How to Keep the Foxes Out of Your Financial Hen House


What do ANZ, NAB, Storm Financial, CBA, Macquarie Bank and Timbercorp all have in common?

If you answered that they all have vowels in their names, you’re of course right. If you said they’ve all employed inept and outright unethical financial advisors, you are also correct.

I’ll admit I haven’t done the maths. But if you were to add up the money squandered by the advisors in just these six companies alone, you’d come up with a figure in the many billions of dollars.

As staggering as this figure is, that’s just the tip of the iceberg. How many other dishonest planners remain in the industry…as yet undiscovered?

Try not to think about that too close to bedtime. You’ll need to count a lot of sheep to overcome the image of a single rogue planner making hay with your hard earned cash.

Fees and fraud

I’ve written to you before about the compounding bite that financial advisors’ fees take from your retirement nest egg…or new boat fund. Or whatever long term savings goal you’re giving them your money for. Even a small annual ‘maintenance fee’ will balloon into a sizeable burden over the course of 10 or 20 years.

You should also be aware that, in exchange for a significant slice of your hard earned money, most financial advisors do not regularly outperform the broader market. Many do much worse.

That alone should make you think hard about taking control of your own financial future…if you haven’t already done so. That was, of course, one of our primary goals when we launched the Albert Park Investors Guild last year. To give our members the knowledge, confidence, and advice they need to take that control. (To find out more, click here.)

If you’re a subscriber and took that advice, you should have done quite well to date.

Even if you went the ‘easy route’ by investing solely in the Wealth Havens portfolio on the date of each recommendation, you’d have made a handy 13.2% return to date. That’s an annualised returned of 24.85%. And remember this represents a diversified, low risk portfolio.

I call it the ‘easy route’ because all of the tips in the Wealth Havens portfolio are simple ETFs, listed on the ASX. These aren’t products which you buy and sell in and out of, trying to time the market while incurring repeated broker’s fees. These are simple, boring, buy-and-hold investments. And the annual fees run between 0.05–0.69%. (These fees are included in the 13.2% return I quoted above.) Good luck finding a financial advisor willing to match those fees!

If you do still have some of your wealth in the hands of the financial planning industry, you may be interested in these recent headlines.

From the Australian Financial Review: ‘Ex-ANZ financial adviser Melinda Scott jailed for $6m fraud’.

Former Sydney financial adviser Melinda Scott has been sentenced to six years in jail after pleading guilty to stealing nearly $6 million from her clients… between 1989 and 2012…

“This case is very unusual but it highlights a very important lesson for all consumers,” Australian Securities and Investments Commission deputy chairman Peter Kell (said). “Even if people trust their adviser it is critical that they ensure all original statements and other documentation relating to their investments are addressed directly to them…”

ASIC started surveilling Scott in December 2011. This led to her personal accounts being shut down and a ban on her operating a business in early 2012. She was previously banned from providing financial advice for 10 years in 1996 but this ban did not include superannuation…

For about 10 of the 23 years during which Scott stole from clients she was employed by Millennium 3, an entity wholly owned by ANZ Banking Group.

My favourite bit is that she’d been banned from providing financial advice, but this ban didn’t include superannuation. Is it just me, or do you feel that if you’re paying someone for advice on your super fund, that would indeed constitute financial advice?

Moving on to bigger fish. This headline, from the Age: ‘NAB in advice scandal’.

National Australia Bank has quietly paid millions of dollars in compensation to hundreds of clients given what it considers to be inappropriate financial planning advice since 2009.

The bank is the latest institution to face disturbing revelations of misconduct in its financial planning division, with a Fairfax Media investigation uncovering instances of forgery, “rogue advisors” and multiple sackings inside its financial advice arm…

Some advisers forged their clients signatures and manipulated documents in attempts to cover up misconduct… These revelations…follow the fraud and forgery scandal inside the Commonwealth Bank’s financial planning operation…

OK. We covered the fact that financial planning fees add up — over time — to a much larger slice of the pie than the industry is comfortable admitting. And we’ve covered the reality that the majority of professional planners earning these fees will not succeed in offering market beating returns over the long haul.

But at least you should be able to trust them to put in a good honest effort!

Now to stem a flood of potential hate mail from financial planners, let me say that obviously there are many honest, hard working individuals in the business. And of those, a very select few may even offer you good value for the fees you pay them.

But why take that risk? Why not take control of your own wealth, pocket those fees, and achieve your financial goals years earlier?

At the Guild, of course, we work hard to help you do just that.

Bernd Struben
Managing Editor, Albert Park Investors Guild

Editor’s Note: This article is was originally published in Albert Park Investors Guild.

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Bernd Struben

Bernd Struben

Bernd Struben is the Managing Editor of Port Phillip Publishing. Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.

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1 year 7 months ago

The Bankster Industry. Rotten to the core.

And these went even fly-by-nighters. They were among the BIG 4. If these guys aren’t regulated then who is.

Watch how fast the rats (lets face it – this is what they are) leave their ship when it starts sinking.

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