ASIC fakes Dover evidence

Yes. This sentence is true. ASIC faked evidence about Dover and Terry McMaster.

ASIC then used its faked evidence to get Dover and Terry McMaster to the Royal Commission, to substantiate a Treasury submission for increased directional powers and to force Dover to close.

What was the faked evidence?

The faked evidence comprises five “Examples” created by ASIC’s Brisbane based investigations team in 2016. This occurred during the ASIC audit of Dover. Terry McMaster requested this audit in early 2016 at a meeting with Louise Macaulay.

These fives examples were first used as a basis for ASIC wanting to close Dover using injunctions under section 1101B and section 1324 of the Corporations Act. They were also used as a base for ASIC requesting increased directive powers from Treasurer Josh Frydenberg in 2017.  They were provided to the Hayne Royal Commission  to induce the Hayne Royal Commission to call Terry McMaster and Dover as witnesses in early 2018. They were then used by ASIC to force Dover to close in April 2018 and by ASIC’s Mr Tim Mullaly’s false statements about Terry McMaster in the June 2018 enforceable undertaking.

This Friday Reflection details how ASIC faked this evidence. Numerous further examples exist.  Many of these will be detailed in the coming Friday Reflections.

If any reader doubts any of the above statements we invite them to contact Terry McMaster on for a detailed documentary proof of each statement.

ASIC’s views on misleading and deceptive conduct (other than its own)

ASIC is loud about the need to stamp out misleading and deceptive behaviour.

ASIC’s senior executive Ms Louise Macaulay denounces misleading and deceptive behaviour by persons other than ASIC. In ASIC Media Release 18-142 17 May 2018 Louise indignantly writes:

“Providing false evidence to ASIC in an attempt to avoid scrutiny by the regulator is reprehensible and does not uphold the attributes of honesty and integrity required of a financial adviser.”

Ms Macaulay then announces ASIC had banned the offending adviser for five years.

I am sure Ms Macaulay will not hesitate to apply this standard to her own behaviour and the behaviour of the ASIC staff she supervised. This includes the ASIC staff involved in faking the ASIC evidence against Terry McMaster, as detailed below. And the ASIC staff who have since tried to cover the faked evidence up. Clearly reprehensible behaviour by ASIC. Clearly behaviour deserving of very serious sanctions and consequences. ASIC staff cannot just make stuff up. They have to be honest and truthful. Not dishonest and untruthful.

ASIC’s Mr Daniel Crennan QC is publicly committed to stamping out misleading and deceptive behaviour. He is on the record everywhere saying he will sternly punish misleading and deceptive behaviour. What will Mr Crennan QC do when confronted with misleading and deceiving behaviour by his ASIC colleagues? Will he stamp it out and sternly punish the ASIC executives involved?  Or will Mr Crennan QC do nothing, become complicit and thereby perpetuate it?

Mr Daniel Crennan QC is a barrister. This means he is an officer of the court and subject to very high standards of behaviour. Mr Crennan QC’s duties to the court and the administration of justice override his duty to his employer, ASIC. It is a serious matter for a QC to be directly and indirectly involved in the falsification of evidence and other misleading and deceptive conduct, or be involved in covering up such activities. A QC is required to do better than this.

ASIC’s ex-banker Chairperson, Mr James Shipton 100% supports Daniel’s public commitment to stamping out misleading and deceptive behaviour. It’s a critical part of Mr Shipton’s “Fairness Imperative”. He is long aware that his colleagues faked evidence about Dover but so far he appears to have done nothing about it. Mr Shipton is new to his role as Chairperson. But as the months go by, fully informed of the fake evidence, Mr Shipton becomes more and more responsible for it.

ASIC Commissioner Mr John Price lectures non-ASIC persons that the behaviour they walk past is the behaviour they accept. He implores them to raise their standards. Dover has repeatedly drawn the fake ASIC evidence issue to Mr Price’s attention. Mr Price appears to have done nothing. Mr Price has walked, run, even sprinted, past it, without a backward glance. His own standards do not seem particularly high: Mr Price’s fellow ASIC Commissioners are fully informed that ASIC falsified evidence. They are choosing to do nothing: they are walking right past it too.

Let’s see if Louise, Daniel, James and John and others at ASIC are fair dinkum. Let’s see if they are genuinely committed to stamping out and punishing misleading and deceptive behaviour. The sort of behaviour designed to induce an erroneous assumption about a person or a state of affairs, usually to that other person’s detriment.

ASIC’s investigation: the great ASIC cover up

The matters discussed in this Friday Reflections are being investigated by ASIC’s Professional Standards Unit. There is no evidence this matter is being genuinely investigated. No person mentioned in the two following case studies have been contacted by the investigating officers. ASIC is refusing to provide details of its progress. ASIC will not even meet with Dover. Dover has repeatedly requested meetings and these requests have been repeatedly declined.

