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My complicated situation

Discussion in 'Managed Funds & Index Funds' started by GMG, 22nd Oct, 2007.

  1. GMG

    GMG Member

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    Location:
    Brisbane, QLD
    Hi,
    GMG here.
    I got involved in this complicated situation that I am getting out of, but it starts to get bigger than Ben Hur!
    I was advised late December 2006 (by a "reputable company") to structure my affairs in this way (going against my want to invest in another Brisbane property at the same time).:

    Early January 2007
    Original investment of $150,000.00 to Leveraged Equities, comprising of:
    $120,000.00 my own funds comprising my savings and LOC, plus $35,000.00 Margin Loan from LE. So it is either $150k in the PDS, or $155k verbal confirmation from my financial adviser.
    It looks LE took the whole amount as security, even though I contributed a significant amount from my own funds, ($120,000.00) and the Margin Loan was very small($35,000.00).
    The securities comprised of:
    Macquarie Property Income Fund, amount $30,000.00
    Colonial First State First Choice Investment Platform:
    Colonial FS BT Core Australian Share: $20,000.00
    Colonial FS Colliers Global Property Security $20,000.00
    Colonial FS CFS Geared Global Share $10,000.00
    Colonial FS CFS Geared Share $40,000.00
    Colonial FS CFS Property Securities $30,000.00

    Grand total $150,000.00

    On October 16th I spoke with LE re: redeeming all my units in all of my funds.
    I was quoted a figure of $110,000.00 after the margin loan repayment back to LE.
    On October 17th, the trades were actioned, so I was told, and emailed.
    I got a reply from LE that "Managed Funds" received my request, and that the sale/redemption will be actioned on the 17th October prices.

    Today's info, 22nd Oct 07 from Colonial is: Redeem funds, value $120,618.25 minus the LE margin loan of $36,037.85, leaving closing balance of: $84,580.40

    All fine and understandable
    However, now I just received the price from MPIF (Macquarie Property Income Fund), that the unit price is $1.26540, market value is $23,73511
    But, margin is 60%, so therefore the value of my redeemed units is only $14,241.06!
    I cannot understand how I can go from the 17th Oct price for MPIF of $1.292, and market value of $24,234.04 to $14, 241.06!!!

    This is starting to get serious.
    If I already paid out the margin loan of $36,037.85, to LE, am I being slugged with it again by LE regarding the MPIF?
    Is this legal?

    I just had 2 serious issues with my "wealth creator manager" from a very well known and high profile company .
    1st Issue was concerning my super roll-over.
    I was made redundant July this year. He recommended to go to a Macquarie Super platform, and rolling out of my corporate fund
    At first I agreed, but after noticing the huge entry fees and trailing commissions, and no assurances as to the new retail fund will perform better, and learning lots more on industry funds versus retail funds,
    I changed my mind, and instructed him (the adviser)to stop the rollover. I did my part, faxed and phoned my corporate fund to keep my money there.
    All the "adviser" had to do, after my clear written and verbal instructions was to close the Macquarie account.
    This was apparently done by him, verbally, over the phone to Macquaire. There is No record of this, and consequently Macquarie managed to withdraw my funds from the corporate fund.
    There is no way for me to get back to my fund, as once the cheque is cashed, they will not accept the money back.
    The appeal to the trustee may take between 45-90 days, outcome unknown.
    Hence, after numerous phone calls, emails and faxes I decided to roll my super into another fund, a high rating industry fund.The matter is still being sorted out.

    Secondly, with Leveraged Equities raising their minimum loan(Margin Loan) amount from $35,000 to $50,000 (mine was only $35,000 as at Dec 06) from 1st Oct 07, I was advised by the same "adviser" to borrow another $15,000 from LE, as this would only cost me another $117 to $250 per month.
    Now, with my situation, not working right now, being made redundant ,with other investments loans to cover, this did not sit right.

