Why did so many people get caught?

A more important question perhaps, is why ordinary people appear to have lost precious superannuation savings and why  were no safeguards in place to protect people loosing so much money?

Firstly, it has never been easier for individuals to take direct control of their super savings, and they usually do this if they feel their super is not performing as well as it should, or as well as they would like.

So, they start looking for alternatives. There are also only so many restrictions ASIC can place on investment choices. If these high risks investments had paid off, then no one would be complaining now. People have a right to choose.

Secondly, while there are tough rules on financial planners, the promoters of these funds, looked to sidestep the law by spending millions of dollars on external marketing companies to cold call people with super.

Once the cold callers got the people on the hook, they were then referred sadly to a small number of financial planners, who couldn’t resist the new business and facilitated people moving their savings to these funds.

These advisers should have advised these clients of the inherent risks in these   products, but it seems they didn’t. In fact, to add insult to injury, it seems a lot of clients were talked into setting up expensive self-managed super funds they didn’t need as a means of accessing these investments.

In lots of way this story is that of just another scam. It wasn’t based in Nigeria or Russia, it was cold callers based right here in Australia calling other Australians and saying have we got a deal for you. Nonetheless it looks just like a scam.

Finally, the modern Australian financial planning industry has grown up around investment platforms. These have become an indispensable part of giving ordinary Australians access to a wide variety of investments.

Platforms are best described as investment supermarkets where advisers or individuals can effectively browse across hundreds of potential investments and choose the right one for them.

Platforms themselves don’t undertake much in the way of investigations into the merits of these investments, beyond that they are registered with ASIC, provide PDS statements to clients and appear legitimate investments.

Investment platforms are a good development offering a wide range of choice but for those who don’t know what they are doing, they can also be an easy way to get caught up with investments they don’t understand.

There are likely to be significant legal changes ahead regarding how platforms operate. As they say, investment platforms are like supermarkets, offering a raft of investment options, but just as supermarkets can’t sell food that will kill you, some are arguing platforms should not offer products that will end as these did.