Widow lost everything when Securitor used Storm strategy

She was further advised to invest almost all of it in funds operated by the St George-linked Asgard (for a $20,000 fee) and lost the lot  including her house she used as security  in last year's sharemarket slump.

Worse, she still owes $17,000 on her margin loan to Colonial Geared Investments.

The Buderim woman's new financial planner, Ken Allen of WB Financial, said yesterday it was the worst advice he had seen in his 23 years as a financial planner.

Mr Allen aired her plight in a submission to the federal parliamentary committee given the task of investigating the collapse of Storm Financial. He did not divulge the woman's identityon privacy grounds.

Apart from an initial settlement offer of $6000 last October, there was no visible move by St George to fix the mess until the woman's plight was raised in Mr Allen's submission.

The planner remains licensed by the Securitor network.

The disastrous strategy recommended to the woman in early 2007, four months after her husband died, was similar to the method employed by Storm Financial. The strategy involved borrowing $300,000 on the woman's house, taking out a $400,000 margin loan and getting a $70,000 line of credit.

The proceeds from the loans were used to pay off her $60,000 mortgage and invest $650,000 in an Asgard portfolio of managed funds, for $20,000 in fees.

But Mr Allen said he had calculated there had to be total sharemarket returns of at least 17.5 per cent a year if the strategy was going to work. And by March last year the widow received the first of many margin calls, forcing her to sell her house for a fire-sale price of $460,000 and eventually all of her investments, leaving her with the $17,000 debt.

"[The woman] was totally devastated," Mr Allen wrote. "She has little financial know-how and had no idea that she was now destitute."

He said the committee should examine how widely practices used by Storm had been used by other financial planners.

"The committee should investigate how widespread the practice of 'double gearing' Centrelink recipients is."

A spokeswoman for Securitor said it was now offering the woman mediation, and it was committed to ensuring she was fairly compensated.

"Securitor investigated the case and regrets the process has taken longer than anticipated," the spokeswoman said.