    All I can say from my bad experience from bad advice, incompetent adviser, working for a glam ff company, this SUCKS!
    I will never, ever again go with the commission only adviser. Next time, if I ever go with a FP, it will be someone who charges upfront fee, and does not get kickbacks from other institutions (if they exist, the ethical Fps)
    Secondly, I am not interested in attending more so called :investors updates, to be "explained", persuaded and sold bad investments. With MacBank again.
    And I have serious reservations with dealing with Macquarie. So far they have been helpful with correcting my super rollover mess up, but I have concerns re: MPIF redemptions of units, and at what date this trade was really actioned.And why is LE slugging me with another loan/margin rate of 60%, since it got paid out with Colonial FS upon redemption
    Had enough.

    The so called wealth clubs, etc, do not look after personal circumstances(In my own personal circumstance right now).
    It is all about the dollar. FF and cosy arrangement with MacBank.
    Beware! Read few posts on Fusion funds, and ff. Fees are enormous and obscene. There is no value, except the hype.

    Anyway, sorry for the post being so long
    Even though I registered on InvestEd long time ago, I haven't posted until now.

    If anyone knows more on LE, margin loans, and why I am being slugged with all theses fees, please help
    PM me, if you don't want to raise this in a public forum

    My lesson here is: Never trust an adviser(commission based, possibly no assets on his side and advising clients on$1000,000 or more thousandts), put everything in writing, and contact the institutions myself as well. Don't trust the high flying, boutique style advising companies, even though they promise integrity.
    Never deal with MacBank again .
    And lastly, stick with my real estate investments, at least I understand them.

    Thanks guys,
    looking forward for opinions, experiences etc.
    This whole matter is stressing me out.
    GMG
     
  2. samaka

    samaka Well-Known Member

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    I think that's the most important point of all. You should never invest in something you can't understand.

    I went to a financial planner to find out what the best option was for me. At the end of all the talk all they ended up recommending me was a few managed funds to invest in - research which I've done myself and am better off for doing so.

    I had to pay $1000 to a financial planner for this 'plan' - which I'm sure took him 15 minutes in Excel and a Word template, however it was probably money well spent, as I'll never use a financial planner again.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Without knowing more details about the timing of your investments and how many units you were allocated - it's a bit difficult to break down what's happened with your fund investments.

    I've used LeveragedEquities for a few years now and am very happy with their product and service. The move to a minimum $50K margin loan is unfortunate - especially for people like yourself who only wanted a smaller loan ... but refinancing margin loans is very easy, and there are other lenders out there who do offer smaller loans.

    I agree that it is very important to get everything in writing, and to take the time to think about the advice you receive before acting on it - trying to undo a transaction can be troublesome and sometimes impossible.

    Good luck with it all - keep learning and you'll do well.
     
  4. GMG

    GMG Member

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    Thanks, Samaka.
    It is interesting tnat the so called FPs only spend few minutes or so to do the "Financial plan" on a quick software.
    Yes I paid $1990 or so to be put in the Sapphire club, and then $1,000.00 or so for the "plan".
    Yes, I will only deal from now with what I know, and am comfortable with.
    My "fatal" mistake was Not asking what assets the planner actully had(my personal impression is $0.)
    Unfortunately, I trusted the hype that this particular company was ethical.
    My stupid mistake!!!
    There is huge oil grease with MacBank.
    However, better now or never for this major lesson.
    Educate myself, read and listen to to others' posts, and, yes to stick to what I am good at, and knowledgeable about.

    But if ff, or LE shafted me, there will be more to it.
    I hate scams!
    This matter will go further
    I am talking of at least $20,000.00 loss.
    And more on super roll-over.
    This is to be continued.

    Thanks,
    and,
    Cheers,
    GMG
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Hi GMG,

    Wow that's quite a mess.

    Before you do anything, I'd read the Statement of Advice. Then read it again.

    Then grab your Financial Services Guide from your "reputable" company. Then write a complain to them, they then have a statutory time period to reply to you.

    If you don't believe that their response is adequate you can go to FICS for non-superannuation complaints and SCT for your superannuation complaints.

    If you wrote letters to your adviser to not redeem certain investments you will still have copies and they could be liable for not completing your instructions as requested.

    Also if your adviser should have had a reasonable basis for moving your superannuation from your corporate fund to a retail fund.

    As an adviser who has worked with corporate superannuation funds I have seen advisers who do not correctly look into the corporate fund and recommend making a superannuation switch.

