Quintis – look at the financial planner

Quintis (formerly known as TFS) is in deep financial trouble – it is possible that Quintis will join a long line of failed agricultural managed investment schemes such as Great Southern and Timbercorp.

As was the case with the other schemes, there is now talk of class actions.  If Quintis fails there will be 2 classes of investor who will suffer – the shareholders of the listed company and the investors in the underlying managed investment schemes.

I have seen many cases where investors in the underlying schemes have been caught up in class actions rather than looking at the reasons why they were in the scheme in the first place.

TFS (Quintis) was a sandalwood scheme.  It was an investment that was unsuitable for most people as it was generally very high risk but also because it was a very long term investment whereby investors could not expect to receive a return for 13-14 years. This meant that an investor in the TFS 2008 Scheme could not expect to receive a return until 2021.  Such a long term structure raised a variety of risks and issues but a particular matter was that the scheme charged substantial annual management and other fess – the result being that investors were locked into a structure whereby they had to pay management and other fees for 12 years in the hope that they would receive a return in year 13.  Added to this is that many investors will have borrowed to make the initial investment thereby adding another layer of risk.  These investors may be about to find out (contrary to what many will think) that if Quintis fails they will still have to pay their loan back.

TFS used financial planners as a distribution channel for its products and paid financial planners substantial upfront and ongoing commissions for providing this service.  The outcome of this process (in the context of the matters set out above) being that many people will have invested in TFS (Quintis) based upon inappropriate advice that was provided by their financial planner – that is, TFS (Quintis) would only have been an appropriate investment for limited class of client but as was the case for Great Southern and Timbercorp it would have been sold to people for whom it was grossly inappropriate.

The upshot of the above is that many TFS (Quintis) investors will have a claim against their financial planner should TFS (Quintis) fail.

The way that the FOS works is that a claim can be made 6 years after an investor first became aware they would suffer a loss.  The time to make a claim will not therefore start to run until until Quintis fails and investors become aware, as a result of that fact, that there is no prospect that they will receive a return from the scheme.  The point being that even though investors received poor advice from their financial planner many years ago, they will still potentially have a claim for compensation against their financial planner.


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