Agribusiness MIS promoters aggressive; advisers ill-equipped to see past commissions
Promoters of agribusiness managed investment schemes are aggressive in seeking out financial planners to distribute their products and focus heavily on the benefits of commissions paid to planners as part of their pitch, according to a Queensland financial planner’s submission to the parliamentary inquiry into the sector.
In his submission, financial planner Martin Kerrigan said the firm of accountants and financial planners he works for, SnellemanTom, generally does “not go looking for agribusiness managed investment schemes”.
However, over the past 21 years Kerrigan has had nearly 30 face-to-face meetings with promoters of agribusiness managed investment schemes, and a "threefold" increase in the number of emails, letters or information kits sent to him on the topic.
Kerrigan said in his experience, the amount of time in those meetings dedicated by the promoter to discussing the “business opportunity in terms of commissions” that can be earned was equal to the time dedicated to the product structure and offering and the taxation aspects of the product.
Furthermore, Kerrigan argued that financial planners and Australian financial services licensees “do not normally have the skill to interpret the forecasts and the opinions” of the primary producer experts that are contained in most Product Disclosure Statements for agribusiness investment schemes. He argued that it is difficult for even professional advisers to “understand the costs, structures and implications” of agribusiness managed investment schemes.
“With our limited agricultural knowledge, we found it difficult to believe or disbelieve the promotional information,” Kerrigan’s submission states.
Given the difficulties faced by advisers in comprehending these schemes, “I suspect clients have even greater problems in interpreting the information provided by the promoters”.
In regards to the promotion of agribusiness managed investment schemes to clients, Kerrigan said many in the financial planning industry have been attracted to the “legality of the product”, with “tacit endorsement” from the Australian Taxation Office and the Australian and Securities and Investments Commission, as well as the “tremendous revenue opportunities” the schemes presented.
As a result, many have “chosen to hide behind the veneer of legality and accept the positive effect that a product paying 10 per cent commission provides to their business”.
Kerrigan said there were some who believed the 10 per cent commissions paid to advisers who recommended these products were necessary, “as the financial planner will need to report on the investment for the next 10 years”.
He encouraged the members of the parliamentary joint committee to “ignore this vacuous and self-serving position".
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