Shield and First Guardian AFCA complaints almost 3500 amid awareness drive

AFCA complaints about Shield and First Guardian have reached 3429 as ASIC has spent the past few weeks catching the attention of investors who are unaware they may have been invested in the schemes.

AFCA lead ombudsman for investments and advice Shail Singh revealed the figure to the Professional Planner Licensee Summit on Wednesday morning. Of the total figure, 1861 relate to First Guardian, 1044 involve Shield and 524 complaints involve both funds.

Out of the licensees involved, InterPrac has the most complaints with 1409, followed by Financial Services Group Australia (402), United Global Capital (289), MWL (241) and Next Generation Advice (31).

ASIC has launched numerous campaigns this year to alert investors who may not have been aware they were invested in the funds and unaware they’ve lost their superannuation savings.

ASIC acted against the Shield and First Guardian funds over concerns that investor money was being misused on high-risk investments, pet projects of directors and personal expenses. Court proceedings against both funds are ongoing.

The investments in the funds grew due to a sophisticated network of lead generators that contacted people who used online “superannuation health check” advertisements and applied high-pressure sales tactics to refer them to financial advisers.

The regulator has commenced action against advisers, licensees, trustees and SQM Research for their alleged involvement in the distribution of the funds.

AFCA released lead determinations against the licensees involved earlier this year, highlighting failures that included lack of diversification of investments, failure to consider best interests duty and inappropriate advice.

AFCA is being sued by InterPrac Financial Planning, the only remaining solvent licensee involved in Shield and First Guardian, over the “fairness” of the complaints authority’s jurisdiction.

InterPrac has been firm in its position that other parts of the advice chain, particularly the platforms trustees, should be involved in the remediation of clients.

Netwealth and Macquarie have remediated Shield and First Guardian investors on their platform, but potential ‘but for’ claims could still come through the complaints authority which would remediate investors for missed capital gains due to the poor advice.

Diversa Trustees and Equity Trustees are in court fighting allegations of wrongdoing; Diversa has applied for a government bailout and Equity Trustees is expected to do so.

Compensation Scheme of Last Resort chief executive David Berry told the summit the organisation is close to confirming its revised levy estimate for FY27. The CSLR previously estimated $127 million with another potential $125 million for Shield and First Guardian complaints that come through AFCA.

But as Shield and First Guardian begin to swamp the scheme, which has led to another government review of the sustainability of the CSLR, remediation for Dixon Advisory is close to being completed.

Singh told the summit that of the 2700 Dixon Advisory complaints, there are 1430 still being processed which will be done by FY27.

Berry added the CSLR had expected 400 Dixon Advisory claims would be outstanding at the end of FY27, but this estimate has changed.

“We believe there’s going to be none,” Berry said.

“The remaining Dixon complaints that were lodged with AFCA, we’re expecting they’ll be resolved in the first quarter of the calendar year 2027.”

The $241 million pre-CSLR claims which have been paid for the 10 largest financial institutions should be completed by the end of the 2027 calendar year, Berry added.

There have also been concerns about how the CSLR might handle double payments – where a determination might get paid out but the client might get remediated through another mechanism.

In the case of InterPrac’s suit with AFCA, an example would be Diversa Trustees or Equity Trustees compensating investors after InterPrac paid a determination.

Berry said such a situation wouldn’t happen.

“We do have some basic subrogation rights which do give us access to recover funds for the actual licensed firms,” Berry said.

“Where that isn’t available to us, we aren’t playing claims unless somebody is prepared to sign a deed of agreement that any proceeds they might receive in the future.

“Those funds would come to us from the trustee or from the product that may be paying a dividend. We would then use that to recover what we’re eligible for and then return the remaining balance to the individual claimant. The risk of a double payment is very low. I wouldn’t say it’s nil, but it’s not the objective of what we’re doing.”

Before Dixon and Shield and First Guardian, AFCA complaints against advice had been trending down and without those major events, complaints had largely sat around the same figure, Singh said.

“We were at 530 complaints for advice and then we got the Compensation Scheme of Last Resort which meant Dixon got in scope and then Shield hit us,” Singh said.