    ASIC is heavily cracking down on these sorts of super switching advice without reasonable basis of advice. If you complain to the licensee about the adviser not having a reasonable basis to give switching advice I'm sure they will reconsider compensating you for your losses. If they don't I would follow it up with FICS and SCT whose decisions are binding on the licensees.

    Relating to the margin lending, check your risk profiling in your Statement of Advice. It would be interesting to see what the licensees restrictions are around margin lending, usually most are 100% growth or 85% growth and some are 70% growth (also known as balanced).

    I don't think the issue is around the service providers, eg, Mac Bank and Leveraged Equities, it's more around the lack of disclosure by the adviser. I'd be checking this in the back of the Statement of Advice again around the fee section...

    After lodging your complaint with the licensee let us know what happens after that, the Financial Services Guide has the amount of time they have to respond to you in writing.

    If they have provided inappropriate advice you'll have a strong case to claim back your losses plus any fees which have been charged for inappropriate advice.

    Also if they are a member of the Financial Planning Association you can also complain to them about the conduct of the adviser and licensee.

    There is no place for dodgey financial advisers and they should be appropriately dealt with by the industry's regulators.

    Warm regards,

    Dan
     
  6. Glebe

    Glebe Well-Known Member

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    OK lets stop hyperventilating for a second! :)

    I did 2 minutes of googling, and found out that on the 15th of October the MPIF posted a 26 cent dividend. Refer to the very bottom of this page:

    Performance - Macquarie Direct Property

    So I think you will find you're owed some income, whether it be $$ in your cash management account, or extra units in the fund.

    Cheers,

    Glebe.

    PS You were aware that the Macquarie Property Income Fund is a geared fund. So you are aware, I take it, that you geared into a fund that geared into property trusts, that gear into actual property. I take it you did read the PDS's before signing away right?
     
  7. handyandy

    handyandy Well-Known Member

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    Sydney Nsw
    Absolutely agree with Glebe that you need to sit down and understand all your figures and what your money actually did.

    You say that you invested in the following :-

    The securities comprised of:
    Macquarie Property Income Fund, amount $30,000.00
    Colonial First State First Choice Investment Platform:
    Colonial FS BT Core Australian Share: $20,000.00
    Colonial FS Colliers Global Property Security $20,000.00
    Colonial FS CFS Geared Global Share $10,000.00
    Colonial FS CFS Geared Share $40,000.00
    Colonial FS CFS Property Securities $30,000.00

    Grand total $150,000.00



    But you need to break this up into the number of units and the unit price at the time of purchase.

    Then having done this you can find what the final unit price was at time of cashing out to give you an actual +/- for each investment.

    Then as per Glebe's post you need to add back any distribution (converted capital to income) to arrive at your real net figures and hopefully you haven't suffered the loses you indicate.

    One unfortunate aspect of your timing is the market correction in August which may also have had a negative impact on the various unit prices. With internal gearing any negativity would be magnified.:eek:

    The issue with LE should be easy enough to resolve ones you have the full story at your finger tips.

    I look forward to seeing the actual figures so we can all help you further

    Cheers
     
  8. GMG

    GMG Member

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    Brisbane, QLD
    Thank you all for help and replies.

    As to the PDs', there were so many of them, and yes I read them, and it was just too much info.
    I trusted and paid the adviser to advise correct plan for me.


    Again, lesson for me to stick with what I understand. Give me a real estate contract, and a bank investment loan documents to read anytime.
    By having so many PDS' with up to 70-100 pages to read per each, some are smaller, it is just information overload in my experience.

    ASX Broker, thank you for the info. At this stage I am still collecting the final sales numbers, still awaiting for LE to inform me on the matter of the MPIF.

    Glebe and handyandy, you are correct in saying that there were distributions. So far these distributions certainly make the loss smaller.
    I was not aware of 15th Oct Mac distributions. I will wait for that and check the figures.

    I did not ask my adviser this time to handle the redemption for me, as he did not handle my super rollover correctly, which took more than a week from my life to sort out, and it is still not finished.
    Now, I'd rather handle the redemption myself, at least I know things will get done.

    Yes, it is unfortunate that I got into the market at the beginning of a volatile period. At least I had my units redeemed on 17th Oct, just before more drops in the market very recently.