The evidence so far suggests ASIC’s PSU investigation is an ASIC whitewash.

Please read the rest of this Friday Reflections carefully and ask yourself what you think has really happened here.

One of many false, misleading and deceptive documents created by ASIC

This is what ASIC gave to the Royal Commission to convince it to call Terry McMaster as a witness:

Introducing Terry McMaster’s client

Terry McMaster had a series of meetings with Dr Amit Vohra[1]in late 2013 and early 2014. Dr Amit was the CEO of the General Practice Registrars Association.

Dr Amit was previously a senior Royal Australian Navy officer. He holds a Ph.D. in science and a MBA. These meetings discussed, amongst many other things, the “McMasters’ Financial Planning for Doctors” manual, and whether McMasters’ could create a similar manual explaining similar issues facing general practice registrars (typically younger doctors just out of university working on salary in a hospital setting).

Dr Amit is now the General Manager of Health Solutions at Sonic Clinical Services.

Does Amit seem like the sort of guy depicted in ASIC Example 3 – Advice of Terry McMaster?

The GPRA’s financial planning manual: Financial Planning for Registrars

The GPRA’s concerns

The GPRA was concerned about commission driven sales pitches from unscrupulous accountants and financial planners selling hard to GPRA members.Many firms specialize in selling expensive and unnecessary financial products to young doctors, via sponsored university cocktail parties and similar marketing strategies.

Dr Amit asked Terry to create a registrar specific manual discussing the common problems encountered by young doctors. He wanted warnings about what to watch out for.

Dr Amit stressed content for young doctors. Particularly commission free and tax-deductible risk insurances, commission free super[3], wills and estate planning, asset protection, co-habiting issues, cars and travel.

The GPRA manual was completed in late 2013.

This extract gives an idea of this manual’s content:

Terry’s advice to Dr Amit

Over a coffee Dr Amit told Terry of his plan to set up a SMSF, transfer his HESTA benefits to it and borrow to buy a house in Melbourne’s western suburbs, near Dr Amit’s family home. Terry was not enthusiastic. Terry suggested Dr Amit instead get commission free low-cost Australian share-based index funds, eg Vanguard[4].

Terry and Dr Amit discussed Terry’s concerns about a SMSF borrowing to buy property. Dr Amit remained insistent on his SMSF investing in property. Eventually Terry surrendered and captured their thoughts in an SOA dated 12 February 2015.

What does Dr Amit have to say about this matter?

First, Dr Amit says he decided to set up a SMSF and borrow to buy a property. Dr Amit says Terry did not initiate the idea and did not encourage it.

Second, Dr Amit says Terry discouraged his idea, and suggested commission free index funds instead.

Third, Dr Amit says he engaged Terry because Terry did not accept commissions and employed a team of experts[5]who specialized in their fields, such as SMSFs, property and risk insurances.

On Tuesday 19 February 2019 Dr Amit wrote to Terry:

Did the ASIC investigators discuss Terry’s advice with Dr Amit?

You would think a quick call to Dr Amit, the recipient of the advice, would be an obvious first step.

The ASIC investigators did not contact Dr Amit.

Since Dover complained about this matter ASIC’s PSU investigators have not contacted Dr Amit. This is despite Dover asking them to do so on numerous occasions, with a CC to Dr Amit.

Terry’s advice to Dr Amit was commission free

Terry’s advice to Dr Amit was commission free: all insurance commissions were remitted to Dr Amit. Making sure his insurance premiums were tax deductible and commission free means over the first three years the net premium cost reduces to just 28% of the original cost[6].

This was obviously in Dr Amit’s best interests. However, as you will learn below somehow the ASIC investigators reasoned it was not.

Terry did not accept commissions. Neither did his McMasters’ colleagues. Every year they rebated more than $1,000,000 in commissions to the McMasters’ clients. They did this to make sure their clients could trust their advice and to make sure they were free of institutional bias.

Terry’s advice included the following passage:

Just another part of Terry’s advice to Dr Amit the ASIC officers decided to ignore.

This where ASIC really get nasty. This is where ASIC starts telling lies.

A reminder: this is what the ASIC experts wrote about Terry’s advice to Dr Amit:

Sounds bad, doesn’t it

ASIC makes Terry look like the worst adviser ever. A rogue adviser whose sole purpose was to corruptly mislead and exploit vulnerable and gullible clients.

There is only one problem: it is a pack of lies. Barely a word is true. Its maliciously false. It was created for no purpose other than to mislead the reader (which ultimately included Treasury and the Hayne Royal Commission). The ultimate goal was to close Dover. ASIC decided to do this on the back of Example 3. Its naive to think the matter was not pre-determined.

