The ILAS Scandal Intensifies: Ex-Employee Tells Regulators that Professional Misconduct and Incompetence Are Rampant at Hong Kong’s Largest IFA Company

Convoy Financial Services is facing another public relations nightmare.

This time, it’s not an outraged client. It’s an indignant ex-employee.

After being lied to, manipulated, and used as a tool for swindling his own father, Shawn Wong is fighting for justice by taking his story to regulators and the media.

Convoy Exploits Youth and Inexperience

According to Shawn, Convoy systematically recruits and exploits inexperienced fresh graduates, with special emphasis on those from the mainland, by taking advantage of their visa status, isolation from friends and family back home, desperateness to find a job, their naiveté, and their parents’ social networks (“guanxi”).

New Convoy recruits are brought through a training program that is focused 100% on sales and 0% on fiduciary duty, even though brokers are morally and legally obligated to be focused on just the opposite. In Shawn’s words:

“Convoy hasn’t initiated any training seminars regarding an insurance intermediary’s moral & ethical responsibilities, investor’s rights and interests, or important provisions and clauses of [ILAS] products. There are only sales skills oriented trainings, which cause their consultants to intentionally or unintentionally be driven by personal interests, violate professional ethics, and mislead investors [by misrepresenting products].”

In other words, Convoy cherry-picks people who have no investment knowledge. They’re too young to have had a job, so they’ve never had a chance to earn money and learn how to manage it. Convoy then rushes them through a short sales training program, which teaches them how to sell ILAS, an absurdly complex, dangerous, unnecessary, and often fraudulent investment product. Armed with no knowledge about the broader market of investment products, and little understanding of the products they are supposed to sell, these new employees are disingenuously designated as “independent financial advisers”. They are then pushed out the door with one instruction: SELL. They are given no salary. Any money they earn comes solely from commissions. This means, if they don’t sell, they will have to beg for support from their parents, or borrow money from a bank as Shawn did.

Cold Calling

Shawn says Convoy’s training sessions teach employees how to “talk to, warm call/cold call clients, how to find their potential needs and how to fire on it, and there are drills within teams to practice meeting clients.”

After this training, employees are provided with the highly personal and private data of potential victims, data which could easily be used to manipulate and abuse the poor schmuck on the other end of the line, who doesn’t know his data has been collected and auctioned off to scam artists. According to Shawn:

“When I was new in Convoy, newbies were provided contact lists to make cold calls (I got both locals and mainlanders) including contact names, phone numbers, address, occupations, some even had assets details (like how much their savings are, what kind of properties they owned, what kind of car they drive) and recent personal wealth management activities, if there is any.”

He was shocked by how detailed the information was, as was I, when he told me.

Pitching to Mainlanders

Being from the mainland, Shawn was trained to pitch to mainlanders, particularly those who might have obtained their wealth by illicit means.

“Convoy’s mainland employees are repeatedly taught to emphasize on ‘bonus’ [i.e., a promotion scam]…tax avoidance and ‘asset safety’. And interpretations regarding “asset safety” may involve illegal/improper income, or even money laundry.”

When asked to elaborate, he said: “ILAS basically allows people to put lots of money in it and packages it as an insurance product registered in some tax haven, such as Isle of Man. For mainland investors, Convoy makes them think this is a safe product and hard to trace.”

Conflicts of Interest

Shawn says the commission rates at Convoy are directly proportional to ILAS lock-in periods. This means the most dangerous ILAS products generate the highest commissions. Products which are less toxic and more transparent, i.e., those with no lock-in periods, are “never on the top list for consultants to sell.”

This means Convoy not only doesn’t educate its clueless young “advisers” about which products are better for clients, it also gives them an incentive to flog the worst of the worst products.

Shawn explains:

“more elasticity for investors means less financial benefits for insurers, so they give less commission to consultants. For products like the Skandia Executive Wealthbuilder Account, the consultant will not be interested.”

False Advertising

For this reason, Shawn thinks Convoy is being dishonest with the public by calling itself an “independent financial adviser”, or IFA, company:

“Convoy always claims that it is indifferent when choosing which insurance company for clients, so that it can act completely for investors’ benefit, which is complete bullshit.”

“what Convoy does not tell clients is, it is only “indifferent” when choosing insurers if the commission is the same.” 

“as long as ILAS is one of the products [advisors] sell, no matter whether it is suitable or not, ILAS will always be the first thing they recommend to potential clients [because advisors] can get much more commission from this type of product.”

