Adviser Urges Caution in Sales Following IFA’s Collapse Due to FCA Restrictions

The former managing director of East London advisory firm Donre Advisory has issued a warning to advisers to be cautious about who they sell their businesses to after he was ousted as a director and his firm was closed following multiple global regulatory investigations into its parent company.

This week, the FCA announced that Donre Advisory had entered creditors’ voluntary liquidation after several restrictions were imposed on it in May.

Founded in 2009 as Basi & Basi Financial Planning, Donre Advisory was established by former managing director Michael Basi, who was a regular contributor to Citywire New Model Adviser and was profiled in 2011.

In late 2018, Basi sold his advisory firm to the international expat advice group Brite Advisory Group. Over the past year, Brite has faced regulatory actions in both Australia and the United States.

Speaking to NMA, Basi explained that the collapse of his advisory firm stemmed from Brite’s desire to steer the business in a direction he was uncomfortable with post-acquisition.

“The sale of the firm included an earnout period. Once that concluded, the owners wanted to move the firm in a direction we were not comfortable with, leading to our removal as directors,” Basi said.

“What has transpired since is evident. The firm had been operating stably since its inception. It’s a regrettable outcome.”

Basi advised fellow advisers to be “cautious about who you sell your firm to.”

His comments align with an FCA supervisory notice issued in May, which reported that the FCA had a call with Donre Advisory’s two directors on 24 May. During this call, the directors stated that their owners had asked them to “undertake additional business activities.” When the directors refused, the owners threatened to remove them if they did not comply with the proposals.

On 13 May, the two directors were removed, with Brite amending the firm’s articles of association and appointing a new director the same day.

Following the directors’ removal, Donre Advisory was left without any FCA-approved senior managers, prompting the FCA to restrict its permissions on 17 May, preventing it from conducting regulated activities.

The FCA stated this was due to the firm “operating without any FCA-approved senior manager function holders.”

Donre Advisory then appointed liquidators on 11 July. Prior to its collapse, the firm had not upheld any Financial Ombudsman Service (FOS) complaints against it and specialised in providing defined benefit (DB) transfer advice to UK expatriates.

In 2022, Donre Advisory reported a loss of £472,000 on revenues of £4.8m, attributed to a significant increase in administrative expenses.

Who is Brite?

While Brite Advisory Group may not be well-known in the UK, Citywire’s sister publications in the US and South Africa have extensively covered the firm in recent months.

The advisory business, which serves UK expat clients globally, was hit with a default judgement by the US Securities and Exchange Commission (SEC) in November 2023 for allegedly violating SEC custody rules.

The SEC’s complaint outlined that Brite USA’s business model involved advising pension holders to transfer their UK-based assets to self-directed pension plans, for which Brite provided ongoing advice. The SEC further stated that Brite USA’s affiliate custodian, Australia-based Brite Advisors Pty Limited, borrowed millions of dollars against client assets to fund related companies without disclosing this activity to clients, as reported by Citywire RIA in April.

In October 2023, the Australian regulator initiated court action against Brite due to concerns about the financial position of Brite and the value of client funds under its management.

Brite also operates in Hong Kong, where NMA reached out for comment.

According to an April report by the Sunday Times, Brite has 10,000 UK expat clients worldwide, with £2.4bn in pension assets.

When asked if he was aware of the issues with Brite at the time of the sale, Basi replied: “We sold the firm in 2018, with no indications of any issues with Brite, who were newly established and approved as new controllers of the firm by the FCA.”

SIPP Connections

The collapse of Donre Advisory, a UK subsidiary of Brite, raises questions about the future of the UK SIPP provider, PSG SIPP, which has 5,600 clients and £1.2bn in assets under administration.

Although Donre Advisory owned PSG SIPP, the FCA noted that it operates independently and continues to trade. However, the regulator imposed restrictions on PSG SIPP “to protect customers” after Brite attempted to appoint new directors to the SIPP provider’s board on 16 May.

In addition to PSG SIPP, Donre Advisory owned Gibraltar SIPP provider Relay Administration and a 9% stake in Malta-based MC Holdings. The future of these SIPP equity positions remains uncertain following Donre Advisory’s collapse.