommodate any sort of “one-size fits all” approach. Financial Advice is tailored to each person's unique situation, it can not be applied by rote to every individual.

Every client, regardless of whether they are from Brite or not, needs to have a proper, thorough advice process, and obtain advice tailored to their unique circumstances. Whilst it is likely that a lot of people receive relatively similar advice, given the relatively homogenous nature of Brite Clients, that does not mean everyone will have the same advice, so going through the process with an adviser is of paramount importance. This includes filling out a client profile, acquiring hard facts, and producing a formal recommendation, in writing.

Some people might keep their Trustee, some might change it, some might even completely change jurisdiction, it all depends on you and your circumstances.

We would also mention to those of you who moved to Brite from a legacy product which still contains an exit penalty due to the repayment of an original commission paid, that any advisers offering to help you transition your exit penalty over, should be considered with the utmost due diligence and attention.

Whilst it could be the case that you are not paying any extra fees, the offer of transferring an exit penalty partially explains why some of you are in the situation where you are now. Perhaps you did not, completely understandably, want to stomach such a large fee being paid in one go, and so the desire to spread it out made Brite’s offer attractive. You also have to remember that the exit penalty is a sunk cost, you are going to be paying back that commission, whether you bite the bullet and do it upfront, or you spread it out over several years. Whilst technically spreading the payment period out can result in less impact on your pension value, that is only applicable if your pension pot rises, and as I am sure you are aware either personally or from reading up online, investment portfolios attached to commission products have a nasty habit of not increasing in value, even when the wider capital markets have soared.

Given that it is also very likely you want a clean break, and to say goodbye to this entire saga, signing up for yet another exit penalty, even if it is the continuation of an existing one, is unlikely to be a sensible option. This offer also signals to you that you aren’t dealing with a modern “fee-only” adviser and are engaging with an adviser who continues to use commission products. Whilst commissions don’t necessarily mean higher fees, in our opinion they are opaque and have a bad reputation for a reason, and are best avoided.

Otherwise, the standard warnings apply, which again, you can read through and use to assess advisers you speak with, using our  12 things to look out for in a new IFA YouTube video below.

Other Things to Consider

It should also be noted that this is likely to be a significant portion of your retirement funding, and you want to make sure that the adviser you choose now to help you out of this situation is someone you like and trust.

Building a long-lasting relationship with an adviser you trust and someone you not only would be willing to work with, but enjoy working with, is incredibly important.

That is also how we work at Cameron James. We only take on clients who we want to work with long term. A transactional relationship is not what we are after, and in our experience, many clients who seek out a transactional relationship get burnt, as many of you reading this may have already experienced. 

Transactional relationships often lead to subpar client experiences, characterised by minimal engagement, inadequate information, and a general lack of comprehensive service.