net worth of yacht brokers

[benjenbav]

Bit like estate agents. Crooks in suits. After shaking hands you best make sure your Rolex is still on your wrist.

If you’ll forgive me, I think that the biggest issue for buyers is not knowing how trustworthy a counterparty is.

Most people don’t buy and sell boats every day. How on earth do they know that the person to whom they are handing a large sum of money isn’t just going to disappear with it?

Client accounts have been mentioned. Useful - so long as the person operating them actually puts the money in the client account.

Every walk of life has its good, bad and middling folk. The big advantage of solicitors’ client accounts is that solicitors have to have insurance to practise. So on a pessimistic view there tends to be a second line of defence.

I don’t think it’s at all unreasonable to do due diligence on the arrangements for safeguarding my money and, if I was buying a new boat today, I would dig down into the accounts of anyone who was going to be holding my money, look for guarantees (manufacturer or insurance), look for comfort on the holding account or - if I was feeling reckless - require a blimmin’ gigantic discount for placing money with men of straw.

Yes, I know they wouldn’t agree to the discount. But, then again, they wouldn’t make the sale.

 

[GEM43]

If you’ll forgive me, I think that the biggest issue for buyers is not knowing how trustworthy a counterparty is.

Most people don’t buy and sell boats every day. How on earth do they know that the person to whom they are handing a large sum of money isn’t just going to disappear with it?

Client accounts have been mentioned. Useful - so long as the person operating them actually puts the money in the client account.

Every walk of life has its good, bad and middling folk. The big advantage of solicitors’ client accounts is that solicitors have to have insurance to practise. So on a pessimistic view there tends to be a second line of defence.

I don’t think it’s at all unreasonable to do due diligence on the arrangements for safeguarding my money and, if I was buying a new boat today, I would dig down into the accounts of anyone who was going to be holding my money, look for guarantees (manufacturer or insurance), look for comfort on the holding account or - if I was feeling reckless - require a blimmin’ gigantic discount for placing money with men of straw.

Yes, I know they wouldn’t agree to the discount. But, then again, they wouldn’t make the sale.

Completely agree with this, entrusting large sums of money to anyone of unknown quantity is pretty scary. Boat brokers are lovely people I'm sure but they're probably not highly skilled in the control environment surrounding financial transactions. I confess, I'm an accountant, and indeed an auditor whilst I did my training in the 80's. I was then a Client Accountant responsible for clients funds for a very large Property Consultancy/Property Management and estate agency business. I know a fair bit about client accounts and how they should be run. I then started my own business providing property financial & management accounting and estate agency software, my clients were some of the biggest names in the business. Their client accounts were generally well managed but as we took on more of the middle tier agents as clients it has to be said that some of the client accounting practices that we took on was very poor indeed - partly because the software that was being used just wasn't up to the job. I too back the Solicitors Accounts over the yacht brokerage accounts simply because I believe them more robust and, as you say, better insured!

 

[Tranona]

Completely agree with this, entrusting large sums of money to anyone of unknown quantity is pretty scary. Boat brokers are lovely people I'm sure but they're probably not highly skilled in the control environment surrounding financial transactions. I confess, I'm an accountant, and indeed an auditor whilst I did my training in the 80's. I was then a Client Accountant responsible for clients funds for a very large Property Consultancy/Property Management and estate agency business. I know a fair bit about client accounts and how they should be run. I then started my own business providing property financial & management accounting and estate agency software, my clients were some of the biggest names in the business. Their client accounts were generally well managed but as we took on more of the middle tier agents as clients it has to be said that some of the client accounting practices that we took on was very poor indeed - partly because the software that was being used just wasn't up to the job. I too back the Solicitors Accounts over the yacht brokerage accounts simply because I believe them more robust and, as you say, better insured!

"client" account is a generic term that does not say anything about how the account is managed. Suggest you read the link in post#10. The type of account used now by brokers follows the principles of that judgement. The key is (as I pointed out) that each client's funds are held in trust and the way of ensuring that the trust meets the tests is for every deposit and withdrawal has evidence that it is related to the contract. In practical terms the buyer deposits funds into the account, preferably electronic transfer. When the contract is complete final payment is made using the same process is used and the stakeholder (usually the broker) deals with any disbursements specified in the contract and transfers the funds to the seller together with an account. The trust then no longer exists. Although the broker is stakeholder so signatory to the account, if he withdraws funds for himself that is not covered by the terms of the contract, that is theft. Another feature of this type of account is that it is totally separate from the broker's personal or business affairs and neither creditors nor the bank has any claim on funds in it - they are always the property of the client based on the trust.

