Introduction: the recurring theme of Dover lacking organisational capacity

One incorrect and damaging theme running through the ASIC documents relates to Dover’s organizational capacity. ASIC keeps saying Dover lacked organizational capacity.

Dover did not lack organizational capacity. By any measure Dover had an organizational capacity well above all similar sized AFSLs. This is just yet another example of ASIC working hard to create a false narrative on Dover.

How ASIC created false evidence about Dover’s organisational capacity

This incorrect notion appears to go back as far as 2015 in a memorandum to the FA OP’s Group dated 11 November 2015 at paragraph 12:

“ASIC is concerned that with approximately 423 unique AFS representatives as at 9 October 2015, Dover has insufficient resources to adequately supervise and monitor its financial services business. Dover has identified only nine staff members, including the Responsible Manager, whom conduct both legal and compliance functions, and for the reasons outlined below, it appears that Dover’s compliance functions are not satisfactorily conducted.”

Where do you start? Perhaps with ASIC’s Report 362 “Review of financial advice industry practice: Phase[1] 2” which examines the compliance processes of some of the biggest 20 to 50 licencees (Dover was in this group). ASIC writes at paragraph 58:

“We found that, on average, there was one risk management staff member for every 85 advisers (although there was a high degree of variance among the licensee). We noticed a small number of outliers, who reported the ratio was more than double the average, and we understand how their risk management activities are effectively conducted.”

Then realise the number of Dover advisers was not 423. It was about 211 (each individual had a corporate adviser as well). Then realise Dover’s 9 (2015) staff members were full time “risk management” staff. Dover had one risk management staff member for every 24 advisers.

Dover had three and a half times the average number of risk management staff for AFSLs of similar size. Plus each one of these staff was predominately occupied with literally checking every SOA for compliance.

Dover had more risk staff than any other similar sized AFSL, both in absolute numbers and relative to the number of advisers. The number of full-time risk management staff was 22 in June 2018 when ASIC forced Dover to close, with one risk management staff member for every 18 advisers. That is, at closure Dover had four times the average number of compliance and risk management staff for an ASFL of its size. This explains Dover’s remarkably low FOS complaint rate: about 1/10th of the number expected for an AFSL of its size.

This industry leading risk management staff to adviser ratio was a critical part of what Holley Nethercote described in 2013 as the “most robust SOA review process” they had seen. In the years 2013 to 2017 it also impressed the nine consultants who each ran a detailed ruler over Dover in this period[2] and concluded all was in order and all compliance processes were sound.

None of the detailed external reviews in 2013 to 2016 identified the issues ASIC identified. This is so even though they used the same data as ASIC and actually spent time with Dover; in some cases long weeks wading through detailed documents and interviewing Dover and McMasters’ staff[3].

ASIC doubles down on its false findings

ASIC repeats its false findings, its erroneous conclusions, over and over again. Eventually they made their way into the 2016 and 2017 documents passed from ASIC’s Financial Advice Unit to ASIC’s Financial Services Enforcement group.

For example, at paragraph 2.4 of FA’s Stakeholder Referral to Financial Services Enforcement dated 29 March 2017[4] ASIC writes:

“Dover has 23 licensee staff (including Terry and Florence) operating from its Melbourne office. Additionally, Dover maintains a compliance team of approximately 12 staff in Vietnam with 2 in training. These staff members perform a number of functions including compliance and adviser relations and are also shared with related businesses McMasters Accounting and McMasters Solicitors.”

Andrew and Leah repeat this false statement word for word a few days later at paragraph 8 of Dover Financial Advisers Pty Ltd (‘Dover’) – Memo to Ops 31 January 2017[5]:

“Dover has 23 licensee staff (including Terry and Florence) operating from its Melbourne office. Additionally, Dover maintains a compliance team of approximately 12 staff in Vietnam with 2 in training. These staff members perform a number of functions including compliance and adviser relations and are also shared with related businesses McMasters Accounting and McMasters Solicitors.”