The ASIC experts are intentionally misleading and deceptive, ie they tell lies

Almost every ASIC sentence is false and pejorative. The others are just pejorative. Mere incompetence does not explain these words. They are breathtakingly inadequate, always assuming the worst and ignoring the facts in front of them. Remember, Dover constantly requested meetings[7]. ASIC refused each request. Dover volunteered legal privileged reports confirming Dover’s compliance was in order. ASIC dismissed these reports as incompetent. Dover undertook to rectify any concerns. ASIC replied in misleading terms and did not mention any of the following matters.

ASIC created misleading and deceptive evidence about Terry’s advice to Dr Amit. This was done for the specific purpose of enhancing ASIC’s required narrative on Dover: ie Terry’s advice was bad, and Dover had to close.

A sentence by sentence break down of Terry’s advice

1          ASIC is concerned Dr Amit is a vulnerable client, and is being misled by Terry

This is not specifically stated but it is strongly implied throughout the ASIC report. It is a false implication. Dr Amit is not a vulnerable client. In fact its hard to imagine a less vulnerable client. I am not aware of any one at ASIC having his credentials and range of training and work experience.

Dr Amit is an ex-RAN officer, was the CEO of Australia’s largest medical personnel association and holds an MBA and a PhD in science. Dr Amit could not be better place to consider Terry’s advice, including the books on financial planning, SMSFs and property Terry hooked into his statement of advice.

ASIC ignored the facts to create a pejorative impression Dr Amit was a vulnerable client. The ASIC investigators just made things up. They lied their heads off.

These lies caused significant commercial and reputation damage to Terry McMaster and Dover.

2          ASIC is concerned Terry is benefiting from his advice in an undisclosed way

This is also not specifically stated but it is strongly implied. It permeates the ASIC report. It is another offensively false implication: Terry did not charge for the advice. Terry rebated all commissions and only charged the agreed time-based fee of $1,800 for setting up the SMSF and installing the insurances. There was no other benefit to Dover or Terry.

Terry refunded all commissions on insurance products. This was made plain in the advice. ASIC ignored this and instead painted a false and misleading picture.

3          ASIC states Terry is forcing Amit to set up a SMSF and buy a property

 “The Advice is to set up a SMSF. The Adviser states that the client wants to do this but it is clearly his advice (ie Terry’s advice) as he makes statements such as “SMSFs generally earn better investment returns than managed investment funds.’”

This is the first lie. This false statement colors all  subsequent findings and conclusions.

First, Dr Amit decided to set up a SMSF and borrow to buy a property. Terry did not initiate the idea and did not encourage it. It was not Terry’s advice. It was Dr Amit’s instructions.

Second, Terry discouraged Dr Amit setting up a SMSF to borrow to buy a property. Terry suggested Vanguard index funds instead.

Third, Dr Amit engaged Terry because Terry did not accept commissions and employed a team of highly qualified experts[9]who specialized in their fields, such as SMSFs or risk insurances.

Dr Amit asked Terry for help with a strategy to set up a SMSF to buy a property in the western suburbs of Melbourne. This was near where his family was living at the time. Terry disagreed. Terry suggested the SMSF invest in Vanguard (commission free) Australian index funds instead. Dr Amit insisted he wanted to set up a SMSF to invest in residential property[10].

The officers are wrong. Their base premise is 100% incorrect. What more can one say: the officers call Terry a liar and thereafter assume everything Terry writes is a lie. A simple phone call to Dr Amit or Terry would have disabused them of these false thoughts. But why do that? Why speak to Dr Amit? Why spoil ASIC’s false narrative before it even starts.

The ASIC investigators also refused to speak to Terry during the investigation. They said they could not do so. Another lie.

4          ASIC is concerned Terry falsely stated that SMSFs get better results

 “SMSFs generally earn better investment returns than managed investment funds”

The context of this sentence suggests the officers believe Terry claimed a false advantage for SMSFs. At the time the statement “SMSFs get better results” was true:  AFR Article saying SMSFs perform better[11].

ASIC must have known this. It was public knowledge at that time. They just had to read the papers. Or study financial planning theory. There are exceptions: some large funds do outperform some SMSFs. Dr Amit knew this. He is not dumb. But as a general proposition the costs advantage connected to a SMSF compared to managed super meant the SMSF would perform well.

5          ASIC is concerned Terry says there are limited risks with SMSFs

“He states that there are limited risks with SMSFs.”

