A Somerset West mother and daughter practising as financial advisers were recently removed as trustees of two multi-million rand trusts and banned from practising as advisers.
Earlier this month, the Cape High Court granted an application brought last year by three siblings to remove Marie Swanepoel and Elizabeth Coetzee as trustees of their family trusts on the grounds of mismanagement, a breakdown in the relationship and the “extraordinary” fees the pair charged.
The case, together with other complaints and the finalisation of a protracted appeal against a professional body’s disciplinary action against Coetzee in 2007, also lead to the Financial Services Board (FSB) debarring the pair in May this year, the FSB has confirmed.
The pair have appealed against the FSB’s decision, which, if upheld, will make it impossible for them to give financial advice for five years. The financial services provider licence of their company, Qmala, has been withdrawn.
In November last year, Coetzee lost an appeal against a 2007 finding made by the professional body for financial planners, the Financial Planning Institute (FPI), that she was guilty of unprofessional conduct. The FPI banned Coetzee as a member and fined her, taking away her right to use the Certified Financial Planner accreditation.
The FPI’s decision followed a complaint by an elderly widow that Coetzee had given her bad advice about investments in her family trust and had earned R900 000 in commission for switching the investments. The court papers in that case revealed that Coetzee’s mother, Swanepoel, had received R2 million from the widow, which Coetzee claimed was a gift.
In the latest court case, Cape High Court judge Andre la Grange ordered that Coetzee and Swanepoel be removed as trustees from two trusts set up for the benefit of the three adult children of Leoniel and Beryl Swart, formerly from the Strand.
The judge did not give reasons for his judgment, which appoints the Swart’s two sons and the trust’s accountant as trustees.
In affidavits accompanying their application, the Swarts’ sons, Hannes and Derek, and daughter, Lynette Rademaker, say that Coetzee and Swanepoel had drawn remuneration of some R2.5 million for their trustee duties in 2012 and 2013 alone.
They also say the pair breached their trust and confidence, had refused to consider their wishes as beneficiaries of the trusts, and that Coetzee’s misconduct made her ineligible to be a trustee.
Last year, the siblings successfully brought an urgent application to the same court to have Derek Swart reinstated as a trustee after Swanepoel and Coetzee held a meeting and dismissed him. The court found this dismissal to be invalid.
In his affidavit with the current application, Hannes Swart says his parents drew up a joint will in which they expressed their wish that their multi-million-rand estate be placed in two trusts for the benefit of their three children.
Swanepoel and Coetzee were appointed executors of the estate and Swanepoel was made a trustee of the trusts.
Leoniel Swart negotiated with Swanepoel and Coetzee that they would administer the estate for 42.86 percent of the maximum fee that can be charged for the administration of an estate: 3.5 percent of total assets (3.99 percent including VAT).
Illustrating how the siblings had lost faith in the mother-and-daughter advisers, Swart says in his affidavit that after his father died, his mother repudiated the joint will and wrote a new one, again appointing Swanepoel and Coetzee as executors, but the new will did not include the clause reducing the executor’s fees.
As a result, while his father’s estate paid almost R490 000 in executor’s fees after his death in 2009, his mother’s estate paid R1.3 million in executor’s fees after her death a year later, in 2010.
Swart alleges that his mother, who was fragile and quite ill, was not qualified to deal with financial issues, and her decisions were influenced by Swanepoel and Coetzee, who did not act in her best interests.
However, in her replying papers, Swanepoel says Swart exaggerated his mother’s condition and that Beryl Swart was adamant she wanted her own will and to distribute her assets in accordance with her own wishes.
Swanepoel says that she spent many hours sorting out the late Mrs Swart’s affairs, that Mrs Swart recognised this and was of the view that they therefore deserved the full executor’s fees.
The court papers also reveal that Beryl Swart wanted her estate to provide an income for her brother and sister. They were income beneficiaries of the family trusts, but instead, Swanepoel and Coetzee set aside a lump sum of more than R4 million to buy annuities with annual escalations of 10 percent and capital guarantees to pay the capital in the annuities back to Mrs Swart’s brother’s and sister’s estates on their deaths.
Annuities with capital guarantees incur higher costs and commissions relative to annuities without these guarantees.
Hannes Swart’s affidavit states that after his mother died, only Swanepoel and Derek Swart were left as trustees, and he had suggested that he and his sister be made trustees. However, he says, Swanepoel advised the siblings against this on the basis that Hannes Swart was a capital beneficiary of the trust, and Rademaker, who lives in the United Kingdom, was not resident in South Africa. She instead proposed that her adviser daughter, Coetzee, be appointed as a trustee, which then occurred.
In his affidavit, Hannes Swart also says that both she and Coetzee failed to inform the siblings of the FPI’s finding against Coetzee and Coetzee’s subsequent appeal.
The three siblings decided that the two trusts should be split into three for the benefit of their respective families, and took legal advice on how to do this. They submitted an agreement they drafted to the trustees, but Swanepoel refused to sign it.
She said as a trustee it was her duty to look after the interests of all the beneficiaries of the trust, which included Leoniel and Beryl Swart’s siblings, their grandchildren, and registered welfare organisations.
Swart says in his affidavit that “the remarks are nothing but unfounded excuses not to adhere to our wishes and probably to create some eternal right to hold onto their positions as trustees (which is very lucrative)”.
The siblings then obtained financial statements for the trusts and discovered that Swanepoel and Coetzee’s remuneration as trustees had increased from nothing to R446 000 a year on one of the trusts and from nothing to R72 000 a year on the other trust.
The trusts hold mostly listed shares and some shares in an unlisted family business.
In her replying affidavit, Swanepoel says the three siblings have lost sight of the fact that their parents chose to create the discretionary trusts for the benefit of their relatives and not for the children to get their portions of their estates.
She says she and Coetzee have administered the trusts correctly and in a professional and competent manner and that much work goes into the administration of a trust.
Swanepoel also states that the Leoniel and Beryl Swart knew about the FPI case.