Investors who suffered losses in the Shield and First Guardian scandal may have received Statements of Advice that appear to have been wrongly or falsely attributed to financial advisers who are currently under investigation by the corporate regulator.
An investigation by Professional Planner has revealed one victim of the collapsed schemes never spoke to or met with the adviser whose personal and business name is listed on the SOA provided to her, which recommend she invest in a First Guardian fund, raising questions about its authenticity.
Sydney-based executive assistant Ardelia Subrata says she was connected to a financial adviser after using online comparison site Aus Super Compare, which is under investigation by ASIC.
She is just one of an estimated 12,000 consumers who collectively lost $1.2 billion in the collapses of Shield and First Guardian after they invested mostly on the recommendations of financial advisers in funds that were given the green light by a research house, hosted on reputable platforms and offered by entities licensed by ASIC to offer managed investment schemes.
Subrata says that after going through an advice onboarding process she received an SOA that bore the name of Rhys Reilly, principal of Reilly Financial.
Reilly Financial was then an authorised representative of InterPrac which ASIC has confirmed is the subject of ongoing investigation. There is no suggestion that Reilly or Reilly Financial personally engaged in misconduct.
However, Subrata says she never spoke to or met Rhys Reilly or any employee of Reilly Financial, although she did receive email correspondence that appears to come from Reilly Financial email addresses, according to communications which have been seen by Professional Planner.
When approached by Professional Planner to confirm whether Reilly Financial gave Subrata advice, a legal representative for the firm said their client did not send an SOA to her, nor was any person authorised to do so on behalf of Reilly Financial.
“My client is aware that multiple persons are alleging that they have received [an] SOA that purported to have been sent to them from my client in circumstances where my client did not, in fact, send the SOA at issue or authorise any person or entity to send it on my client’s behalf,” representative of Reilly Financial told Professional Planner in a statement.
“My client is currently considering his/its position with respect to this matter. My client has informed Interprac about this matter.”
Professional Planner has previously revealed InterPrac is in the process of cutting ties with Reilly Financial.
Reilly Financial’s legal representative confirmed the advice firm had previously placed clients into Shield and First Guardian funds but had ceased doing so in July 2023.
Professional Planner understands the adviser Subrata spoke to was a separate party, who has not been named in the ASIC investigation and is associated with another advice firm located in Melbourne.
Subrata says she never had an in-person or face-to-face call with the adviser, and the whole process was conducted over the phone.
Sources close to the investigation suggest there is a strong possibility that more SOAs may have been fraudulently created and wrongly attributed to third party firms, although this has not been formally established by ASIC or the courts.
A spokesperson for InterPrac declined to confirm any details to Professional Planner and said the company’s policy is not to comment on any client-specific disputes that are currently in progress.
“InterPrac recognises members’ concerns and advises clients that have been affected by the failure of the Shield or First Guardian funds to contact InterPrac’s salaried advice team, which will assist them regarding their personal situation,” the spokesperson says. “The company will act in clients’ best interest to the best of its ability.”
‘Too good to be true’
Subrata says she began exploring options to maximise her retirement nest egg because she feared she was falling behind financially.
“Two years ago, I was looking at my super and I thought if I do a comparison, I can get a better super provider,” Subrata says.
“I was with AustralianSuper at the time, and I feel like [I was] not getting a lot of growth. I’ve been working full-time since I was 19 and I’m 38 now. I started researching my own super comparison and when you start doing that, your algorithm in your social media – especially on Instagram – has changed.”
Subrata was referred to a comparison website called Aus Super Compare, which she used to compare funds, and which led to a follow-up call from a representative after she’d provided her contact details.
“I guess they’re just a matchmaker, they were asking all the questions about what my situation [was] at the time, my salary, my financial goal and things like that,” Subrata says.
Projections of her returns, which were attached to the SOA purportedly from Reilly and have been seen by Professional Planner, showed that Subrata would more than double her retirement savings by investing in the First Guardian Growth fund, which claimed would have left her with $1.4 million in retirement rather than the $600,000 she was currently on-track for with AustralianSuper.