This is a lie. Terry did not state “there are  limited risks with SMSFs”. This is simply not true. A large amount of information was provided on the risks connected to SMSFs. Terry actually wrote:

“There are limited risks associated with managing your own SMSF such as poor investment decisions by yourself and the potential costs of rollover. You can read our guide to self-managed funds, which is also a product disclosure statement, Doctors’ Guide to SMSFs(which also worked as a product disclosure statement[12]for a SMSF, which is good practice but is not required by ASIC.)

“You mentioned that the main purpose to set up the SMSF is to enable you to buy real estate. Given that this is the case we recommend you familiarize yourself with borrowing in a SMSF by reading link to chapter 5.2 of the Doctors’ Guide to SMSFs.”

Further, this statement falsely implies Terry did not explain the risks connected to Dr Amit’s strategy.

Terry then provided numerous other warnings about the risk connected to SMSFs, gearing and property investment. These were in the SOA and the hyper-texted linked manuals, ie Financial Planning for DoctorsDoctors’ Guide to SMSFsand Financial Planning for Registrars deemed to be part of the SOA by ASIC in ASIC’s RG 175-180.

It’s hard to see how one could be more expansive on risk than Terry. Certainly no AFSL other than Dover went to these lengths to explain the risks connected to SMSFs, to SMSFs borrowing and SMSFs investing in property.

The ASIC investigators obviously knew this: it was obvious from the advice document. They chose to not tell the truth and they chose to tell a lie .

Bear in mind Dr Amit is an MBA, a PhD and a CEO. He is a smart bloke. He can make up his own mind on matters like this.

6          ASIC is concerned Terry did not create a fact finder

 “The Adviser fails to complete a fact find.”

This is a lie. Obviously a fact finder was completed. ASIC is lying again.

What did ASIC think the bit in the appendix headed “Information upon which this SOA is based” was?

This document is obviously what ASIC calls a fact finder, except Terry used a more accurate non-jargon description.

The Corporations Act does not refer to a “fact finder” and doesn’t require a fact finder to be on the file[13]. However, it is an industry convention, one way of proving compliance with the “know your client” rule.

For advisers who are accountants, such as Terry, the “know your client” rule is easily met. The huge amount of data on the  accountant’s file easily satisfies the “know your client” rule.

You can see part of the fact finder here:

7          ASIC is concerned Terry did not ascertain Dr Amit’s super balances

 “He fails to, among other things, ascertain the client’s current super balance that will be rolled into the fund but says it is ‘about $200,000”.

This is a lie. Another one.

Terry obviously did ascertain Dr Amit’s current super balance. What can one say? It is pictured here:ASIC got it wrong again. The balances were ascertained and confirmed in writing with HESTA. They are on Terry’s file. Amit’s super was $157,436 and his wife’s super was $39,349. A total of $196,785, ie about $200,000. They rose to more than $200,000 by the time the rollovers to the new SMSF were completed. The balances change as the HESTA pricing model reacted to the market. Hence the phrase “about $200,000” rather than an incorrect precise figure.

By the way, what grounds did ASIC have for saying Terry failed to ascertain Dr Amit’s current Hesta balance? There is no evidence for this assertion.

It seems they just made it up.

8          ASIC is concerned Terry failed to ascertain “other things…”

This is another lie.

What other things did Terry fail to do? This is a maliciously deceptive and mislead suggestion. It implies Terry omitted other unnamed critical tasks and the the omission was deliberate and for nefarious reasons. There were no “other things…” omitted. Everything that had to be done was done.

9          ASIC is concerned Terry recommended a property around the $450,000 mark

“He says this will allow the client to purchase a property for around $650,000 but recommends a property with (sic) no more than $450,000.”

This is correct. One struggles to see how the officers could have a problem with it.

Terry counselled Dr Amit against borrowing to buy a property in the SMSF. Terry preferred Australian shares index funds. Consistent with this, Terry suggested a property value below the maximum limit based on lending percentages. Terry was being conservative: the idea was to not take on too much debt and risk. To ensure the SMSF was not stressed and was liquid.

This meant the SMSF was protected against the loss of a tenant, an unexpected repair bill or an unexpected fall in the market.

10         Terry did not consider Dr Amit’s existing HESTA insurances

This is an obvious lie. What did the ASIC investigators think this was:

 “The Adviser makes recommendations for insurance without consideration of the existing HESTA policies and whether some superannuation should be retained in that fund to continue the policies.”

This is a lie. Terry’s advice did consider the insurances in the old fund. Could it be more obvious? It was in the SOA under the heading “Part B Insurances”. Dr Amit was not happy with the insurances in his old fund. This was a fair call. For example, the income protection insurance is limited a low sum insured, and cannot be changed[14]. This was explained in McMasters’ manuals Terry gave Dr Amit.

