InterPrac defends conduct in First Guardian complaints process

On the back of the latest Australian Financial Complaints Authority (AFCA) numbers showing that Sequoia subsidiary InterPrac Financial Planning had 298 complaints made against it over the first two months of FY25–26, the licensee has sought to redirect complaints to the super fund trustees.

According to reports in The Australian over the weekend, InterPrac director and head of legal at Sequoia Justin Harding has been contacting clients that lodged AFCA complaints against the licensee in relation to its authorised representatives’ advice to invest in the First Guardian Master Fund.

The firm urged these clients to also make a complaint against their super trustee, which in the case of First Guardian claims is either Diversa, Equity Trustees, or Netwealth.

It also provided clients with a pre-drafted complaint, according to the report, that did not take into account any personal circumstances or the specifics of their experience, however it does not attempt to have the complaint against InterPrac withdrawn.

In a statement, an InterPrac spokesperson told ifa that it has “assisted only a very small number of members to navigate the AFCA path toward compensation”.

“No program of standard letters exists. There are considerable technical issues around lodging such a complaint,” they said.

The spokesperson also argued that the licensee’s position has been “consistent throughout this period”.

“Many members have found it difficult to know how to lodge a complaint to AFCA against the many parties involved in the advice chain,” the spokesperson said.

“InterPrac notes that AFCA have themselves deemed any complaint regarding superannuation trustees to be a ‘Superannuation Complaint’ under the Corporations Act, meaning the trustees cannot be joined to the current complaints against InterPrac according to the AFCA Rules.

“This technicality in the AFCA rules makes complaints for failed funds within superannuation extremely difficult to navigate.”

Sequoia first introduced the idea that investors caught up in the Shield and First Guardian saga could seek compensation through the Operational Risk Financial Requirement (ORFR) in early September.

An email, titled “Important Update Regarding Your Superannuation Investment” and seen by ifa, was sent to clients of InterPrac-authorised advisers who invested in Shield and First Guardian.

The correspondence states that Sequoia, as part of an ongoing review, has identified that certain clients may be able to pursue “remediation” through the ORFR.

Since 2013, all APRA-regulated superannuation funds have been legally required to maintain an ORFR reserve – described in the email as a “financial safety net designed to protect members from losses that arise due to operation issues such as governance failures or investment menu oversight”.

AFCA's rules under the microscope

According to InterPrac, AFCA has “excluded superannuation trustees from its complaints process” through its interpretation of its rules.

“This would leave members unable to receive full compensation unless a separate complaint was lodged against a trustee in addition to any complaint they may have had regarding advice,” the spokesperson told ifa.

“To include the trustees into the AFCA complaint process requires members to lodge a new and additional complaint directly against the trustees for their involvement in placing the failed products on their platforms. This results in two complaints, one for the advice and the other for the product behaviour.”

Earlier this month, Financial Advice Association Australia (FAAA) general manager policy, advocacy and standards Phil Anderson said the situation for both clients and the vast majority of financial advisers that had no role in the scandal is made more difficult thanks to AFCA’s rules around superannuation complaints.

“We are aware of complaints to AFCA against the super funds who included Shield and First Guardian on their investment menus that have been rejected on the basis of AFCA Rule C.1.5,” Anderson said.

“AFCA have determined that these complaints do not fall within their jurisdiction as the investment performance of Shield and First Guardian are excluded; and super funds’ decision to list these investments on their platforms relate to the management of the fund as a whole.

“Such decisions are clearly very concerning for these clients. We have also seen decisions that have highlighted that complaints could not be considered as the amount of loss cannot be calculated due to uncertainty about the level of recovery through the liquidation of these schemes.

“This limitation has not been applied when it comes to advice-related complaints, which have already received an AFCA determination and progressed to the CSLR.”

While there has been little in the way of movement on complaints against super trustees, according to InterPrac that could change.

“InterPrac is pleased that it has recently received confirmation from a complainant that AFCA is hearing their first complaint against a trustee, which validates InterPrac’s position that the trustee’s involvement and responsibility must be heard and considered by AFCA,” the spokesperson said.

“InterPrac fully supports superannuation members’ goals of being financially restored and believes this is consistent with its call for the activation of the Operational Risk Financial Requirement (ORFR).”

Finger pointing continues

This is far from the first time that Sequoia and InterPrac have attempted to shift the blame away from its own conduct and towards other segments of the chain – though it is not alone in doing so.

“I think clearly the management of First Guardian and Shield are to blame,” Sequoia managing director Garry Crole said in an interview with ABC last month.

While few would disagree with this sentiment, some of Crole’s other attempts to distance his firm from blame in the scandal might be met with more scepticism.

In the interview, the licensee boss stressed that InterPrac’s oversight of its authorised representatives was robust and it had received “no complaints whatsoever from any member in respect to the advice until after the failure of the funds”.

“Our oversight model is to, in respect to the advisers that we’re talking about, is we look at the statements of advice that they give, we look at the recommended products that they make,” Crole said.

“We require them to do ongoing training on a regular basis. In all cases those advisers were doing that.”

While the corporate regulator describing much of the advice related to Shield and First Guardian as “cookie-cutter”, Crole maintained: “If the fund had been as it suggested it was, [the advice] would have been appropriate.”

He even argued the super fund trustees had not let anyone down, rather they had been “deceived”.

“I think the superannuation system in Australia is the best super system in the world. What I’ve been talking about of my recent time talks to that. But no, I don’t think the super trust leaders have let people down.”

Also last month, ASIC deputy chair Sarah Court summed up the finger pointing in a parliamentary committee hearing.

“One of the challenges with these matters is that in a sense, everyone is pointing fingers at everyone else,” Court said.

“For example, the financial advisers are saying to us, ‘Well look, you can’t hold us accountable for this ASIC, because the ratings house had rated these funds, or at least the Shield Master Fund, as of investment grade.’ Super fund trustees are telling us the same thing, saying, ‘Well we relied on the ratings houses’ or ‘We relied on the fact that these members had financial advice.’”