Portus fallout part 2: The irate investor

(March 2005) What happens when an advisor recommends Portus to a client and then stops all communication when the firm’s assets are frozen? It’s not a pretty story, but you can probably guess the outcome. The advisor loses the client, who is left frustrated and upset.

Debbie*, a single parent and business owner from Edmonton, went with her Manulife advisor to a Portus meeting last December. She recalls from her notes that in its sales pitch, Portus promised steady, stable returns, 100% principal protection, lower volatility, tax minimization, and a buffer against the ups and downs of the market.

“This was promoted as a safe, secure investment,” she says. “And my planner said he wanted to have me in bank notes because of what has happened in the last few years in the markets because my capital has been diminishing,” she says. “I’ve been with him since 1998 and I trusted him — he has generally done his homework.”

“He talked about these bank notes as though they were Canada Savings Bonds,” she says.

The advisor then had Debbie sign three blank forms, apparently in a hurry to get the Portus order in before a December 10 deadline, leaving her with the offering overview to look over. That’s when the 47-year-old became suspicious.

“I started reading through it, and I got to the point where it says Portus will be entitled to an annual management fee equal to 2.25% of the net asset value (NAV) calculated and accrued weekly and paid by the trust. Portus will also be entitled to a performance fee equal to 18% of the gross of the NAV. And [my advisor] never told me that he was getting a 4% referral fee.”

“When I read that, I e-mailed him right away and I said it looks like I’m getting into the same high fee situation that’s been discouraging me from getting into mutual funds.”

But by then, the paperwork had already been processed and Debbie was told by her advisor that she would face significant withdrawal fees if she pulled out.

Since then, the only communication Debbie has received is an e-mail from the advisor’s assistant saying he was busy but would be in touch after RRSP season. “I’m not going to deal with him anymore, it’s not worth it,” says Debbie, who has switched the remainder of her investments to another advisor and has joined a class-action lawsuit. (There are at least two such lawsuits currently on the go, one against Portus and one involving Manulife Securities.)

Related News Stories

Portus fallout: Dealing with worried clients Portus fallout part 2: The irate investor Portus fallout part 3: The blame game

The Ontario Securities Commission effectively shut down Portus on February 3, issuing a temporary order preventing the firm from opening new accounts. The following week, a further order was issued freezing the firm’s assets, estimated about $730 million. A hearing has been scheduled for May 17.

“If in fact, the OSC has secured the $730 million, there’s a chance I’ll get some money back, but in the meantime all you can do is wait,” Debbie says.

“This has been a lesson for me. I’m angry with myself that I didn’t research this a bit,” she concedes. “Because I know I would have found something that would have made my question it. But I feel Manulife is on the hook for this, they did not do their due diligence and they will lose clients without a doubt.”

Late Thursday afternoon, Manulife released a letter from company president Dominic D’Alessandro to clients of Manulife advisors who were referred to Portus. In the letter, D’Alessandro reassures clients that Manulife will guarantee the recovery of 100% of the principal invested.

“Our clients want to know the status of their investment and we don’t think they should have to wait for the investigations into Portus to be completed before they get an answer,” he said.

D’Allesandro added Manulife is monitoring developments in the case and is working with regulators to find a satisfactory resolution to the Portus situation as quickly as possible.

“While more information is still needed to get a full picture of events, it is clear that the reality of Portus’ products and structure were not as they were represented or as they were understood by others, including Manulife.”

D’Alessandro also says the firm will “aggressively pursue all avenues to secure and recover invested funds.”

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*Debbie is a pseudonym. The investor preferred not to use her real name.

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

(03/03/05)