Dr Amit was right: when Terry asked Sarah Gao[15], a chartered accountant employed by McMasters’ who helped Terry with para-planning work to get quotes from other reputable life offices[16]Sarah sourced a better deal for from AIA, a reputable insurer.For the same cost, ie premiums of $2,335, Dr Amit got $10,000 pcm income protection insurance to age 65 (cf $10,000pm with Hesta for two years), $1,500,000 life insurance (cf $850,000 with Hesta) and $1,500,000 of TPD[17]insurance (cf $765,000 with Hesta).

In other words, Dr Amit got more cover for the same premium. It was a great piece of work by Sarah. Of course, Dr Amit and his wife were delighted. Dr Amit’s before and after position is summarized in the following two tables, both lifted directly from Terry’s advice to Dr Amit[18]:

On the life insurance and TPD insurance side of things, with HESTA Dr Amit got $850,000 of life cover and $765,000 of TPD cover. With AIA Dr Amit got $1,500,000 of life cover and $1,500,000 of TPD cover. Once again, an extraordinarily better deal, but not to the same extent as the much better income protection deal.

If this does not satisfy the best interests duty, what does?

It gets better: commissions rebated in full

Of course, as was obvious from Terry’s SOA, it gets better than this once the McMasters’ Commission Rebate Scheme is considered.

The position over 3 years is shown here:

As you can see, over the three years Dr Amit’s SMSF received $3,268 in commission refunds. This made Dr Amit’s insurances even cheaper than before, and an even better deal.

To be frank, it is impossible to understand how the ASIC investigators did not know this. It was blatantly obvious. Anyone with the slightest knowledge of financial planning would see how much better the AIA deal was for Dr Amit. Terry’s advice to Dr Amit to switch insurers and pay the new insurer’s premiums out of his new SMSF, with a full commission rebate, was manifestly in Dr Amit’s best interests[19]. Dr Amit got much more cover for a much lower net after-tax cost.

We stress this: the above data was in the SOA. Form your own view on why ASIC left it out.

11        ASIC says Amit did not leave money in HESTA to benefit from its insurances

 “The Adviser makes recommendations for insurance without consideration of the existing HESTA policies and whether some superannuation should be retained in that fund to continue the policies.”

This is another lie. Obviously the HESTA benefits were considered.

For the reasons set out above Dr Amit would have been pretty dumb to leave any super benefits in the HESTA fund, as appears to be suggested here by ASIC.

This was obviously not in Dr Amits’ best interests. As explained above, Dr Amit’s HESTA fund insurances were inadequate compared to his new AIA insurances. If Terry recommended “some superannuation should be retained in that fund to continue the policies” he may have breached section 961B(1) of the Corporations Act. He may have been exposed to a complaint from Dr Amit that he had not acted in Dr Amit’s best interests. He may have been negligent, in not procuring the better income protection and life insurance and TPD insurance for Dr Amit.

Doubling up on income protection insurance is also problematic: the indemnity principle means Dr Amit cannot over-insure and if the insured event occurs each insurer will pro-rata reduce the benefit to avoid a total benefit greater than 75% of Amit’s total income.

We confess to being at a complete loss as to how ASIC could think otherwise. Its just another ASIC lie.

12        ASIC is concerned Terry recommended arbitrary sums insured

The Adviser makes recommendations for arbitrary amounts of insurance (fails to identify relevant personal circumstances of the client including number of dependents) which the client later revises.”

This is yet another lie.

The sums insured were discussed. They were not arbitary. Dr Amit chose the sum insured/premium combination. Dr Amit holds an MBA degree. He can think for himself.

Dr Amit was fully apprised of the risks of being uninsured, as Terry wrote in his SOA:

13        ASIC is concerned Terry failed to identify the personal circumstances of the client including the number of dependents

The Adviser makes recommendations for arbitrary amounts of insurance (fails to identify relevant personal circumstances of the client including number of dependents) which the client later revises.”

This is yet another lie. The number of dependents was identified. It was: “1 Child”.

How could ASIC miss it? It was in the fact finder ASIC said had not been prepared:

14        ASIC is concerned the AIA product was selected by someone other than the adviser and that persons other than Terry were involved in the advice process

 “The AIA product was selected for the purposes of the quote, by someone other than the adviser, who tells another person to quote and that “AIA is fine”.

This is best dealt with together with the next sentence:

 “Terry McMaster provided the SOA but does not appear to have developed the advice document or present the advice document or discuss the advice with the client. This was done by name deleted (Lydon) who is not authorized to provide financial services.”

