Cold comfort: Manulife still facing questions over Portus

(March 4, 2005) Manulife’s pledge to refund all money invested in Portus products is providing some comfort to worried clients. But there are still questions as to how to the Portus offering slipped through Manulife’s compliance department and what will happen to the generous referral fees Manulife advisors received for recommending Portus, currently under investigation by the Ontario Securities Commission.

On Thursday, Manulife president Dominic D’Alessandro released an open letter to clients, apologizing to those who have “been distressed” by the Portus situation and guaranteeing that they will receive 100% of the principal invested with Portus.

“We will, in effect, “stand in your shoes” and aggressively pursue all avenues to secure and recover invested funds,” D’Alessandro said.

Manulife spokesman Tom Nunn says details on how the firm will distribute the Portus funds to investors will be released by the end of the month. But Nunn says he’s not sure how the insurance giant will deal with the commission issue. It’s estimated Manulife advisors received as much as $10 million by recommending Portus products, via an upfront 4% referral fee.

An anonymous Edmonton-based Portus investor profiled on Thursday on Advisor.ca, says she feels better about the situation since the Manulife guarantee was announced.

“I’m happy that D’Alessandro and Manulife are responding and actually doing something. But I think they need to take a good hard look at their company and find out who said Portus was OK. I think there will still be ramifications for Manulife.

“I’m glad someone realized they had to take responsibility for the fiasco of recommending a product they had not done their homework on. They say I’ll get 100% of the principal back so I’m wondering if they have the audacity to keep the referral fees,” she asks.

And the guarantee doesn’t make her feel any better about her Manulife advisor, who called her yesterday for the first time since the OSC announced it was probing Portus in early February.

“I’m still disappointed that my advisor got me into this,” she says. “I’ve pulled everything out of Manulife except for Portus and this won’t change my mind.”

As for compliance, D’Alessandro has launched an internal investigation but says that the “reality of the Portus products and structure were not as they were represented or as they were understood by others, including Manulife.”

However, Manulife has no means to compel Portus to cooperate with the investigation, he notes. “It is likely therefore that we are still some weeks away from getting all of the information required to determine how best to resolve the situation.”

An OSC hearing on Portus is scheduled for May 17, but insiders say there’s a good chance the regulator will need more time to complete its probe, considering the product’s complex structure.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com