Patrick Diack was censured by the FMA for offering the money if people outside Work and Income offices signed up for Superlife products. He was unregistered and had also been working for his brother, Lawrence’s, firm, Mr and Mrs KiwiSaver, selling Fidelity Life KiwiSaver products.
He said his team amassed 5000 customers by again offering financial incentives, usually in the form of vouchers, to clients who signed up.
That soon raised eyebrows and another warning was issued, Fidelity Life requested the company be closed down and Diack was fired.
Patrick Diack said his father drafted an agreement between the two brothers, under which Lawrence Diack agreed to pay half of the trail commission for the 2000 customers Patrick was directly responsible for signing up, for the rest of his life.
The trail was 0.25% of funds under management, per annum.
But after two payments, they stopped. He received only $891 in total although some of his debts were written off. Diack said it was because the FMA had publicised his name and his brother knew he would not be able to rewrite the customer base.
Lawrence Diack went on to set up another business, Saving Kiwis, and Patrick Diack said he should have been paid commissions via that business too.
He took the case to court but was unable to have the contract enforced because the judge ruled that his behaviour, including threats, dealing in KiwiSaver while not being a registered adviser, and touting for business with incentives while wearing branded clothing and handing out business cards, had been to the detriment of his brother’s business.
The judge said the trail agreement had only been signed by Lawrence under duress but the fact that a payment was made amounted to confirming the contract.
“The very existence of the trail is conditional on [Mr and Mrs KiwiSaver] maintaining its relationship with Fidelity Life and remaining in existence as an authorised agent for selling KiwiSaver products. Both those conditions were liable to fail if Patrick acted in a way which brought [the company] into disrepute or damaged its business…. If a share of trail is to continue to be paid to Patrick, both parties logically have an obligation not to act in a way which might bring the trail to an end.”
But he said Fidelity Life was still paying trail to Lawrence Diack’s firm and might do so indefinitely. “This has obviously created a deep feeling of injustice in Patrick… I consider that relief should be granted by way of payment of a lump sum of $5000 as compensation.”
Patrick Diack said he had been left hurt and broke by the experience. He had spent $20,000 on his legal challenge. “I’m now unemployed and broke. I’ve got nothing. I worked for him for 18 months and made him a lot of money. I trusted my brother.”
Lawrence Diack did not want to comment.
Update note: We have had a number of comments on this story and have chosen not to moderate any of them. Consequently we have turned off comments on this story.
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