'I'm devastated,' says David Aaron

TO ENVIOUS outsiders, he was a brilliant salesman with all the trappings success can bring...a white Bentley, a £3m-plus London flat, a large house in the Home Counties, a liking for expensive massages and membership of exclusive clubs.

But the financial empire that David Aaron built with wife Doreen and sons Michael and Stephen lies in ruins. Administrator KPMG is trying desperately to find a buyer for the firm he set up more than 30 years ago.

The company's 20 staff fear for their jobs as KPMG, which was called in just before Christmas, cuts costs to reflect the fact that the David Aaron Partnership, apparently once one of the most prosperous independent financial advice firms, is no longer open for new business.

It has taken a long time for the facade to crumble - not surprising given Aaron's ability to schmooze prying journalists with trips to some of London's top restaurants followed by a chauffeur-driven ride home in his Bentley.

And Aaron, 63, was an expert in social climbing who loved to mix with old money and titled people. He was a generous host at his home in Milton Bryan, Bedfordshire, or his flat in Lowndes Square, Knightsbridge.

Now, Aaron claims he is a broken man. 'I'm devastated,' he told Financial Mail on Sunday. 'I love my clients. I'm sad about how things have turned out.'

But he has only himself to blame because what eventually brought down the Aaron empire was pure greed.

Like many financial advisers, Aaron used the market boom of the Nineties to change the way he did business. Rather than simply advise, Aaron went for the hard sell of investment products through the use of dubious direct marketing literature, often carrying endorsements from 'independent' experts.

Nowhere was this more evident than in the promotion of 'precipice bonds' - investment plans linked to the fortunes of selected stock markets or specific shares. These worked well when stock markets were rising, but took on nightmare qualities for investors when they plunged because the bonds magnified the fall.

From 2000, Aaron was one of the main sellers of these bonds, striking up lucrative deals with issuers to sell direct to the public. He was not alone in this, but it was the aggressive marketing of the plans that made him stand out from the others.

In Aaron's literature, the plans were described as low risk by a panel of 'experts'. These included leading personal finance journalists, among them a former Financial Mail reporter, and Aaron's own public relations adviser, the former bankrupt and old Etonian Julian Gibbs. But they simply did not have sufficient knowledge to make such bold claims.

With many of the bonds set to mature over the coming three months, Aaron's business, based in Woburn Sands, Buckinghamshire, is expected to be hit with a deluge of investor complaints, leading to massive compensation claims. Experts estimate investor losses are between £1m and £3m.

On Friday, Aaron continued to defend the way he sold these bonds. 'The experts we used in literature were not asked to endorse the plans, but to give their genuine opinion,' he told Financial Mail.

The fear of big compensation bills partly explains why a rival adviser, The Money Portal, pulled out of a deal late last year to buy the business. Yet it is believed that The Money Portal was alarmed at the state of Aaron's business even before taking account of likely claims.

Though Richard Craven, managing director of The Money Portal, refused to talk about the deal, it is believed that accountant BDO Stoy Hayward, appointed to trawl through the Aaron books, was appalled by what it saw. One person close to the negotiations said: 'Go beyond the plush cars, the smart offices, the image of Aaron in the Press as some kind of big player in the adviser market and you're left with a business weighed down by enormous liabilities.'

One area of alarm was the £521,549 of director loans to Aaron and his family reported in the last accounts filed at Companies House for the year ending 31 December, 2001. Aaron said the loans, still outstanding, had been taken out in preference to directors' salary to 'help' the business. In the same year, however, the wage bill for directors - largely Aaron and his family - amounted to £474,551.

Early this week, Aaron will present KPMG with an up-to-date statement of the company's financial position. In turn, the administrator is confident that the remaining assets in Aaron's business will be sold in the next few weeks.

Aaron said he hopes to remain involved in the adviser market. Hundreds of former clients will be bitterly counting the cost of listening to that advice.

Anyone with a complaint against the David Aaron Partnership should write to KPMG at 8 Salisbury Square, London EC4Y 8BB. It will then liaise with the FSA and the Financial Services Compensation Scheme over possible compensation. The FSCS is able to provide compensation up to a limit of £48,000.