This is uniquely true. Terry did not work on his own. Terry owned a multi-disciplinary professional firm turning over about $50,000,000 a year. Terry had more than 50 staff on his team at McMasters’ and another 50 on his team at Dover. Terry was accompanied by a junior staff member at meetings. This employee was entrusted with creating the advice for Terry’s review and implementing the advice for the client. Sometimes this person was a solicitor, sometimes an accountant and sometimes a financial planner (or a combination thereof).

Terry introduced three of the McMasters’ team[20]to Dr Amit. They were:

  1. Lydon, a university educated chartered accountant with experience in setting up and accounting for SMSFs (obviously Dr Amit would need a SMSF experienced accountant on an on-going basis. It made sense to introduce Lydon[21]in the early days to enhance client continuity. Lydon did the SMSF work (interestingly, Lydon is married to an ASIC solicitor)
  2. Sarah holds a Master of Commerce degree from Melbourne university. She is a chartered accountant with extensive experience in risk insurances. Sarah enjoyed para-planning work and eventually crossed over to become a fulltime financial planner. Sarah was brought in to help Dr Amit with the selection and implementation of the risk insurances and
  3. Berivan, a director of McMasters’ Accountants. She holds a a master’s degree in accounting. Bez is also qualified both a financial planner[22] and a licensed real estate agent with more than ten-years full time experience helping clients buy houses in bayside Melbourne while she studied accounting part time. Berivan was available to help Dr Amit with the property side of things.

This depth of skill was one reason why clients engaged Terry and his multi-disciplinary firm, McMasters’ Solicitors, Accountants and Financial McMaster.

A team usually beats an individual, and a team will have a greater range of skills. This is shown by the great results achieved by Sarah Goa for Dr Amit on the risk insurances side of things. Terry expected Dr Amit would get a better deal from someone other than HESTA. He left it to Sarah to do the leg work, and to approach the question with an open mind, a higher skill level and a lower hourly charge out rate. Sarah did a great job. To be frank she did a better job than Terry would have. This is because she worked full time in this area and Terry did not. She was a risk specialist. Terry was a generalist.

If the officers had rung Dover this could have been explained to them.

Its fair to say portraying the involvement of three skilled, qualified and experienced staff members like this as a negative was a dishonest misrepresentation by the ASIC investigators. Yet another ASIC lie.

15        ASIC is concerned McMaster did not recommend trauma insurance to Dr Amit

 “The advice fails to consider trauma insurance.”

This is yet another lie. Trauma insurance was discussed in detail. It was not recommended. It never was. McMasters’ never recommended trauma insurance.

ASIC criticizes Terry’s for not recommending trauma insurance. Terry’s views on trauma insurance were well known and were set out at page 165 of the Financial Planning for Doctors[24]. Dr Amit had a copy of this manual. It formed part of Terry’s advice. Terry thought trauma insurance was unnecessary if the client had adequate income protection and life insurance. As detailed above, once Dr Amit switched to the AIA income protection policy and its life insurance and TPD policy this box was ticked: Dr Amit was adequately insured.

You can read an extract from the Doctors’ Guide to Financial Planning detailing Terry’s thoughts on trauma insurance here:Plus, it is common knowledge there are huge issues with definitions, such that nearly half of all trauma insurance claims are rejected by the insurers.

The omission of trauma insurance shows the advice is in Amit’s best interests. Most AFSLs require advisers recommend trauma insurance knowing it is not in the client’s best interests. They recommend it just to get a commission.

Terry would not dream of doing this.

Terry did not accept commissions.

16        ASIC is concerned the strategy depends on Dr Amit paying $50,000 a year

“The Adviser states that the client will be able to contribute $50,000 a year to superannuation without any basis. The viability of the strategy is predicated on this, but there is no evidence that the client can afford this or that this is a better strategy for the client than reduction of their non-deductible debt.

This is a blatant lie. It’s a whopper. An incredibly false statement that ASIC just made up.

It’s clearly a deliberate false statement intended to deceive the reader.

Terry did not state “that the client will be able to contribute $50,000 a year to superannuation” or anything like it. And “the viability of the strategy” was not “predicated on this”.

This is a blatant lie. (emphasis very much intended)

The ASIC proposition defies common sense: how could borrowing $250,000 to buy a $450,000 property require $50,000 a year in contributions (after rent) to be viable? It’s just a dumb suggestion. An absurd proposition. The only reference to $50,000 was in the context of the maximum that can be contributed as a deductible employer contribution each year. The SOA read:

“The contributions each year can be as much as $50,000 depending on how much you and Surbhi are able to salary sacrifice.”

Further, the concept of a contribution, what it is, who can pay it and how much can be paid is detailed in each of the Doctors’ Guide to SMSFsand Financial Planning for Doctors. Both manuals formed part of Terry’s advice.

