Naomi Halpern became caught up in the Timbercorp saga after receiving bad advice from her accountant. Photo: Wayne Taylor/Fairfax MediaVictims of dodgy financial advisers have questioned the likelihood of David Murray’s consumer protection recommendations being implemented, raising doubts about the funding and competencies of the corporate regulator.
Storm Financial victim Frank Ainslie said the Australian Securities and Investments Commission was too underfunded to take on extra responsibilities.
“Government bodies just aren’t set up to be proactive. ASIC has been given more responsibilities but it has fewer funds,” he said.
“I do not believe ASIC has the resources or the ability to be proactive in situations like this.”
In the May budget it was announced ASIC’s funding would be cut by $120 million during five years.
Mr Ainslie was one of many investors who lost most of their life savings, equating to at least $3 billion, when the company collapsed in 2009.
“Storm’s profits looked good on paper … but it was overleveraged. My wife Helen and I sold our shopping centre for $1.1 million in 2007 and mortgaged our $600,000 house because the concept sold to us by Storm seemed very good,” he said.
“Now, I estimate we will get back about 26 per cent of our investment [through settlements with Macquarie Bank and Bank of Queensland] … not including the $300,000 we had paid in fees alone.”
In David Murray’s financial systems inquiry, he recommended strengthening product issuer and distributor accountability by improving the internal risk management in the product design process.
He also recommended ASIC be given proactive powers, including the ability to ban a product, when there was a risk of significant consumer detriment, and that financial advisers receive training and have a university degree.
But Mr Ainslie said even if advisers received better training, it would not weed out the “bad eggs”.
Another victim, Naomi Halpern, became caught up in the Timbercorp saga after receiving bad advice from her accountant of six years.
“The recommendations are very valid but the report provides no indication of how they will actually be implemented,” she said.
Like Mr Ainslie, Ms Halpern has her own qualms with the corporate regulator but she approved of many of the inquiry’s recommendations, particularly in regards to removing impediments to more-innovative product disclosure.
“I believe one of the key ways people can be protected is if all financial advice meetings between an adviser and investor are recorded,” she said.
“If there was a record of what had taken place, this would protect both the adviser and the investor.”
Ms Halpern’s accountant advised her to invest in schemes like Timbercorp and by the end of 2008 she was $650,000 in debt.
“I think the recommendation for a register of financial advisers is a good one but it also needs to include information about whether the adviser has been banned before and any other disciplinary action taken by regulatory bodies,” she said.
“But I don’t know if these recommendations will be enough to restore confidence in the system.”