Financial planners who sold their businesses to Poynter Hargraves claim underpayment

A group of financial planners who sold their business to Poynter Hargraves claim they have been underpaid – a claim the Adelaide firm denies.

Businesses which sold their client books to Poynter Hargraves claim to have been underpaid.

Five financial planners who have sold their client books to Adelaide firm Poynter Hargraves claim they have not been paid their second and third tranche payments.

News Corp Australia reported last month that the Mile End financial planning firm has been required to instigate an external review of its practices and submit to new conditions placed on its financial services licence after a “targeted surveillance” operation by the Australian Securities and Investments Commission.

The firm, which has to replace managing director Craig Hargraves as its responsible manager as part of those conditions, is also in dispute with a number of financial planners who say they have been yet to be paid a combined hundreds of thousands of dollars.

Through his lawyer, Craig Hargraves said the payments were not made because of commercial terms in the sale contracts around the retention of clients and were “entirely justified’’.

Firms including FGB Financial Strategies, the former financial planning arm of Bernie Lewis Home Loans, and Mackay-based ACF Planning, were sold to Poynter Hargraves in recent years it is claimed, with the deals involving an upfront payment of usually 70 per cent, with further payments to follow.

Poynter Hargraves managing director Craig Hargraves.

FGB’s former owner Andrew Murdock said, in each case, the vendors had not been paid their follow up payments, with Poynter Hargraves apparently saying the recurring revenues generated by their client books did not live up to expectations.

Mr Murdock, and Mark Lewis from Bernie Lewis Home Loans, disputed that there was any issue with the quality of the businesses they sold to Poynter Hargraves.

News Corp Australia spoke with representatives of four of the five businesses via an online hook-up, with each saying they had experienced the same response from Craig Hargraves, with all also saying that they had sold good quality client lists to the firm.

Mr Murdock said he sold a book of about 1000 clients to Poynter Hargraves in 2018.

He said he was due follow up payments of $299,898 by the company 45 days after the sale and a third instalment of $214,213, both of which have not been paid.

Mr Murdock said Poynter Hargraves had told him clients had left or not been contactable and therefore he was not due the payments but he had not been shown comprehensive proof of this.

Mr Hargraves’ statement says “a purchase price reconciliation was sent in strict accordance with the sale and purchase agreements to each of the vendors’’.

Mr Murdock said he had complained to ASIC about the non-payment issue but had been told it was a matter for the civil courts.

Michael Goggan from Mackay in Queensland said the first payment for his business, ACF Planning, was late, and he also did not receive his second and third payments, nor a good explanation as to why.

Mr Hargraves’ statement says it is standard industry practice to stagger the purchase price over time, to allow for adjustments should clients leave and therefore impact recurring revenue.

“A number of vendors of client portfolios who sold their portfolios to Poynter Hargraves have not been paid (or not been paid in full) their second and/or third instalments,’’ the statement says.

“The reconciliations contemplated by each of the sale and purchase agreements were undertaken some time ago and provided to the vendors.

“The withholding of payments by Poynter Hargraves to these vendors is entirely justified under the terms of the relevant sale and purchase agreements. No vendor has commenced proceedings against Poynter Hargraves claiming that Poynter Hargraves had no entitlement to withhold payments in light of those reconciliations.’’

Mr Hargraves’ lawyer said Mr Hargraves had been contacted in October 2020 by someone threatening a class action on behalf of a number of vendors ,but had not been able to establish the bona fides of the person, who had not been heard from since November.

Poynter Hargraves was set up in Adelaide in 1987, and now has offices in Miranda in NSW and Brisbane, Cairns, Mackay and Rockhampton in Queensland.

ASIC said last month its investigation had found that Poynter Hargraves firm “had poor risk controls around conflict management and was not adequately monitoring and supervising its representatives’’.

“ASIC’s surveillance also found that some clients were provided with financial advice that failed to meet the best interests duty and related obligations.’’

ASIC has required the firm to engage an independent expert to “review and make recommendations on how its audit processes and conflict management can be improved’’.

“The independent expert must also pre-vet a sample of advice and report on the effectiveness of the improvements made by Poynter Hargraves,’’ ASIC said.

The licence conditions were imposed by consent following Poynter Hargraves’ engagement in addressing ASIC’s concerns, the regulator said.