It’s a fair speculation that the investigators’ supervisors were never going to look at the original SOA. The investigators thought they could get away with telling a whopper lie like this, so they did. The purpose was to create a false narrative on Dover and Terry. It worked. The consequences were extreme.

17        ASIC is concerned McMaster encouraged property

 “The adviser recommends a buyer’s agent stating that among other things this should yield a better outcome. Specifically the adviser recommends the clients use “Buying Bayside” which the SOA notes is an associated business of McMasters (the adviser’s firm).

However, a company search conducted showed that the adviser is a former director and shareholder of Buying Bayside and was a director and shareholder at the time the SOA was produced. It is also noted that a potential family member of the adviser (name deleted) is the current major shareholder and director of Buying Bayside.”

ASIC says Terry recommended property and implies this is a bad thing. It would be negligent to not recommend residential property. Direct property was the best investment available at the time, as this ASX sourced graph shows:Bayside Melbourne did even better.

Most AFSLs did not allow advisers to recommend the best performing asset. Why? There is nothing in it for the AFSL. No commissions, no Funds Under Management and no Premiums Under advice.

Terry was not influenced by commissions, Funds Under Management and Premiums Under advice. Terry was only influenced by the best interests of the client. This is manifest in the advice to Dr Amit.

Dover encouraged property[25]. This was provided the only person who paid the adviser was the client. No apartments, off the plan deals or commissions. Dover was unique in attaching conditions to ensure advice was in the client’s best interest[26].

Must it be said again: Dr Amit wanted to use a SMSF to invest in property. Terry said the SMSF should invest in Vanguard Australian shares funds instead. Dr Amit insisted on property.

A simple question for the ASIC investigators: do you wish you had bought more Melbourne property in 2014?
By the way, if the ASIC investigators had bothered to ask either Dr Amit or Terry they would have been told Buying Bayside declined to get involved. This was because it believed it did not have enough local knowledge to assist with a western suburbs property purchase.

18        ASIC is concerned Terry recommended Dr Amit use a buyer’s advocate

ASIC is concerned Terry suggested Dr Amit use a buyer’s advocate to assist in the search, and that he said this will yield a better outcome. ASIC implies using a buyer’s advocate is a bad thing and was not in Dr Amit’s interests.

Terry’s advice on a buyer’s advocate is reproduced here:.

As you can read, Terry did not say what the ASIC experts said he said. The ASIC investigators lied again.

Terry fully disclosed the relationship between commission free Buying Bayside and commission free McMaster’ Accountants, Solicitors and Financial Planners. For completeness, Buying Bayside did not get involved because Melbourne’s western suburbs were outside of its geographic expertise.

The ASIC investigators could have found this out with a simple phone call. But why ask an obvious question? The obvious answer may up-end ASIC’s obvious lie.

19        ASIC is concerned Terry said SMSF clients knows where the SMSF assets are

ASIC is concerned Terry told Dr Amit an advantage of an SMSFs is the client knows where the SMSF assets are. ASIC implies this is wrong. Terry is not wrong. Terry is correct. All one can do is shake one’s head in astonishment at the ignorance of such a sentence: how it could fall from the pen of an ASIC SMSF expert? 

This is a real head scratcher? How could the ASIC experts say something so wrong? How could they be so dumb? Why were they so dumb?

The most powerful advantage of a SMSF is control. Graeme Colley is an SMSF expert and you can read his thoughts on the advantages of SMSFs here: 6 Top Advantages if an SMSF. How can one read something like this and then imply it’s wrong to say an advantage of an SMSF is the client knows where the SMSF assets are? If the ASIC experts are to opine SMSFs they should at least demonstrate an awareness of the basic concepts.

The ASIC investigators did not do this. They instead demonstrated their ignorance of SMSFs.

SMSFs are literally “self-managed” by the client/trustee/member. The client is the trustee, ie the legal owner of the asset. This means Dr Amit will know where the asset is at all the time[27]. This particularly with real estate. Dr Amit’s name would on the title (the state revenue offices use the legal owner’s name, ie the trustee’s name, not the beneficial owner’s name). The various bills (eg water) and notices (eg council rates) would be sent to Dr Amit’s address.

It’s the same with share investments. The share trading account is in the trustee’s name and can be accessed it will. The trustees obviously always know where the SMSF assets are.

Whatever investments he chose, Dr Amit would always know how the SMSF’s investments were performing and where they were. That’s just how SMSFs work.

20        ASIC is concerned the best interest duty is breached: s 961B(1)[28]

Terry’s advice was manifestly in the best interests of Dr Amit under section 961B(1)and there is no need to rely on the “safe harbor” rules set out in section 961B(2). See the attached document:  ASIC and its non-best interests dutyfor an explanation of these rules. However, it appears ASIC incorrectly applied the section 961B(2) so called “safe harbor rule” to incorrectly conclude Terry’s advice is not Dr Amit’s best interests.