    Once I have all numbers re: unit prices etc, I will post the whole amount plus distributions received, and the original unit prices when they were bought.

    As I like and enjoy real estate and understand it, I will keep following this path for now.
    Any future investments, whether managed funds, LICs and so on, I will keep educating myself, and possibly go through the investsmart site.
    But for now I've had enough excitement.

    Yes, pulling back is good for me and so is taking a deep breath.
    Thank you all for reminding of that. It helps, so does a good night sleep.

    I don't know how long it will take to get the final statements, but once I have them all, I will post the info.

    Thank you all once again for your help.

    Cheers,
    GMG
     
  9. GMG

    GMG Member

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    Sim, thank you for good and practical advice.

    ASX, thank you too. My adviser is licensed, but I am not sure if he and the company he works for is a member of Financial Planning Association. I will double check on that.

    Once again,I thank everyone for their quick replies and suggestions.
     
  10. GMG

    GMG Member

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    Just received info from LE

    Latest update:
    I was notified by LE today that the market value of MPIF stands at $23,735.37

    My confusion was with the amount of MPIF as a security value, which was $14,241.06

    LE person said that by LE stating the security value versus the market value may have inadvertantly confused me, so LE emailed me today the correct redemption amount today.
    This is all being sorted out now.
    The MPIF market value wil be transferred to my nominated account soon.

    Halleluyah!
    LE have been very helpful and prompt with me, I can see this now.
    Macquarie took little longer than other Fund Managers to process the redemption, still they were also prompt.
    The whole matter should be finalised in the next 2 days
    And, yes, by my quick calcualtions adding up all the distributions I received during holding these investments, my loss is almost neglible. Still need to dig out all my documents yet, but now things are looking good!

    Thanks to Invested great help!
    Cheers,
    GMG
     
  11. remorseless

    remorseless Member

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    Glebe,

    My understanding is MPIF posted a 0.26 cent dividend, not 26 cent?

    Regards,
    Mick
     
  12. bundy1964

    bundy1964 Well-Known Member

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    0.26 is how I read it too. June is the best month overall in the fund history.

    MDP distribution history

    Seems a common problem with income funds of having one good 1/4 a year and three average ones, with capitalised interest and drawdowns there are work arounds they just arn't as neat and tidy as a regular distribution.
     
  13. Glebe

    Glebe Well-Known Member

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    I think you're right Remorseless.

    Digging around and here are some futher distributions:

    31/03/2007 2.56950

    30/06/2007 29.79773

    MDP distribution history
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    End of financial year is almost always better than the others (unless they have a shocking quarter), since all undistributed income and realised capital gains must be distributed at that time.

    But this highlights one of the issues of relying on distribution income from most managed funds - it can be very unpredictable :(
     
  15. voigtstr

    voigtstr Well-Known Member

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    If relying on distribution income, make sure you keep a cash buffer so you can last at least 6 months if you get two quarters of very poor performance. When the fund picks up again you can pay back your cash buffer.
     
  16. GMG

    GMG Member

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    An update so far:
    Colonial has been finalised and paid me out, Le margin loan has been paid out.
    So far so good. Still waiting on Macquarie MPIF though. I will not post the final figures until MPIF has paid me back.

    Another question, please advise if it should be in another new thread.
    I also have Macquarie Fusion November/ December 2006 fund.
    Maturity date is 30th June 2012. $150,000 loan from Macbank,"capital guaranteed". I had to purchase a put option, since it is a %100 loan from Macquarie. The fund's performance has been so-so. For the past year it only made $27,000 or so profit.
    However.....there is the cost of the interest. I paid it monthly in arrears since the start date of December 06, and from 29th June this year I had to prepay next financial year's interest with the cost of put option. Approximately $15,000 at 9.4% fixed for the term of the loan (till end of June 2012).
    So, the cost of interest alone for the next 5.5 years will be close to $90,000.00
    Now, there is a risk that the fund will not do much in the next 5-6 years.
    Yes, it is "capital guaranteed", but I may potentially lose up to $90,000.00 in interest fees

    So, has anyone here tried to get out of Fusion prior to maturity date?
    What were the break costs? I know that Macquarie will insist to pay out the loan in full, once I decide to get out. With only $27,000 so called profit, and already pre-paid interest for the 07-08 financial year, is it at all viable?

