Lead generation from third-party marketing firms – also known as super comparison sites hounding unwitting consumers into cookie-cutter advice arrangements – is just one link in the convoluted chain of misconduct and failures that has put more than $1 billion of super savings at risk.
Between Shield and First Guardian, they paid in excess of $100 million to lead generators, including Venture Egg boss Ferras Merhi-owned or linked firms.
Though the exact extent of funds that went Merhi’s way isn’t entirely clear yet, the First Guardian portion appears to be at least $13 million.
When it comes to the role of Merhi and his involvement in both advice and lead generation, Financial Advice Association Australia (FAAA) chief executive Sarah Abood said accepting “really substantial marketing payments” is clearly conflicted.
“We’re all very well aware that conflicted remuneration can no longer be paid. We aren’t seeing anything in the public domain around this, but it certainly looks to us that these marketing payments were illegal,” Abood said on an FAAA webinar on Tuesday.
“They’re illegal to pay, and they were illegal to accept, but we haven’t yet seen an ASIC action taken on that basis, or anything in court.”
Indeed, she explained that the first issues that other financial advisers had reported to the FAAA as problematic were related to cold calling and advice firms being involved with the high-pressure sales tactics these third-party marketers employed.
“[They] appeared to be arrangements that might have been designed to avoid anti-hawking legislation because, of course, it’s illegal to hawk financial products. Some of these firms that we saw had hired third-party firms to kind of do their hawking for them, if you will,” Abood said.
“I want to clarify, I’m not a lawyer, so I’m not using that term in the legal sense, but it looked to us as if these high-pressure sales tactics were being applied at a remove. We don’t believe that’s appropriate.
“It’s perfectly legal to market your business and to let consumers know that you’re there and what you can do. It’s certainly incredibly inappropriate to be hiring high-pressure salespeople, because you can’t do the high-pressure sales yourself.”
She also reiterated that the amount of advisers involved in the scandal was incredibly small compared with those doing the right thing, which the CEO had previously stressed in response to mainstream media reporting on advice involvement in the collapses.
“One of the things that I find extraordinary is how few advisers were involved,” Abood said.
“There are only five financial advice firms, at least so far, that ASIC has identified as being involved with these, and a single adviser, a chap called Ferris Merhi, is personally responsible for over 8,000 of the investors who put money into those two schemes.
“So, in an environment where the average clients per advisor is somewhere between 100 and 130, I find that alone extraordinary and I also find it hard to understand how that was possible, how it wasn’t picked up earlier that something really odd is going on with this particular adviser.”
Both Merhi and Venture Egg were authorised representatives of InterPrac Financial Planning, though the licensee has since cut ties with the adviser.
Alongside funnelling about 5,000 clients with $250 million in Shield and 3,600 clients with $192 million invested in First Guardian through Venture Egg, according to Merhi’s own previous media comments, he also controlled Financial Services Group Australia.
This licensee authorised four firms that ASIC highlighted in connection to Shield and First Guardian: Rebellis Financial Services, 5 Point Australia, AS Financial Planning, and STC Financial.
Poor advice ‘without a doubt’ involved
Last month, ASIC deputy chair Sarah Court said that while the regulator is limited in terms of the information it can disclose given the ongoing investigations, the “whole area of exploitation” remains an important focus.
“Our primary aim here in the enforcement work that we’re taking is, at least at the outset, to preserve any assets that remain in the schemes so that they can be realised to the extent that they are available for the benefit of the consumers, while we continue our investigative work,” Court said.
“We’ve really invested heavily in these matters, and we have diverted a number of resources from other important projects.”
Importantly, she noted, the investigations are looking at the entire chain, including conduct of the lead generators, the financial advisers, the superannuation platforms, “who we think have a real role here”, and the research houses that “listed these funds as investable”.
Abood welcomed the focus on more than just the financial advice element of the failures, however, she stressed that “it’s not the case that advice is not at fault here”.
“We’ve seen some pretty poor advice associated with these two products that have failed. That said, I think we can all agree that the people who are most responsible for this failure are the people who set up the products,” she said.
“In the case of First Guardian – of course, it’s still subject to the liquidator and we haven’t seen a court case yet, but it appears that it may have been a Ponzi scheme. There’s certainly language that the liquidators used in their report that would suggest that.”
The “core issue” remains the product, but the CEO made it clear the profession needs to acknowledge where advice did play a role.
“We saw examples where advice had been given extremely quickly after a lead had been received. Some of that statement of advice was uncompleted,” Abood said.
“We sometimes saw almost entire fact find sections that were not completed, that they had notes there saying, ‘client did not provide’, and there was cookie cutter advice in the sense that every client appeared to be recommended the same product, and a product that was focused on property was apparently an inappropriately high proportion of a client’s portfolio. All of that we would absolutely consider to be problematic.”
She added: “With a very small number of advisers, we can’t allow this to happen again. It’s really important that we understand what were the warning signs that we should have seen and acted on earlier, and make sure this can’t happen again.”
I hope FAAA are watching the poor victims speak about how they lost funds to the scammers!
