DeVere tight-lipped on offshore fees

BENEFIT REMAINS UNKNOWN

Business investigations reveal international financial advisory firm deVere has invested clients in offshore funds that are not FSB-approved, a potential breach of regulations as such funds may not be legally marketed locally.

Business has seen deVere client portfolios that include investments into unapproved offshore funds, including the MitonOptimal Special Situations Fund, Strategic Growth Fund Plus, GAM MPS Growth Strategy Fund and GAM MPS Balanced Strategy Fund. Under the Collective Investment Schemes Control Act (Cisca), foreign funds have to meet the same standards as those set for local collective investment schemes.

Kedibone Dikokwe, head of Collective Investment Schemes at the FSB, confirmed any financial advisor investing client money into unapproved funds is “contravening the Collective Investment Schemes Control Act and his/her FSP license condition”.

Anybody who solicits such investments faces jail of up to five years.

Business approached deVere for an explanation and for details of commissions deVere has earned. DeVere spokesperson George Prior would only say clients with complaints “can contact us directly”, adding “we are committed to fixing any issues that may arise”.

So the amount the company stands to benefit from questionable marketing remains unknown.

MitonOptimal says the Special Situations Fund has two classes in Guernsey, both of which allow an upfront charge of 5%.

In both cases, 4% accrues to the advisor, and 1% to MitonOptimal. One class pays the fee to the advisor immediately, while the other amortises it over the first five years of the investment.

GAM would not discuss its agreement with deVere, but a former deVere employee has said the GAM funds also have a 5% upfront charge. Of this, 1% goes to GAM, 2% to deVere and 2% to the advisor.

FSB regulations ensure foreign funds are suitable vehicles for the average investor. This will exclude funds such as GAM’s that employ sophisticated, alternative strategies.

Both the GAM funds are “aimed at sophisticated, professional, eligible, institutional and/ or qualified investors who have the knowledge and financial sophistication to understand and bear the risks associated with the investments”, GAM’s marketing material says.

It also says “GAM hedge fund products are only available to investors who are comfortable with the substantial risks associated with investing in hedge funds”.

Earlier this year, Business revealed how deVere had failed to disclose the commissions.