“For a real IFA, the bottom line is, there is not any sort of interest conflict between the advisor and the client. Thus, for most cases, the advisors are only compensated by the client for the service.”

“What I don’t understand is, why have the government and regulators allowed them to use the term ‘IFA’ to fool the public for so many years?”

It’s a good question and especially salient given that this deceptive practice has been outlawed in the UK.

Shawn’s Story

Shawn says he never applied for a job at Convoy. The company somehow obtained his contact information, called him, promised a great future, and invited him to an interview.

Their pitch sounded convincing. His soon-to-be supervisor supposedly earned $600-700K in her first year alone. If she could do it, he thought he could too.

One of the hurdles every “Convoyee” must pass is a 6 month probation period, in which one must sell $5 million in “business value”. If the freshly minted “IFAs” aren’t able to do it, then they are sometimes encouraged to ask their parents to buy a $5 million ILAS policy, so that they may remain “employed”.

This happened to Shawn and a number of his friends and acquaintances. He says:

“Even when I had not sold any products, their persuasions could still get me hypnotized to believe that probation was just a small barrier, a little more time is all I needed, a brighter future was right after it, and asking my parents to help at this point was totally worth it.”

Shawn’s father came to Hong Kong in November of 2010 for his graduation ceremony. During this trip, his father had a long, private discussion with Shawn’s supervisor at Convoy. After the meeting, his 60-year-old father signed the paperwork for a Zurich Vista plan, which obligated him to pay $17,000 HKD per month for the next 25 years ($5.1 million total). The plan was obviously unsuitable for someone of his father’s age, so Shawn’s supervisor coached Shawn to fill out the paperwork in a way that wouldn’t send up any red flags when it was being processed. This included lying about his father’s income to make it seem as if he could afford the policy, even though he couldn’t.

Perhaps Shawn’s supervisor was genuinely interested in seeing him succeed, but there was more at stake than just Shawn’s future. Because Convoy is set up like a giant pyramid scheme, his supervisor would receive a cut of the commission generated by the $5.1 million policy sold to his father. Presumably his supervisor’s supervisor’s supervisor’s supervisor would also get a cut.

SCMP recently reported that insurance companies pay brokerage companies a commission equal to 4.2% of the business value of regular premium ILAS products. This means Convoy likely received a total commission of $214,200. Shawn said 1.5% was passed along to him ($76,500). The remaining 2.7% ($137,700) would have been split up between the company and its senior management—an excellent return on investment, considering that Convoy paid Shawn no salary.

Because Convoy did not disclose it, Shawn was not aware that Convoy’s cut of the commission would be so large—nearly twice as much as the amount he was given. This massive commission would ultimately come out of the first 18 months of payments into the Vista policy (meaning these payments were flushed down the toilet, irrecoverable), but neither Shawn nor anyone who buys the policy knows this, as it’s not disclosed in the policy documents, and it’s well-hidden by obfuscatory fees and deceptive accounting.

Shawn remained “employed” at Convoy for more than a year, until he finally realized it was impossible to earn a living there without violating his own sense of right and wrong. He says:

“I didn’t believe I had the “thick face” to sell ILAS to my relatives/friends and my parents’ friends while knowing that they didn’t actually need it. I also knew there was no way they would buy it if they had understood the clauses or knew that I didn’t understand them.”

Moreover, he was trained to present ILAS as a means of “some sort of tax avoidance/evasion or capital flight from mainland China. Refusing to apply these potentially misleading sales methods is one of the reasons for my unpleasant performance in Convoy.”

Shawn finally quit.

“After 8 months of payments, I was unable to make further payments (since they were partially made by my father and the rest by myself)…So I asked my father to stop…But we didn’t plan to cancel the policy until Zurich sent me a letter after ~6 months or so and said the policy had lapsed. Then we started to realize the problem.”

The problem was that none of the $136,000 they paid into the so-called savings plan was really saved. It was pocketed by Zurich and Convoy.

Because Shawn and his father had not made at least 18 months of payments (known as “initial contributions”), Zurich would claw back a percent of the commission paid to Convoy, which means Convoy would claw back a percent of the commission paid to Shawn. Shawn’s clawback amounted to $42,900.

“I received a call from Convoy in late May 2013. They told me they had sent a letter for commission clawback a few months before. I hadn’t received it, so I asked them to send it again.”

