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[UPDATED] Moyle: Steer clear of messy family situations

NZ Financial Planning founder and director Greg Moyle has been criticised by a High Court judge, and says he’s learnt one thing recently: Don’t be a trustee or the executor of an estate where there’s a second marriage involved.

Friday, April 11th 2014, 6:00AM 22 Comments

by Susan Edmunds

He been criticised in court over his handling of a $1.4 million estate.

Moyle was the executor of a will left by farmer Murray Dean, who wanted to provide an income for his widow, and for the money to be distributed among his sons, from his first marriage, upon her death.

A High Court judgment said the value of the estate had dropped by $230,000 over 10 years after Dean’s death - and New Zealand Financial Planning was charging more than $1000 a month as a portfolio monitoring fee. It also showed an unauthorised payment of $52,000 out of the capital of the fund to Dean's wife, also an executor of the will.

Moyle said the overpayment was a mistake, was small and was recovered so there was no depletion of the capital that was to pass to her stepsons when she died.

Justice Murray Gilbert found Moyle had "persistently failed over many years" to provide information to Dean's sons even though they were entitled to it and it was available.

But Moyle says he became the victim of a family dispute.  He said he heard from the brothers in 2006 and answered their inquiry.  “They wanted information and I said I was happy to [provide it] as long as the life tenant, their stepmother, was happy. My recollection is that she wasn’t. The next correspondence was six years later.”

In 2011, he was contacted by lawyers and Moyle sent information requested.  “They wanted more information that I didn’t have… they wrote to me on December 20 and said they wanted the information by January 14 or they were going to court. I couldn’t get the information from the accountant until the end of January.”

Moyle said the case had left him with a lot of concerned clients.  “The consequences for me are far in excess of the issue. I tried to act in the interests of my client, who wanted to look after his wife.”

He said it was detrimental to other financial advisers to have the case played out in court. “It paints the industry as self-serving, managing money until it’s all gone. What I’ve done wrong is accept the appointment in the first place.”

The investment had been for income rather than growth because his client wanted his widow to be in a sound financial position, he said.

Moyle was ordered to pay $1300 in court costs.

He has now moved his clients from NZ Financial Planning to a new company, Financial Planning NZ.

Moyle said he had no knowledge of a complaint reportedly made to the FMA about him in 2011.

READ THE JUDGMENT HERE

Wendy Russell, Dean's widow, responds: What family dispute? There has been no dispute to my knowledge. It seems also that [Moyle's] recollection about information being sent to the Deans has failed him. At no time did I suggest they they not receive reports. In fact, I was aghast to find this has not been done on a regular basis.

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Comments from our readers

On 11 April 2014 at 8:24 am Fred said:
Poor man! Unfortunate reporting & a very harsh penalty with reputational consequences for an industry pioneer.

A caution for Advisers in the comment thee only wrong was accepting the appointment in the first place.”
On 11 April 2014 at 8:49 am Brian said:
Moyle's movement from NZ Financial Planning to Financial Planning NZ is nothing to do with this event.

Now that Moyle is firmly within AMP's mandate, it will be interesting to observe their repercussions of this.
On 11 April 2014 at 9:02 am Anonymous said:
A little disingenuous of Mr Moyle perhaps?
Having read the 7 page judgment in detail,I would suggest that all advisers read the judgment themselves. The link is below.

My understanding is that there are clear precedents that an Executor and Trustee have a fiduciary duty to all beneficiaries, which include income and capital beneficiaries.

All AFA's should understand this well.