There is no recent (20+ years) cases of any broker stealing clients' money from the separate account unlike for example solicitors where the size and volume of cases is such that solicitors are required to hold insurance. Of course there are many more solicitors and vast sums of money flowing through their accounts so the chances of offences is greater. On the other hand most brokers are small businesses and the number of transactions live at any time with funds in the account is small. From memory the funds in the Opal account for incomplete brokerage transactions was around £90k. Also the period of time that funds in each trust are there is small - weeks for deposits and days for final payments so difficult to abscond with funds without detection. Your comments about poor accounting practice are wide of the mark in most brokerage activities as client accounts are generally not handled through the business accounts as the only interface between the two accounts is the transfer of the commission payment from the client account to the business account. That is the main learning point of the Opal case.

As a seller or buyer, it is a broker client account for me over a solicitor - and the service is "free".

 

[GEM43]

"client" account is a generic term that does not say anything about how the account is managed. Suggest you read the link in post#10. The type of account used now by brokers follows the principles of that judgement. The key is (as I pointed out) that each client's funds are held in trust and the way of ensuring that the trust meets the tests is for every deposit and withdrawal has evidence that it is related to the contract. In practical terms the buyer deposits funds into the account, preferably electronic transfer. When the contract is complete final payment is made using the same process is used and the stakeholder (usually the broker) deals with any disbursements specified in the contract and transfers the funds to the seller together with an account. The trust then no longer exists. Although the broker is stakeholder so signatory to the account, if he withdraws funds for himself that is not covered by the terms of the contract, that is theft. Another feature of this type of account is that it is totally separate from the broker's personal or business affairs and neither creditors nor the bank has any claim on funds in it - they are always the property of the client based on the trust.

There is no recent (20+ years) cases of any broker stealing clients' money from the separate account unlike for example solicitors where the size and volume of cases is such that solicitors are required to hold insurance. Of course there are many more solicitors and vast sums of money flowing through their accounts so the chances of offences is greater. On the other hand most brokers are small businesses and the number of transactions live at any time with funds in the account is small. From memory the funds in the Opal account for incomplete brokerage transactions was around £90k. Also the period of time that funds in each trust are there is small - weeks for deposits and days for final payments so difficult to abscond with funds without detection. Your comments about poor accounting practice are wide of the mark in most brokerage activities as client accounts are generally not handled through the business accounts as the only interface between the two accounts is the transfer of the commission payment from the client account to the business account. That is the main learning point of the Opal case.

As a seller or buyer, it is a broker client account for me over a solicitor - and the service is "free".

I made no reference to poor accounting practice in brokers accounts.

 

[Tranona]

I made no reference to poor accounting practice in brokers accounts.

So why mention the problem in an industry that is nothing like yacht brokerage?

 

[shanemax]

More laughter - you really do have some weird ideas.

Experience my dear chap, I ran my own removal business for 30 years so had a lot of experience of lazy estate agents doing the minimum for the maximum fee. Its the sort of job that appeals to lazy get rich quick lovies. One estate agent owner who I will not name said I can promise my new young staff the world, give them a 1 litre company car, work them to death and when they get wise replace them with the same young ambitious idiot. Thats life.

 

[benjenbav]

So why mention the problem in an industry that is nothing like yacht brokerage?

As mentioned, I think the big issue is counterparty risk, specifically the difficulty of knowing that safe practices are being followed by the broker.

For instance, the issue in Peters v Moriarty wasn’t that there was no client account nor that anyone had dipped into the client account; rather it was that the clients’ money didn’t make it into the client account - and thus fell to be dealt with in accordance with standard insolvency priorities, so that the would be buyers were unsecured creditors.

I would not see a one-size-fits-all solution to comfort buyers in the heart-in-mouth experience of punting away large sums with no immediate return. I know folks who’ve bought (new) with a manufacturer’s guarantee standing behind the broker/agent for stage payments. Others who have used insurance products. Etc.

Think, check, be sure is all I’d say.

 

[Tranona]

As mentioned, I think the big issue is counterparty risk, specifically the difficulty of knowing that safe practices are being followed by the broker.

For instance, the issue in Peters v Moriarty wasn’t that there was no client account nor that anyone had dipped into the client account; rather it was that the clients’ money didn’t make it into the client account - and thus fell to be dealt with in accordance with standard insolvency priorities, so that the would be buyers were unsecured creditors.

