Inquiry too late for many victims
For the past 13 years covering personal finance for Fairfax Media, I have interviewed or received emails from dozens of victims of shockingly bad financial advice and of investments that failed. Billions of dollars have been lost - often the entire life savings of retirees.
There was the 61-year-old cancer patient who had inherited her parents' house. Although she was assessed as a "defensive investor" type by the financial adviser, she was given a "diversified portfolio" that consisted mostly of Westpoint's York Street Mezzanine investment in Sydney (which failed in 2005) and debenture-issuer Bridgecorp (which loaned money to property developers including Westpoint and failed in 2007).
There was the age pensioner who put almost all of her life savings of $50,000 into an investment run by Australian Capital Reserve. She first heard of the investment through its advertising on TV. She emailed me after the company collapsed: "My husband died last year and I will probably end up having to sell my home and try to get into a retirement village."
Then there was the 74-year-old widowed mother who lost $23,000.
"She was attracted to the TV and newspaper ads, and started out investing $8000 [without telling us or asking our advice]," wrote a relative of the woman. "She went on to add her matured fixed deposits from her bank over the past two years and built up her investment in Australian Capital Reserve to $23,000. Each time her notes were about to mature, she would receive a phone call from Australian Capital Reserve persuading her to add more to her investment."
Another wrote of her "sadness and frustration" at her mother's misfortune: "I spent the whole day with her at Royal Perth Hospital breast clinic, where she is undergoing further testing for breast cancer ... and then came the ACR collapse. She lost $250,000. It was everything she had. She lives off a pension and used the interest to get herself something from time to time or to spend on the grandkids.
"She worked like a Trojan, as most in that generation did, and earned every cent herself, as a single mum. We could never get her to spend her money because something had to be left for her kids. She is totally spent, the life sucked from her. Her devastation is frightening."
One woman wrote to me about her sister who, at the age of 21, suffered a horrific work accident. After several years, she won compensation.
"[She] is now 36, with three kids under the age of eight," the sister wrote. "In 1998, she was advised to invest all the money she had left - $180,000 - with ACR.
"You cannot even imagine how hard it was for me to be the one who informed her of her loss ... Who will help my sister? Who will look after those three little kids?"
And then there are those who must try to find work when they were planning to put their feet up.
"My husband and I have just lost $250,000 due to the collapse of ACR. This was my husband's retirement fund and, as he is 62, his chances of now getting a job are slim to none," said another.
These are just some of the stories; there are many, many more over the past dozen years.
These disasters were not self-inflicted. They did not come about because investors were greedy. They were told to go and see a qualified financial adviser or they invested in a seemingly low-risk investment "just like a bank account".
Investors cannot be totally protected. But these people should have expected a better level of protection.
Sometimes the victims are partially compensated, sometimes planners are banned, and sometimes the perpetrators of dodgy investments are brought to justice. But it has been too little too late. Usually, after the money is lost.
The Senate inquiry into ASIC comes after an investigation by Fairfax Media showing the regulator took 16 months to act on information from whistleblowers about serious misconduct inside Commonwealth Bank's financial planning unit. Hopefully, the inquiry will be wide-ranging and - if lessons can be learnt and acted upon - future generations of investors will be better protected.
Frequently Asked Questions about this Article…
The Senate inquiry is a parliamentary review of the Australian Securities and Investments Commission (ASIC). The article says it's long overdue but welcome because it follows evidence that ASIC was slow to act on serious misconduct. For everyday investors, the inquiry matters because it could identify regulatory failings and recommend changes that aim to better protect people from bad financial advice and risky investments.
The article highlights that a Fairfax Media investigation found ASIC took 16 months to act on whistleblower information about serious misconduct inside the Commonwealth Bank's financial planning unit. That kind of delay meant problems sometimes continued unchecked, allowing more investors to be harmed before enforcement or corrective action occurred.
The article gives several real examples: Westpoint (York Street Mezzanine, which failed in 2005), debenture issuer Bridgecorp (which failed in 2007), and Australian Capital Reserve (ACR), whose collapse left many investors with large losses. It also mentions misconduct inside Commonwealth Bank's financial planning unit revealed by whistleblowers.
The stories in the article show a wide range of victims — retirees, age pensioners, widows, and people on compensation — suffering severe losses. Examples include a 61‑year‑old cancer patient who lost inherited property investments, an age pensioner who put almost all her $50,000 savings into ACR, a 74‑year‑old who lost $23,000, households losing $250,000, and a woman advised in 1998 who lost $180,000.
The article attributes the disasters mainly to poor financial advice and misleading presentations of products. Victims were often steered into unsuitable or risky investments despite being assessed as conservative, or persuaded by TV and newspaper advertising to treat some products as 'just like a bank account.' These were not cases of investor greed but of being misled or misadvised.
Yes — the article notes that sometimes victims receive partial compensation, some financial planners are banned, and perpetrators of dodgy investments are occasionally brought to justice. However, the piece stresses this is often 'too little, too late' and usually happens after the money has already been lost.
The article says the inquiry is hoped to be wide‑ranging and to result in lessons that, if learned and acted upon, could better protect future generations of investors. It does not promise outcomes, but frames the inquiry as an important step toward improving investor protection if reforms follow.
The article warns that advertising (for example, TV and newspaper ads) and the recommendation to 'see a qualified financial adviser' do not guarantee safety. Several victims were drawn in by ads or told investments were low risk, yet suffered heavy losses. Everyday investors should be cautious about treating marketed products as equivalent to bank accounts and expect a higher standard of protection and suitability from advisers.
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