Here is the link to the judgment for those of you who want more information

http://goo.gl/VcQl7X
On 11 April 2014 at 9:20 am Thomas said:
Even now Greg doesn't seem to understand that he was a trustee and executor not just a financial adviser to the estate. It is for conduct in the trustee's role he has been criticized.
On 11 April 2014 at 12:38 pm Informed said:
With respect, it is irrelevant whether Mr Moyle is an 'industry pioneer.' Rather, this is a stark reminder for all professionals about the value of one's reputation today and, in turn, how past deeds can be so critical.
On 11 April 2014 at 1:42 pm Bill said:
Financial adviser to the client
& manage the clients money
& be a trustee in their trust too !!!

conflict of interest ?

rather unwise ?

no brainer ?
On 12 April 2014 at 2:48 pm Lee Garlington, PhD said:
I am an asset manager and $1000 per month for a $1.4m estate desiring income is much too much in my mind. The usual charge is 1% to 1.5% of the asset per year. Further he should have had all of the information that his accountant had. Another example of "good ole boy" Financial casualness.
On 14 April 2014 at 9:50 am Keith said:
By my calculations, $1,000 per month is $12,000 per year. If you charge 1% of $1.4m that equals $14,000 per year and 1.5% is $21,000 per year! Based on this, $1,000 per month does not look excessive.
On 14 April 2014 at 10:31 am Stanley Running said:
$1000 per month is excessive. Bearing in mind most likely there are underlying fund managers being paid at 1.5% of Fum per annum, these guys are probably getting charged 2.5% all up on an income portfolio
On 14 April 2014 at 10:46 am Brent Sheather said:
OMG, time to inject some reality into this discussion of fees. Keith how can you say $1,000 per month doesn’t look excessive? If it is $12,000 pa on $1.4m that is about 1%. Given that a high quality bond portfolio is going to struggle to yield more than 5% a 1% fee is 20% of pre-tax returns out the window to manage something that doesn’t take too much brain power. That looks hugely excessive does it not?
On 14 April 2014 at 10:52 am sparker said:
I concur, this judgement is well worth the read, and provides a cautionary and timely reminder to all advisers of their Fiduciary obligations.
Also helps provide clarity around portfolio reporting legalities to the trusts ultimate beneficiaries which is not often discussed.

Ps. I would believe any fee over 1% is too expensive for a $1.4m income portfolio:)
On 14 April 2014 at 12:36 pm James said:
Brent, the portfolio wont be a bond portfolio.

The Trustees have an obligation to look after both classes of beneficiary (those who receive the income and those who eventually receive the capital).

Therefore the portfolio should be more of a "balanced" portfolio rather than bond portfolio. (There have been several high profile court cases about this, eg Mulligane). Also the fees charged to run an estate are usually charged to capital, not income, so the widow won't bear the cost of portfolio management or estate managment.

Also Brent, the yield on a bond portfolio is locked in at the time the bonds are purchased so the bond portion of this portfolio could well be returning in excess of the 5% that you would yield today if you were to purchase an entire bond portfolio from scratch.
On 14 April 2014 at 3:02 pm Bill said:
The 1% probably covered:

- his duties as trustee

- some of his office costs - rent & phone & power & rates & insurance

- some of his PI cover

- some of the cost of external research

- some of his time, getting CPD credits

- a whole lot of extra costs due to FMA & AFA requirements

- a whole lot of time and cost absorbed on AML & CFT & FATCA

- wages

- portfolio design and monitoring

- tax

After all that I am guessing Mr Moyle took home maybe $1,000 pa. for himself

David Greenslade once told us: "guys, this business is not without risk (e.g. being sued or FMA'd), and if you are not going to make a fair profit, then go and do something a whole lot less risky"

I don't always agree with DG, but in this case he was 100% right

Mr Moyle was made a common but unwise decision to be both an adviser and trustee, and he is now paying a very heavy price.

As DG said, this job is not without risk - lots of risks.

On 14 April 2014 at 4:10 pm Realist said:
It was obviously unwise for him to act in the three different capacities. Someone with his experience and qualifications should have known better.