Q. What are you doing?
A. Nothing!
Why would anyone continue to be a member of your organisation?
That’s it. Bash advice and advisers when SQM Research rated both Shield and First Guardian 3.75 “Favourable” “no corporate governance concerns or they are minor in nature”.
And then super platform trustees decided to include them on their platforms requiring due diligence under APRA Prudential Standard SPS 530.
Oh and the funds were being audited.
But somehow these funds spending client money rather than investing it is somehow the advisers fault. What degree of fault do the research house, platform trustees, auditors and ASIC themselves have???
There is zero accountability from these large institutions and from ASIC themselves that were warned by the FAAA about First Guardian in 2021. First Guardian was also submitting audits to ASIC from a deregistered audit firm for years. They did nothing.
It was a whole eco-system failure and SQM Research, BDO Audit, FSA Partners, Macquarie, Equity Trustees and ASIC should be deeply ashamed for what they’ve enabled. There are real existing laws that were broken here… but still nothing has happened to anyone except for the poor advisers relying on the honesty and accuracy from these large institutions.
How in the actual F did interprac not pick up one advisor with 8,000 clients… everything starts and ends with interprac. They are the first line of authorisation and oversight. AIC yes, but it starts with interprac… Who at Interprac got a ride in the lambo and free Dubai trip?
It’s become apparent that some financial
Advisers were aware of issues back in 2023 but continued to onboard new clients super into first guardian. If they themselves admit to being aware or running their own due diligence then what responsibility do they have to pass on that concern and advise client who paid them for their financial advise. They let this fester away hoping for the best when the warning signs were there. When First Guardian advised their network and gave notice prior to their restructuring early 2024 and were locking down funds transfers at what point did that information make it to the consumer?
It’s so off, people have died and others are now on Centrelink. Shame on the whole system. Australian Government please save our super!!!!!!
Absolute garage and no evidence of this. Why would any adviser recommend a fund that they knew had underlying issues?
Yes they were concerns in late 2023 because the platforms put a stop to new applications but the reasons were never stated by the platforms.
The concerns were related to volume and not fraudulent behaviour, which wasn’t apparent until mid to late 2024. By that time the funds were already frozen.
Was there a research house involved? Asset consultant? Any of them ever ride in the Lambo? What about the AFSL? Any of their nests feathered? Wonder if there were more pig snouts at the trough. Sounds like a ponzi scheme run by a narcissistic sociopath with antisocial personality disorder. And ASIC were obviously asleep at the wheel when the Lambo drove past.
Advisers were told the business model had been thoroughly vetted and approved by the Licensee’s legal and compliance team. That approval covered everything — the referral partner process, client data collection, advice templates, and the overall advice process.
The portfolios themselves were built by an Investment Committee led by a Chief Investment Officer (CIO) with 15 years of experience. Which makes it fair to ask: how did Shield and First Guardian end up in the model portfolios?
Importantly, no employees knew that Ferras Merhi was receiving conflicted remuneration. Had they known, it’s hard to imagine anyone agreeing to take on their role.
With so many advisers involved, red flags should have been raised when a handful were writing an unusually high volume of business. That leads to some obvious questions:
What audits were run?
What supervision was in place?
How was monitoring and escalation handled?
Good governance would usually mean having safeguards like regular file audits, volume monitoring, conflict checks, extra supervision for high-volume advisers, remuneration reviews, and clear escalation processes.
In the end, the Licensee isn’t just responsible for approving business models — it also has to make sure the right safeguards are in place to protect clients, advisers, and the integrity of the advice process. The lack of effective monitoring, the inclusion of questionable portfolios, and the missed conflict risks all raise serious concerns about whether that responsibility was met.
Interesting. I wonder whether the licensee directly told the advisers the model had been approved by the legal and compliance team, or their CAR employer relayed such a message to them untruthfully. Under the current licensing model it’s possible for an adviser to be employed (and therefore largely controlled) by a CAR. But in spite of their considerable control over advisers, the CAR has very little responsibility or accountability.
“Under the current licensing model it’s possible for an adviser to be employed (and therefore largely controlled) by a CAR. But in spite of their considerable control over advisers, the CAR has very little responsibility or accountability”.
Therein lies the problem: This creates a situation where directors can move on with income intact, while advisers are left to shoulder the blame.
Allegations point to clients being left in cash for months, product switches made without the advisers knowledge and without proper Records of Advice, and claims that the business model was “thoroughly vetted” despite little sign of audit reports, breach notifications, or meaningful due diligence on the AFSL and responsible manager.
These shortcomings expose serious gaps in regulation that must be addressed—otherwise, we risk nothing more than kicking the can further down the road.
I think the issue is ASIC’s approach to regulation is wrong. Thinking never ending disclosure documents and statements of advice and file notes is going to solve the problem is crazy.
Hopefully ASIC will realise that best practice regulation is where ASIC actively monitor things more closely so when people like Merhi’ provide advice to 8,000 clients (or even 1,000 clients), they can get onto it.
to “actively monitor things” is the job of the AFSL who has authorised an Adviser.