This is wrong and breaches the NSG case[29]findings on the best interest duty: in the NSG case ASIC acknowledged the correct test was section 961B(1) and the safe harbor rules in section 961B(2) are only considered if the advice fails section 961B(1).

 [1]Dr Amit is not a medical doctor, although he works in the general practice health space. He is science Ph.D., and also holds an MBA.  In his younger days he was a naval officer

[2]This is obviously not a question asked by ASIC, and ASIC did not try to find out: ASIC has not contacted Amit

[3]to be frank this reduces to “don’t go near bank run super funds”

[4]McMaster had for years recommended Vanguard’s Australian Shares Index Funds due to the absence of commissions and the low operating costs, typically quoting articles like Why Warren Buffet Suggest Vanguard Funds. Obviously and Australian resident investor should select and Australian shares index fund to take advantage of the full dividend imputation system.

[5]Most staff were solicitors or accountants or financial planners. Many were dual or triple qualified. There were more than 50 qualified staff

[6]See the table below for computations showing how little this costs the client

[7]These are detailed in chapter 13: “ASIC’s in-house lawyers set Dover and Terry up for the Royal Commission”.

[8]The 2016 Holley Nethercote report is reproduced and discussed in full in chapter 4. In summary, it analyses Dover’s SOA procedures and Client Protection Policy, and concludes all is in order. This report was voluntarily provided to ASIC despite being a legally privileged document. Dover did this in good faith. The ASIC officers dismissed the 2016 Holley Nethercote report (and a similar Sophie Grace Report) as incompetent. But worse, they did not tell Dover they had done this.

[9]Most of the staff were solicitors or accountants or financial planners. Many were dual or even triple qualified.

[10]See the e-mail from Dr Amit Vohra to Terry McMaster of Dover dated 19 February 2019.

[11]The general point that SMSFs perform better was recognized by most authorities. Time has shown Amit’s preferred strategy of investing in the western suburbs of Melbourne, near his home, was a superior strategy.

[12]Refer to paragraph RG 168.50 to 52, which can be read here: RG 1868 Product Disclosure Statements

[13]You can read a helpful fact finder Q&A on this topic here: Helpful Financial Planning Association Q&A on fact finders

[14]This is common knowledge in the financial planning industry. The ASIC experts must have known this.

[15]The ASIC experts did not bother to learn about Sarah Gao. They assumed she was an uneducated shyster.

[16]Does this help explain why Terry employed people who were more skilled in certain tasks than he was? It’s a great effort by Sarah. Who would have thought it would lead to ASIC shutting Dover down due to Terry’s poor advice?

[17]Total and Permanent Disability insurance

[18]The data was in the SOA. The ASIC experts seem ignorant of basic financial planning concepts. They just did not understand Terry’ advice

[19]The cheapest way to obtain insurance cover is through a full commission product with a full commission rebate. This is cheaper that “dialling the commission down” ie asking the life office to reduce the premium and not pay commissions used by some independent advisers. This is because in dial down the decrease in the premium is less than the decrease in the commission.

[20]McMasters’ employed more than fifty professionals.  Different staff were used for different client assignments depending on client needs, staff skills and work preferences and staff availability and other work commitments

[21]Coincidentally, Lydon is married to an ASIC solicitor

[22]Bez was once an owner and director of Dover. She is now authorised by Independent Financial Advisers Australia, and is a member of the Independent Financial Advisers Association of Australia

[23]There are actually an almost infinite number of things Terry did not recommend. For example, he did not recommend insurance on the life of Dr Amit’s child. Some advisers and AFSLs would have. These policies pay commissions too.

[24]This document formed part of the statement of advice: ASIC’s RG 175-180

[25]You can read a manual on advising on property called “The Financial Planner as a Property Adviser h

[26]You can read an interesting article by Halseys Financial Services Lawyers of how ASIC obtained section 1324 and 1101B injunctions to prevent Park Trent Properties Group and its CEO Mr Ron Cross (who Peter Kell describes as a property spruiker: ASIC media release 28 July 2016) here: ASIC successful in … restraining sales group who encouraged investors to invest through SMSFs. It appears ASIC incorrectly believed Dover and Terry McMaster were involved in similar nefarious and egregious schemes. If ASIC had accepted any one of Dover’s many invitations to meet and discuss Dover’s business model this misunderstanding on the part of ASIC could have been avoided.

[27]Unless the trustees forget the property’s street address, which I have seen happen before. But we expect it is rare.

[28]You can read about the best interests duty here:  ASIC and its non-best interests duty