Financial services firm NavraInvest is in joint venture negotiations with a third party to assume the role of the company’s replacement distribution channel.
NavraInvest has been forced to begin talks with the unnamed firm after NavraInvest’s distribution channel and financial planning division, Navra Financial Services (NFS), was placed in liquidation in July last year.
NavraInvest director Steve Navra said the collapse of NFS was due to the company’s high exposure to agribusiness firm Great Southern and to a lesser extent volatile markets.
“Obviously the GFC (global financial crisis) had an effect on all fund managers throughout – lack of confidence in the market diminished all new business,” Navra told InvestorDaily.
“But the big killer was the collapse of Great Southern.”
He said ASIC insisted NavraInvest, and other financial services groups, contact their clients who had invested in Great Southern products to inform them of the possibility they might have received inappropriate advice, in which case the clients were advised to contact the Financial Ombudsman Service (FOS).
When asked whether he expected to receive any complaints from clients following NFS’s collapse, he said he did not.
“I don’t think so. There has been a liquidators’ meeting. If anyone wanted to put in claims, they could have put in claims. It’s all just been done in a very orderly fashion,” he said.
At the time of Great Southern’s collapse, NFS had around $30 million of clients’ investments in the failed agribusiness firm. All of the $30 million was lost, Navra said.
“We then got 22 complaints through the ombudsman and the ombudsman chose to divide the complaints into six components each of less than $150,000 that fitted their mandate, which we then had to defend,” he said.
FOS’s decision to divide the complaints left NFS facing 132 complaints and financial ruin.
“The result of that was that our insurance went through the roof to the point that the insurers refused to insure us and without insurance I was forced to close [NFS]. Without [NFS], NavraInvest doesn’t have a distribution,” Navra said.
“The fact that FOS split the claims into many different claims and that affected our insurance was the direct course of demise for [NFS], which was a very profitable business prior to that.”
Of the 22 claims against NFS, none had been proven, he said.
According to NavraInvest’s June 2011 annual report, the company’s investment of more than $1.6 million in NFS had been written off.
“The deferred tax asset, which was $219,000 related to the potential future benefit associated with accumulated losses, has also been written off,” the report said.
“The overall loss made by the company for the year is $1,420,263.”
Volatile markets have also hit NavraInvest’s funds division, with the firm informing clients earlier this month that since investments were moved to cash last November, the Navra Blue Chip Australian Share Retail Fund and Navra Blue Chip Australian Share Wholesale Fund will be terminated in March.
The company’s property funds and its Asia-Pacific fund remained ongoing, Navra said.
Assets under management in NavraInvest’s funds had fallen to about $50 million from around $225 million, the company report said.
Navra said the company’s joint venture negotiations were crucial to its survival.
“I don’t think it will go under entirely; I think we may choose to close it if we don’t have a distribution,” he said.
“Failing the JV, the directors will probably hold a shareholders’ meeting and put it to shareholders that we will probably look to close the business.”
If the business closed, he would have “lost everything”, he said.
