An article in today's Courier Mail (September 13) written by John McCarthy showed some of the seedy side of financial planning.
The article related to complaints by financial planners who had advised clients to invest in Westpoint investments. As we now know the 12% return offered from these investments was unsustainable, and the scheme collapsed.
Investors are seeking compensation from these financial planners through FICS (Financial Industry Complaints Scheme). However the planners are complaining that this should not happen as the Westpoint investments were 'promissory notes' rather than financial products.
What rubbish. Financial planners let clients know about the FICS scheme as a way of settling disputes and, at the first sign of trouble try to wiggle out of it.
The investors came to the financial planners looking for advice on financial products, and the advisors decided that the Westpoint investments were suitable. I am sure it was not the client who decided that they were passionate about investing in promissory notes. Moreover financial planners should have nothing to fear provided that:
- They explained to clients the high fees that they were receiving from Westpoint for the recommendations
- They explained the risks related to investing in promissory notes related to mezzanine finance (a high risk bridging finance) so that clients were aware of the risks
- The only invested a moderate amount of the investors capital into the notes, say 5%
Of course, if the media articles are correct, any financial planner who represented the Westpoint investment as being 'safe' and 'like investing in a bank' should be in serious trouble for dishonest or incompetent advice.
