ifa reported on Tuesday that the controversial Compensation Scheme of Last Resort (CSLR) made its first payments to four claimants who suffered financial services misconduct. Today, we bring you the case studies outlined by the CSLR that relate to victims of poor financial advice.
The case studies follow in their entirety:
Case Study: Lauren (*name changed for privacy)
Location: NSW
Sub-sector: Personal Finance Advice
Compensation paid: $145,417.76
Lauren and her family fell victim to a fraudulent financial adviser who provided deceitful advice and convinced her that she was investing in a property that was to be built.
The adviser stole the money and fled the country, leaving Lauren and her family in a difficult financial situation and causing them to apply for a financial hardship loan as they were unable to meet their mortgage repayments.
The CSLR payment has prevented Lauren and her four kids from having to sell their house and fall deeper into financial hardship.
“We invested with a financial advisor who turned out to be fraudulent and stole all his clients’ money, including ours. We lost a significant amount and approached a liquidator, who suggested lodging a claim with AFCA. However, the process was delayed due to COVID-19, and then we had to wait for the CSLR’s establishment.
“The advisor provided deceitful advice. We believed we were investing in a property being built and he managed to convince us to give him access to our super funds. He had a way of making people trust him but he took our money a year before we even agreed to the investment – which wasn’t even real. He withdrew our superannuation funds without our consent and eventually, he fled the country and escaped justice.
“We had to apply for a financial hardship loan because we couldn’t meet our mortgage payments, especially with four kids, two of whom have special needs.
“The CSLR team was incredibly helpful, keeping me informed every step of the way. The compensation was like a massive weight being taken off our shoulders. It changed our lives.
“Without it, we would have had to sell our house. Now, we can pay a substantial portion of our mortgage, significantly reducing our payments.”
Case Study: Matt (*name changed for privacy)
Location: NSW
Sub-sector: Personal Finance Advice
Compensation paid: $16,836.56
Matt invested $200,000 with a company he was told invested in international bonds, under the recommendation of his accountant. He planned to use his return on investment towards his daughter’s education. After the first year, he stopped receiving payments along with zero response from the company’s managing director.
After receiving an AFCA determination, Matt applied for the CSLR which he believes was his last resort and is an important scheme for anyone who has been wronged in the financial services sector.
“My accountant recommended a company that invests in international bonds. I followed his advice but unfortunately, it turned out he was in cahoots with them. I invested $200,000 with the understanding that I will receive quarterly income, which I intended to use for my daughter’s education.
“For the first year, everything seemed fine until the payments stopped coming. My accountant didn’t help so I spoke directly to the company’s managing director to no avail. I got a solicitor involved and that did not lead to anything, so I went to AFCA and they eventually issued a determination in my favour but I couldn’t get all my money back because the company went bankrupt.
“I applied for the CSLR the minute I could. I think the CSLR is absolutely fantastic for people like me, we were taken for a ride, I know at least another 15 couples who were also scammed. Some of them died because of old age or got heart attacks because of what happened and never saw their money back. I am hoping that these companies who are illegitimate or criminals get pushed out of the business. The industry needs to have higher standards.”
Case Study: Lachlan (*name changed for privacy)
Location: NSW
Sub-sector: Personal Finance Advice
Compensation received: $150,000
Lachlan and his partner sought advice from a financial adviser which resulted in the loss of their entire life savings. Through poor financial advice and severe misconduct, the couple suffered severely both financially and emotionally.
While still heartbroken, the pair have expressed immense gratitude for the CSLR, as the scheme has now given them some hope and financial stability back into their lives.
“We lost our life savings as a result of very poor financial advice and misconduct. We relied on the financial advisor to provide sound investment strategies but in the end, the strategies they recommended turned out to be a conflict of interest (while not in our best interests) and feathering their own nests!
“The loss had a significant and detrimental impact on my partner and I because it was virtually our whole life’s savings wiped out! It also caused a rift in our relationship with ongoing stress and anxiety. It was and continues to be a very dark period in our lives.
“It means a tremendous thing to us to receive compensation from CSLR. While it’s not as much as our original losses we are still very grateful that we’re able to receive this money.
“We were heartbroken when we were informed that the financial firm went into liquidation and thought we’ve lost everything, but the CSLR has now given us some hope and financial stability back into our lives.”
I smell a rat. The CSLR is nothing more than a charity & free insurance cover for the inept & incompetent government & industry authorities.
So I can go unlicensed, stop paying bias ASIC and bloated taxes to inactive politicians to litigate my fellow advisers, and if my clients are worse off then Advisers foot the bill for my unlicensed activities. No brainer. The entire retail advice profession should cancel their Auth Rep # now, why bother ?
has anyone asked if this is what Hayne actually wanted? i doubt it. Last straw, disgusting joke
Case 1 – Was the fraudulent adviser an actual licensed adviser, or a Mellissa Caddick type operator?
Case 2 – Was the accountant just an accountant masquerading as an adviser? or was he licensed as an adviser with the ability to recommend products, or just for strategic SMSF advice? Also, this sounds like a product failure was the main issue, so what was ASIC’s role?
Case 3 – “in the end the strategies they recommended turned out to be a conflict of interest (while not in our best interests), and feathering their own nests!” Doesn’t this sound exactly what Industry Super are proposing, with their own conflicts of interest (recommending their own product) and watered-down or non-existent best interests duty?
In addition, these events happened before the establishment of the CSLR, so many others out there will be popping up once word gets out. How far back are these claims going to go?
You can jump on instagram today and see :if you have $50,000 in super you may qualify to buy your own property”. comments are generally turned off so you can’t warn people off. There are very good reasons for some to have a SMSF and quality advisers in this space but this is just abhorrent. another fail on asic’s watch.