Wealthsure Pty Ltd (WPL) has been placed into voluntary administration, with control of the company passing to Melsom Robson Chartered Accountants as of Monday September 21.
WPL is a separate entity to Wealthsure Financial Services (WFS), which was acquired by Sentry Group in April 30 this year. Prior to this, the two Wealthsure Group entities were part of the same company, but with individual Australian financial services licenses (AFSLs).
Notification of the appointment of an external administrator to WPL was posted on the Australian Securities and Investments Commission (ASIC) website on Monday.
“My understanding is that it has gone into voluntary administration simply because it’s had one or two [professional indemnity insurance] claims that have turned pear-shaped, and they’ve decided it was too hard [to continue],” says David Newman, the former managing director of Wealthsure and now an executive director of Sentry Group.
Before the merger between WFS and Sentry Group was finalised, the Australian Securities and Investments Commission (ASIC) renegotiated the enforceable undertaking (EU) it accepted from Wealthsure in August 2013. This was essentially restructured as two separate EUs, reflecting the different activities of the WFS and WPL businesses, the latter also holding an Australian credit license.
“We bought WFS, which had a license, was clean, and had only been operating for about two years, with around 20 advisers. We bought that license, and then we transferred the advisers from WPL across to WFS,” says Murray Hills, chairman and director of Sentry Group.
Pushed to breaking point
Newman says that after the EU, WPL had been managing a number of ongoing internal and external disputes, including client complaints and claims against the business’s professional indemnity run-off cover.
“I can’t give you a number, as it’s four or five months since we had oversight of that, but it wasn’t a huge number [of claims],” he says.
“We weren’t talking hundreds or even 40 or 50, but I think just for one or two of them, the result was just not what was expected.”
Hills says that in one of the largest claims, Larsson versus Wealthsure, “the award claim was $860,000 plus costs, probably closer to $1.5 million in total, and that was a bridge too far”.
Business as usual
Both Hills and Newman emphasise that neither Sentry Group nor Wealthsure Financial Services – which now has a total of 247 authorised representatives – are materially impacted by WPL’s entry into administration.
“It has no effect on us day-to-day, all the financial management was transferred, and the advisers came across,” Hills says.
“It’s unfortunate, because there might be a bit of brand damage, unfortunately.”
However, he suggests these events could hasten the rebranding of the Wealthsure AFS license under the Sentry Group banner.
“We might. We’ll let it settle for a couple of weeks, but might raise it at our next adviser PD day in November, to see if there is a majority [of advisers] that would be interested in changing the name.
“But again, June 30 next year would be the logical time,” Hills says, referring to the broad changes it requires, including document and stationery reprints and website alterations.
“In terms of our advisers, we’ve written to them this morning, they seem to be comfortable that they’re moving on in the new license with us,” he says.
The road ahead
Around five months ago, Newman handed control of WPL over to Albert di Sabatino, who could not immediately be reached for comment yesterday.
“I guess he’s now stepping aside today, and the administrator would be running it,” Newman says.
“The important thing is that the old Wealthsure WPL is, as a result of the merger [with Sentry], a separate standalone entity and cancelled its AFSL back in April.”
According to Hills, the cancellation of WPL’s AFS license was part of the arrangement made with ASIC: “It wasn’t going to trade, and had no advisers left. It was a shell, and has been managing the run off of claims.”
For APL and its new administrator, the next step involves a creditors meeting, which is scheduled for October 2.
“But for us, we’re ploughing ahead, continuing to do things in growing the network and building the business,” Newman says.
He says the most recent developments were not entirely unexpected.
“It was at the back of my mind that, potentially, it could be there,” he says.
“We’d prefer for it not to have occurred, but it is what it is, and it’s not our call.”
Hills agrees, saying they would “prefer not to have the brand issue”.
“Knowing then what we know now, we might have forced it [the rebranding],” he says.
“It costs some businesses upwards of $20,000 to make a branding change, and we didn’t want to make too many changes at that time…but we’ll manage it.”