Shawn received it and replied, explaining how he was manipulated, poorly trained, and encouraged to use unethical sales methods.

“Based on, but not limited to, mentioned facts, I hereby demand to be free of any obligations to Convoy…In exchange, my father and I will surrender our rights to claim the corresponding premiums paid in the ILAS plan mentioned above. Otherwise, as a financial media professional, I have no choice but to use my resource righteously to protect my interests, and reserve my rights to take further legal actions for my loss.

Please inform me of your decisions by mail, or email”.

Convoy never replied to Shawn. Instead, nearly one year later, he was contacted by a debt collection firm.

“I unexpectedly got a phone call from Milliken and Craig in March 2014. This is what pissed me off, and then I decided to break the silence and fight against every injustice Convoy forced on me.”

The Necessity of Speaking to the Media

Shawn’s father wrote a complaint letter to Zurich. Zurich responded that it had done nothing wrong and referred the case to Convoy.

Certain that Convoy would also claim no wrongdoing, Shawn wrote a letter to the Insurance Authority:

“Convoy’s representative told me clearly, that in past cases dealing with similar complaints, Convoy has NEVER made the compensations…this statement made me very worried that, in Convoy’s ‘internal investigation’, no matter right or wrong, as the power of Convoy and individual investors are unequally matched, investors’ rights and interests were always trashed.”

Shawn was given the impression that Convoy would treat his case as a personal act of misconduct on the part of his supervisor. His supervisor would be contacted, and if she didn’t want to pay back Shawn and his father, then Convoy would do nothing. Case closed.

Shawn doesn’t believe that pinning all the blame on his supervisor is right. He thinks the root of the problems lies much deeper. It stems from the way Convoy recruits people with no experience, neglects to give them the proper training required to perform the duties of the profession, and instead drills and incentives them to sell at all costs, utilizing morally dubious tactics.

Shawn says:

“I believe my whole small team at that time all had no clear understanding of the [initial contribution period], even my supervisor. (Yes, even now I still believe she did not trick me on purpose about this. She just did not have a clear clue either.)”

Shawn is not hopeful that Convoy will admit any responsibility. He also thinks filing complaints with regulators will lead nowhere.

“I know for SFC regulated activities, these are all 100% misconducts. But for the insurance industry, which is mostly self-regulated by entities like PIBA, even though it may be morally wrong and violates the code of conduct, I doubt there is enforcement power over that. People in PIBA’s committee are industry players too. They won’t punish misconduct if it raises questions about their own behavior.”

Shawn believes he has been left with no choice but to turn to the media. This is the reason he contacted me and welcomed me to publish his story and his documents. It is also the reason he recently sat down for an interview with a journalist from South China Morning Post.

11 days ago, Shawn invited that journalist to accompany him to a meeting at Convoy, in which Shawn was supposed to negotiate a possible settlement. Shawn did not warn Convoy beforehand that the journalist was coming, as he suspected Convoy would refuse to accept his presence.

Shawn’s premonition was correct.

“They refused to talk, as anticipated. I think that legal compliance dude was shocked. And a little pissed.”

So, instead of meeting as planned, Shawn handed the legal compliance worker a letter which he had written beforehand. Shawn told him:

“I can’t attend without a witness and don’t believe my best interests can be protected if I talk to you legal guys by myself.”

Shawn’s letter outlined the possible ways that he would be willing to settle. Shawn requested that Convoy answer within seven days, by May 15.

On May 16, Shawn had not yet received a response, so he called Convoy and asked why. They said they had mailed a response letter the day before, so it probably hadn’t arrived. But then, a few hours later, Convoy called Shawn again and said no, actually, they hadn’t mailed the letter yet. They’d mail it later that day.

Now, it is May 19, and Shawn still hasn’t received a response.  I asked Shawn if he wanted me to wait to publish his story.

He said, “Go ahead. They’ve brought this upon themselves.”

2 thoughts on “The ILAS Scandal Intensifies: Ex-Employee Tells Regulators that Professional Misconduct and Incompetence Are Rampant at Hong Kong’s Largest IFA Company

  1. GuessWhoIam

    I was Convoy‘s ex-employee, and I even witnessed some employees imitating their clients’ signatures in some situations.

    Reply
  2. GuessWhoIam

    Btw, the team leader, or say the recruiter of that employee, just kept one eye open and another close for the forgery signature.

    Reply

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