I would not see a one-size-fits-all solution to comfort buyers in the heart-in-mouth experience of punting away large sums with no immediate return. I know folks who’ve bought (new) with a manufacturer’s guarantee standing behind the broker/agent for stage payments. Others who have used insurance products. Etc.

Think, check, be sure is all I’d say.

Simply ask the broker for details of his client account, pay direct into that account. The Opal case fundamentally changed the approach to client accounts and the BMF and YDSA insist their members use it keep it entirely separate from their business account.

Buying new is a different scene where as you rightly say more caution is needed to avoid becoming an unsecured creditor. I had reservations about paying my stage payments for my Bavaria with 20% on order and 20% at confirmation of build date, balance on completion (by way of cash and my old boat). The dealer is part of a substantial conglomerate and as part of the deal they needed to buy a forward to benefit from the then current high value of the £ which of course resulted in a lower price for me. The period of time my money was at risk was short by boat building standards at just over 3 months from order to delivery. Of course it all went like clockwork.

It is important that people understand the difference between broker and dealer as the processes and risks are different

 

[benjenbav]

A crude characterisation of the difference between buying a boat through a broker and buying a new boat through a dealer might be that, in the former, you are buying something that already exists and that - except for your deposit - will be handed over at the same time you pay the money.

In the latter case, to cite the numbers in #28, you might be handing over 40% of the price to someone (whose net worth may be less than your own) who will pay it on to a third party with whom you don’t have a contract, for that third party to build something that doesn’t yet exist and which won’t be complete for some considerable time.

Who on earth would be crazy enough to do that? Well, all of us who buy new boats.

 

[shanemax]

Beware of the "middle man" He introduces buyer to seller, has very little interest in who's who and takes a fat slice for himself, usually moving on as quickly as possible.

 

[Tranona]

Beware of the "middle man" He introduces buyer to seller, has very little interest in who's who and takes a fat slice for himself, usually moving on as quickly as possible.

Another load of nonsense.

 

[Tranona]

A crude characterisation of the difference between buying a boat through a broker and buying a new boat through a dealer might be that, in the former, you are buying something that already exists and that - except for your deposit - will be handed over at the same time you pay the money.

In the latter case, to cite the numbers in #28, you might be handing over 40% of the price to someone (whose net worth may be less than your own) who will pay it on to a third party with whom you don’t have a contract, for that third party to build something that doesn’t yet exist and which won’t be complete for some considerable time.

Who on earth would be crazy enough to do that? Well, all of us who buy new boats.

The distinction is that the broker has no financial interest in the boat and the contract is between the seller and buyer. A broker can act for both new or old boats, his role and the laws that govern it are the same. with a new boat the contract will be with the builder who is subject to consumer law.

A dealer is trading on his own account, whether it be a new or existing boat and the purchase contract is with him. and is subject to a wider range. of consumer protection legislation.

 

[Tranona]

[Deleted quoted content removed]

You do seem to have a strange view of the world. This thread is specifically about yacht brokers and dealers so fail to see what your jaundiced view of banks and the national economy has to do with the subject. As I say absolute nonsense, but you clearly seem to get some kick out of posting nonsense.

 

[benjenbav]

The distinction is that the broker has no financial interest in the boat and the contract is between the seller and buyer. A broker can act for both new or old boats, his role and the laws that govern it are the same. with a new boat the contract will be with the builder who is subject to consumer law.

A dealer is trading on his own account, whether it be a new or existing boat and the purchase contract is with him. and is subject to a wider range. of consumer protection legislation.

Consumer law is helpful, but less so in a counterparty’s insolvency where that counterparty, at the relevant time, has both your money and a controlling interest in the goods you are trying to buy.

 

[macca499]

I think my original point was that in any industry I have been involved in, there is the same range of accounting practices 1. Guys who extract all profits via salary & divy, happy with low company net worth on paper but tax efficient and focused on personal wealth 2. Guys who like to show as much profit and success as possible, happy to pay associated tax and perhaps half an eye on a sale at some point and 3. Guys who just can’t run a business, I just find it odd that all brokers would appear on companies house anyway to fall into category 1 or 3 with the consensus here leaning towards category 1. Not sure if i would ever buy a new yacht with the price level we are now at compared to 10 years ago but good to learn of the perils involved

 

[Tranona]

Consumer law is helpful, but less so in a counterparty’s insolvency where that counterparty, at the relevant time, has both your money and a controlling interest in the goods you are trying to buy.

No, but it gives a while load of rights that you do not have if you buy a boat privately with or without a broker.