So why does ASIC each year charge the ASFL’s and Advisers for monitoring?
There is no annual fee to ASIC for “monitoring”.
There are no fees charged to Advisors by ASIC for monitoring.
There are 3 ASIC fees payable in relation to an Adviser for updating of the Financial Adviser Register: $38 for corrections, $38 to cease and $60 to register. These are not recurring.
Separately, the AFSL pays an annual levy based on the number of Advisers it has authorised.
“Separately, the AFSL pays an annual levy based on the number of Advisers it has authorised.”
And what service does ASIC provide for this fee?
Are you unfamiliar with the role of this Regulator?
For the 2024–25 financial year, Australian financial services licensees who provide personal advice to retail clients can expect to pay a minimum levy of $1,500 plus $2,314 per adviser?
ASIC’s 2024–25 CRIS.
Our ongoing regulatory work
2 Our regulation of the financial advice sector is focused on promoting a fair,
strong and efficient financial system for all Australians. Our work includes
monitoring the conduct of AFS licensees and financial advisers and their
2024–25 CRIS: Financial advice sector
© Australian Securities and Investments Commission July 2025 Page 2
compliance with conduct obligations under the Corporations Act 2001
(Corporations Act). We carry out this work through supervision,
surveillances and other actions, and identifying and addressing causes of
harms or breaches of the Corporations Act and Australian Securities and
Investments Commission Act 2001 (ASIC Act).
More like Venture Bad Egg with nothing more than an empty shell.
When you look at the links and associations of these people to others who are known criminals, it doesn’t take long to understand why the lure of vast amounts of money overwhelms the need for compliance with the law or the morals and ethics in regard to the 1000’s of people they ‘encouraged” and manipulated into investing in these failed enterprises.
I hope the authorities have cancelled their opportunity to escape the country because if not, we will next be reading that they are residing in a luxury penthouse in Dubai amongst the ever increasing numbers of
seemingly “untouchable” Australian criminals who live there and yet run their corrupt operations in Australia.
It seems ridiculous in the extreme that InterPrac as a licensee acted only after it all started to crumble.
I wonder if it had not imploded when it did, how long would it have been before anything was identified as being highly unusual in terms of business volumes and practices?
Sensible comments from Sarah. Looking forward to the strongest possible action against the guilty Financial Advisers (civil and/or criminal, by ASIC/Courts/AFP).
Sarah Abood ,needs to be commended for digging deeper on Shield and First Guardian as other media outlets seem to tip toe on egg shells .The Gatekeepers are at fault. How can I log into my Macquarie Portal and see my 300K sitting there frozen by the Federal Court ,but yet be told that my money is sitting underneath a Macquarie assett management platform they use at arms length with no responsibility.
People actually feel sick for me knowing whats happened and how a 70 million dollar banking Royal commision did not capture this baby or have any impact on this at all .Shield used a legal loophole to get around spending 36 Million over 18 months for lead Generators. Did the Alarm bells have flat Batterys? ASIC. This is also a slap in the face of all employers that Legally had to pay Super to their workers year after year. There is huge gap inbetween the employer releasing the money for the worker and the release of Super.
Did they really use a legal loophole? Or did they just break the law, and ASIC sat on their hands in spite of being tipped off about it by many of the honest majority of financial planners long ago?
it also begs the questions on how the dealer group didnt know or act sooner.
they knew all along…follow the money
if that is true than the AFSL should be cancelled and the directors be banned for life as not fit and proper persons to hold any company position.
The bigger question is why ASIC did nothing when it was reported them in 2021. ASIC have zero accountability and their performance of late stinks. Finanancial advice regulation needs to be shifted to a singular industry body.
ASIC had all the information they needed in 2020 to shutdown First Guardian from tip offs and David Anderson’s previous conduct how he was ever granted a license to set up First Guardian Master Fund is beyond belief.
They allowed it to continue for almost 5 years while dragging in huge amounts of investor money which in itself should have raised red flags at ASIC but they just sat back and watch it happen and when all the damage was done they then step in.
The whole debacle is on ASIC and their failures have taken away the retirement saving of thousands of Australians and it should never have happened.
I just hope the government take control of the situation and compensate those affected due to monumental failures of the system.
Interesting, do you know when ASIC knew in 2020 – roughly – and where that can be confirmed?
I feel for you Damian.
The regulator has certainly let you down and their focus in regulation needs to be looked at. The general public struggle to access honest financial advice because of the intense regulation enforced on the industry. Yet crooks seem to operate with impunity.
How did this not trigger alarm bells at the regulator?
The bizarre thing is none of the product providers will foot the bill, nor will the advisers involved. The rest of the industry foots the bill and gets the privilege of paying for ASIC’s incompetence and the clean up bill which in part may cover some of your losses. Meanwhile I pay my Professional indemnity, ASIC fees, AFSL fees and compliance consultant fees because if I make a minor mistake ASIC will penalise me.
The system is broken and successive governments have broken it further.
Good luck