The projections showed expected 5.5 per cent returns from her AustralianSuper MySuper balanced option, while the First Guardian growth option through YourChoice Super, would give her 9.88 per cent per annum (the statement did include the boilerplate past performance doesn’t guarantee future performance).
YourChoice Super is a super fund that can invest in different options and sits on the OneVue platform. OneVue’s trustee, Diversa, is under investigation by ASIC.
“I was interested in the projection they gave me,” Subrata says. “It was too good to be true, and it should’ve rung alarm bells.”
‘Build up my super’
The projection given to Subrata in her SOA shows First Guardian was also touted as an ESG fund – with gambling, military equipment, alcohol and tobacco, and fossil fuels among its investment exclusions.
The projection also said the fund “seeks investments that support” healthcare, innovative technology, renewable energy, sustainable development and education.
But in hindsight Subrata says the promised returns should’ve been enough to make her avoid committing to the investment.
“I knew at the time it should have been a red flag,” Subrata says.
“Super is such a volatile market right? Like you can’t predict what’s going to happen in the future. The fact that he can give me a projection that is good, it should’ve rung alarm bells with me.”
Subrata says she followed the advice despite a gut feeling something wasn’t right.
“Because obviously at the time [my] financial goal was to increase my super as much as I can while I can still work full time,” Subrata says.
“I don’t have any plans to fall pregnant anytime soon or go into maternity anytime soon, so while I’m in this state I just want to build up my super.”
After six months, Subrata says she saw no growth in her fund. After waiting another six months only to see the same outcome, she says she wanted to switch back to AustralianSuper.
She says she found it difficult to get in touch with the YourChoice super platform, and she was unaware at the time that it was under regulatory investigation.
“When I put in the request to transfer my super back into AustralianSuper, six weeks later my super [still] was not moved,” Subrata says.
It was after this that she says she found out her super account had been frozen.
“That’s my whole super since I was 19 years old,” Subrata says.
“At this point they’re still going through investigations and they can’t tell me an outcome. I pretty much have no idea where my super is going to go.”
Beefed up investigation
ASIC announced earlier this month that more resources have been dedicated to its ongoing investigation into the failures of Shield and First Guardian and chair Joe Longo said at an industry conference recently that the regulator would like more oversight powers to act earlier.
ASIC is investigating InterPrac and Reilly Financial as well as financial adviser Ferras Merhi (authorised by InterPrac), Merhi’s firm Venture Egg, and FSGA – a licensee Merhi controls.
An InterPrac spokesperson told Professional Planner in June that Merhi and Venture Egg had been placed under very stringent compliance requirements from December 2023 and all new business from that point in time under the InterPrac AFSL ceased.
The Federal Court froze the assets of Merhi in February and secured further travel restraints in July and ASIC has since expanded its investigation into Merhi.
FSGA’s licence was cancelled by ASIC in June and Merhi was removed from the ASIC Financial Adviser Register by InterPrac in late May.
The regulator is also investing the role played by platforms including Macquarie and Equity Trustees with the latter already being sued by ASIC; and the responsible entities (REs) for the funds, Keystone Asset Management (Shield) and Falcon Capital (First Guardian).
Keystone directors Paul Chiodo and Ilya Frolov, and Falcon Capital directors David Anderson and Simon Selimaj are also under investigation.
There is an elephant in the room.
An ounce of prevention is worth a pound of cure (Benjamin Franklin some time ago now). More recently “treatment without prevention is simply unsustainable” (Bill Gates).
There is no accountability for our erstwhile leaders. Reports have been made to ASIC either directly or through associations.
Nothing happens – there needs to be a better system to act. Perhaps some blame can be laid at the feet of our association leaders and politicians. Preventable action just does not happen when warnings are clear. We need a system where reports are made through a formal arm of our associations – these can easily be triaged. These should never then be left in files and not followed-up. Accountability dies in this mire. There should then be feedback to the association which follows a strict timeline.
I have one right now. Could this be the grandson of Dixon and the son of Guardian / Shield? Time for action not words.