The after fee performance of the portfolio leaves a lot to be desired. Perhaps someone from his former group should run a performance report for a balanced risk profile investor for the period (1/4/07 to 30/9/12)and report it in the comments for the article.
On 14 April 2014 at 4:30 pm Brent Sheather said:
Hi James

Yes that is what I thought at first too and I am aware of Mulligan and the need to account for both income and residual capital beneficiaries but … if you look at the performance of the portfolio … I think it fell in value by $230,000 over 10 years … this suggests it had a high bond weighting or was very badly invested in shares?

On your last point the yield on the bond portfolio would have been locked in but only for 2-3 years as this is the time it would take for the short dated bonds to mature so I’m guessing that the yield to maturity on the bond portfolio would be close to 5%. And even if it was 6% taking 1% in fees doesn’t look “fair” or “putting your client’s interest first”. Does it? Obviously I don’t know the details of this portfolio just making a general comment.

On 14 April 2014 at 5:47 pm btw said:
Brent, just to clarify – “putting the client’s interest first” is an AFA duty so isn’t applicable in this instance. The trustee or fiduciary duty that applies in this case is to “act in the client’s best interest”, and specifically, to “avoid any conflict of interest”. In this case, if Mr Moyle was indeed guilty of such a breach, he is fortunate he wasn’t made to restore the full value of the portfolio – which is possible for a breach of fiduciary duty.

I don’t mean to be pedantic – but the Code Committee has deliberately created this state of confusion and I (occasionally) feel duty bound to point it out.
On 15 April 2014 at 8:59 am Bill said:
If the income beneficiary needed a fixed income (as available from a platform) throughout the GFC, then the portfolio may have fallen due to the fixed income exceeding the return

e.g. if the lady was drawing down say $60,000 pa through 2008 and 2009 then this would have been consumption of capital, since the return would have been a minus

What else would anybody do ? Not use capital during the GFC and starve ?

And there was inflation over the past 10 years. No doubt the house needed painting or a new roof, the car needed repairs, perhaps she needed a new hip, and so on

Sounds like a lack of realism here from the judge all the way down to the complaining sons



e.g starting at $1.4 million, and she wanted say $50,000

The $230,00 fall does not eman it wa sa bad porfoiloDos not mean
On 15 April 2014 at 12:37 pm btw said:
@ Bill,

Bill, there is nothing in the judgement that indicates she was entitled to a fixed sum. She was only entitled to the net annual income, whatever that might be. She had no right to "dip" into capital.
On 15 April 2014 at 3:10 pm graemetee said:
These comments have gone off the rails, again. The case was about a trustee's duty to beneficiaries which was not disputed in the facts. Moyle didn't supply information that he should have and he didn't dispute that. The issue was costs of the legal action that Mr Moyle was attempting to get the Trust to pay and nothing to do with investing. perhaps with different legal advice the claimants could have got a lot more than their costs but that is nothing to do with this case.
On 15 April 2014 at 4:13 pm Gavin Austin ABCompliance said:
Brent your quote. "I think it fell in value by $230,000 over 10 years … this suggests it had a high bond weighting or was very badly invested in shares?" From the judgement itself it fell from $1.403 million as at 31/3/2007 to $1.168 million as at 30./09/2012."

That's 5 1/2 years by my maths and covers most of the period when markets were badly affected by the GFC. So to fall in value by 17% and if you add back the fees and the incorrect capital payment then only by 8.4% (both simple rates not compound) may suggest it wasn't as badly invested in shares as you thought.
On 15 April 2014 at 5:12 pm brent sheather said:
Hi Gavin, I didn't look closely at the judgement..just the comment in Susan's article which says it dropped by 230k over 10yrs.
I agree your numbers using the judgement don't look too bad...but I would have to compare it with the benchmarks and know more details to comment further.
On 16 April 2014 at 6:57 am The Editor said:
Comments are being closed on this story. There has been some useful discussion and hopefully advisers/trustees have used this event as a useful reminder of their duties. We note the judgment has been viewed many times.
The Editor
Commenting is closed

 

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