This article in the Sunday Star Times gives a good insight into the advice given on finance companies by Chris Lee. Have a read of this :
http://www.stuff.co.nz/business/pers...-and-adversity
Excerpts :
"In March 2006 Lee invested the Lindsays' money in Hanover Capital, but in October the next year he withdrew support for the company and wrote in his public blog: "Mark Hotchin and Eric Watson are not bankers, and not the sort of people one would regard as low-risk conservatives." Good one.
"In a letter to the couple in early February, Lee said: "Never did I make your decisions. Not once have I contacted you, or any client seeking to persuade you to invest money in anything. Never have I invested your money for you. You invested your money." Another good one.
Advice and adversity
By ROB STOCK - Sunday Star Times
"It appears to be a collection of investments without any structure, and looks more like something from a DIY investor, rather than one put together by an investment professional."
That's the opinion of senior Spicers' financial planner Jeff Matthews on a portfolio created for retired Southland farmers Clare and John Lindsay on the advice of high-profile Kapiti Coast adviser Chris Lee.
In an assessment paid for by the Lindsays in a bid to get Lee to compensate them for losses, Matthews said: "It is pretty obvious you have a poorly constructed portfolio, which has exposed you to considerable capital loss from investments that should be considered safe.
"A well-constructed bond portfolio should give investors peace of mind and a regular income, and you have neither."
And peace of mind is what the Lindsays say they were after, saying they told Lee when they first contacted him back in 2005 that they considered themselves conservative investors, though they have no written proof of that, and Lee says he does not keep records of clients' risk profiles.
But the Lindsays have been left holding virtually worthless Babcock & Brown subordinated notes, as well as capital notes in St Laurence (in moratorium), debentures in Dorchester Finance (in moratorium), Hanover Capital preference shares (in moratorium), debentures in North South Finance (in moratorium) and two tranches of debentures in Strategic Finance (in moratorium).
The couple said they were private people and asked for the sums involved to be kept confidential, but felt they needed to tell their story because they were infuriated to see Lee continually quoted in the media and criticising others when they feel so badly let down.
"You read his blogs and feel he's a really good guy that is there for the investors, but we feel that is just an illusion," said Clare Lindsay.
Around 60% of their portfolio was in finance companies. Around 30% was in investments with either no rating from a respected international ratings agency, or a rating below investment grade.
Nine of the 18 non-cash investments in their portfolio are in serious trouble, with another bonds in Nufarm trading at a discount to face value.
Missing, noted Matthews, were the large weightings of highly rated, liquid corporate bonds and government stock which would usually underpin a portfolio for conservative investors.
The result has been a big drop in the Lindsays' income.
Lee said that although he sympathised with investors who had lost money, financial markets deteriorated further and faster than anyone forecast. That badly affected and in some cases destroyed reputable organisations that were previously well thought of.
"No financial strategy, other than to buy government stock and use bank deposits only, has been successful," he wrote to the Lindsays earlier this year.
Ad Feedback Clare Lindsay said the couple felt they had been naive. They feel they handed over the management of their retirement nest eggs too casually something they would not have done with the management of their farm.
They have not ruled out legal action, but feel they are not wealthy enough to risk more on a court battle for compensation.
The Lindsays have asked Lee to buy back the investments they say were never suitable for them Hanover Capital preference shares and St Laurence capital notes, both of which are lower ranking than debentures as well as their investments in Strategic Finance, made in late 2007, when they say Lee should have realised there were high risks around the company.
Lee has told the couple he will not do so.
The couple also feel betrayed by Lee's public criticism of companies he had advised them to invest in.
In March 2006 Lee invested the Lindsays' money in Hanover Capital, but in October the next year he withdrew support for the company and wrote in his public blog: "Mark Hotchin and Eric Watson are not bankers, and not the sort of people one would regard as low-risk conservatives."
Lee told the Sunday Star-Times he could understand the criticism, but said his outspoken stances and advice to finance companies had been heeded in cases which had helped preserve the company. He declined to say which firms had been so preserved.
Lee said: "They want to put their side of the story to you, which is their right. It is not something I would do, but I guess it is their choice.
"I won't comment on them individually, but I do accept we are in very stressful times, and that people have every reason to be outraged by losses they have and anyone who has lost 10% of their money would be outraged, but most of the country that have invested money would have lost more.
"The reality is we haven't got everything right, but we have been a little bit more right than wrong."
He estimated that about 12% of $1.2 billion in clients' money was in frozen finance companies, the bulk in Strategic and St Laurence. The outcome for investors in those is uncertain.
The Lindsays say that when they went to Lee in 2005, they thought they were taking on an adviser who would build a portfolio for them. The only difference to other advisers was that they would manage their own paperwork.
Lee said his firm did not work like that. It did offer advice, but as a sharebroker with around 10,000 clients, it did not take responsibility for clients' portfolios. Instead, advice was given when sought on individual securities, and free consultations given on portfolios, Lee said.
"We can't and don't run portfolios for people. We don't charge them fees [Lee is a commission-only adviser] or sit down with people in Auckland."
And at the end of the day, investors were making their own decisions.
In a letter to the couple in early February, Lee said: "Never did I make your decisions. Not once have I contacted you, or any client seeking to persuade you to invest money in anything. Never have I invested your money for you. You invested your money."
Clients are contacted through email alerts, but it is they who pick up the phone and ask whether new issues are suitable for them, or what they should do when an investment they have matures, he said.
In one letter to the Lindsays, Lee does appear to acknowledge that the couple were concerned over risk, saying he believed they expressed their needs as "being above bank rate interest on your capital with as little risk as possible", reflecting their retirement and decision to defer buying a house.
Lee famously offered to compensate clients he had advised to invest in Provincial Finance, which was the first finance company to collapse, back in 2006.
But Lee said that was because he could see that there had been flaws in his researching of the company. It should not be interpreted as an offer to make up for any losses resulting from advice his firm gave, he said.
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Originally Posted by minimoke
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