    I haven't phoned Macquarie yet.
    Just wonder if anyone here has done this, and what were the consequences.
    I will discuss the matter with my accountant.
    However I would hate to lose $90,000.00.
    The "capital guaranteed" is only useful to the bank, but if the fund performs poorly, I will be liable for the interest loss.
    Any comments or opinions, please, and thank you.
    GMG

    And yes, I will re-read the PDS again, but I feel I need a lawyer to look at it and explain it in plain English.
     
  17. Glebe

    Glebe Well-Known Member

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    I have no idea, I went to the Fusion seminar and the whole thing baffled me. Someone else will know though.

    Im curious as to why you want to sell. You went into it with a 5 year timeframe, and you're bailing because it hasn't performed well in it's first year? Or is there another reason?
     
  18. handyandy

    handyandy Well-Known Member

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    Hi GMG

    The following link gives some discussion about the Mac capital gareentee products.

    http://www.invested.com.au/7/macquarie-newton-asia-funds-12992/

    There are also other posts around discussing similar things including the withdrawal process. A number of people have already activated a withdrawal but it can take some time and whilst the fund is in limbo you still pay the interest charges.

    Cheers

    PS I am in the middle of winding up one of these investments. You can just phone up Mac and they will send out a quote of the expected costs. In my case the prepaid interest is prorated back.
     
  19. GMG

    GMG Member

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    Thanks Glebe.
    I don't necessarily want to bail out of Fusion at this stage.
    Just considering my options.
    The reason for my question is that I was made redundant this year, and I have real estate plans as well, but mostly I am concerned that if we have a prolonged bear market, I may end up with the original amount invested Minus the $90,000.00 or so out of my own pocket, being interest payments
    This is lot of money to lose.
    I did recently fair amount of reading on the so called capital guaranteed products, but all they do is to protect the bank's capital, not mine.
    I do not remember my adviser explaining the potential loss on the interest repayment. All I heard was: Capital guaranteed, you will get your money back at the worst. At best the fund will double in the next 5 years.
    No mention at all of the paid interest loss.

    Yes, when I was still employed on a great wage, this "seemed" a good investment option.
    Now I'm not so sure.
     
  20. GMG

    GMG Member

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    Many thanks, handyandy. Very helpful thread.
    All I can say is: Yes, what a great business for PS.
    Automated, great money spinning machine.... Pity, it is not looking after his clients personally. It just throws a general template, properties are bad now. Put money into managed funds. Hey, borrow more, you can buy more funds this way. IT SUCKS!!!
    I was unfortunate enough to join the S club last year, which does not exist anymore.
    I will never listen to the hype and sell spiel again. Very cosy arrangements with Mbank!!!
    Strategy: get as many people as possible to the I updates, explain, scare and then sell MBank's managed funds (and some other funds).
    It does not matter about personal situation, just put all your spare money into the funds, and for the business of ff, fabulous commissions, kicbacks and trailing commissions for the life of the investment. Doesn't matter if the investment performs poorly. Hey, the commissions will always be paid!

    Agree, ff donut products= "scary stuff".
    I got lot of value form PS in the late 1990's and 2000. Certainly there was more integrity then.
    Now, clients beware.
    I am sick and tired of being pushed managed funds down my throat.
    And I am certainly very wary of the very cosy arrangement with M bank.
    M bank must be giving out some great incentive/commisions to all the sales/brokers/promoters.
    Even the mortgage broker I've been dealing with is promoting/recommending M Bank resi loans.

    I will call MBank soon, and get the figures from them.
    As I mentioned before, Had I LISTENED to myself, I would have been at least $100,000.00 upfront on another resi property in Brisbane.

    I did not attend the I update recently here in Brisbane
    I am still undoing the major stuff up with my super rollover
    Guess who mucked up? A certain wealth creator manager.
    And guess what super platform I was advised to go into?.....
    M bank.

    I don't trust any recommendations from ff.
    I find them incompetent.

    And no, I will not renew my memebership. Sapphire dissappeared now anyway.
    Good riddance.
    Had enough of hype and badly performing funds.

    Cheers,
    GMG.