ASIC misrepresented Dover’s organizational capacity

The above paragraphs get the Dover and McMasters’ staff numbers wrong by 300%. It’s an amazing error. Dover and McMasters’ had a total of 116 staff in 2017. ASIC significantly understated Dover’s organizational capacity[6].

The correct combined staff figures in 2017 were 116. They were remarkably well qualified and experienced staff.

The Dover team including all Vietnam based staff admin staff had an average of 1.6 university degrees. This is well above the industry average.

Why did ASIC do this?

Why did ASIC not look at the Dover and McMasters’ website: the staff were pictured there. Why did ASIC not ring Dover? Why did ASIC refuse to meet Dover? Why did ASIC refuse to provide Dover with an interim report for discussion purposes?

The irresistible inference is ASIC wanted to create a false narrative on Dover as part of its strategy to shut Dover down. Facts were not going to help ASIC do this

Taken on its own, well anyone can make a mistake. However, taken not on its own, that is, taken in the context of the incompetent reports created by ASIC Financial Adviser Unit, this is another deliberate misrepresentation. It has a further significance: it lent credence to ASIC’s other misrepresentations as summarized in the preceding chapters.

The following pages provide additional information about Dover’s staff competencies: it was easily the most diverse and well qualified workforce of any of the large AFSLs.

Two simple and obvious questions for ASIC

Is this the sort of team to exploit clients?

Dover’s Vietnam:
Dover’s Australian team:

The McMasters’ Australian Accounting and Legal team at 31 January 2017

Table showing Dover’s compliance/risk management staff March 2018: head count 22

The next two pages are extracted from Dover’s 2018 Adviser Information Memorandum

Dover currently employs 23 staff in Melbourne and 25 staff in Vietnam. The team is highly skilled, university educated and have or are in the process of obtaining adviser qualification[7]. Dover values diversity and different cultural, gender, e  thnical and religious backgrounds in the team.

Team morale was high with low absentee rates and low turnover.

Dover has a highly diversified staff composition with most staff born overseas. The average Australian Dover staff member is 28, Asian, female, and has 1.6 university degrees.

Dover’s staff are well educated. This means they learn new skills quickly and can change roles to adapt to changes in the business. Dover encourages multiple areas of expertise for each team member and taking up business development promotional activities to create more challenging tasks.

Compliance staff are seconded to MLA Lawyers for legal work, such as estate planning and wills.

Senior Management

Biographies for all staff members can be seen here.

Terry McMaster is the sole director, and a Responsible Manager. Florence Tee and Yin Low are also Responsible Managers.

Since early 2017 Florence Tee was CEO. This relieved Terry McMaster of some operational responsibilities and freed up time for other projects, such as additional services for advisers.

Melbourne location

Dover is located at 71 Tulip Street, Cheltenham, Victoria, in the middle of Melbourne’s famous sand-belt, next door to the Royal Melbourne Golf Club. The building is beneficially owned by Terry. Dover does not pay rent.

Most Dover staff live close by.

Dover’s Melbourne office: Tulip Street Cheltenham

This building is owned debt free by the McMaster family. Dover did not pay rent. It is actually two separate buildings joined by a walkover, including a third level at the rear right hand side which was used as gymnasium and Pilates centre for staff.

The ASIC FA investigators did not visit this building. All invitations were declined.

Dover’s organizational chart

 

 

[1] Report 362

[2] This is discussed in detail in “Why did nobody else see what ASIC saw?

[3] At one stage First State Super had more than 20 staff on its Dover due diligence project. Andrew Davison, Leah Sciacca and Claire Legge were based in Brisbane and did not meet with or speak with Dover: a good example of how not to review an AFSL.

[4] Attached as an appendix

[5] Attached as an appendix

[6] We expect the misunderstanding arose on Andrew Davison’s one visit to Dover. He misunderstood a sentence something like “… and Dover can borrow staff from McMasters’ if needed”. He also visited a temporary “overflow” office in Black Rock, when the nearby Tulip Street office filled to capacity. He was invited to visit the much larger Tulip Street office but he declined: he only stayed about one hour.

[7] Typically a diploma of financial planning. Dover pays for this course and allows staff time off work for study