Older investors suffer as advisers go ‘belly-up’

Failed financial advisers, often with lapsed professional indemnity insurance, are devastating the retirement plans of older Australians, consumer lobby group for the over 50s, National Seniors Australia says.

To add insult to injury, the investors – many of them with Self Managed Super Funds (SMSFs) – are unlikely to get their money back because they cannot sue the principals of the failed businesses, according to a new report.

The report said Australian Financial Services (AFS) had elderly clients with SMSFs containing hundreds of thousands of dollars in “inappropriate” investments recommended by AFS authorised representatives.

National Seniors chief executive, Michael O’Neill, said that retirees’ savings already hit hard by the GFC remained vulnerable to further losses unless the Australian Securities and Investments Commission (ASIC) took a tougher approach.

“Some financial advisers are taking advantage of trusting and inexperienced retirees and frankly giving the rest of the industry a bad name,” Mr O’Neill said.

“What retirees and people approaching retirement want is assurance and meaningful protection to make advisers accountable and the regulations that govern them more enforceable.

“ASIC also needs to be accountable for the role it has in creating a fair environment especially for inexperienced investors.”

All investors, including SMSF trustees, should ensure the advice they receive includes information about the adviser’s insurance and how they can insure their own investment, he said.

Earlier this year, National Seniors released a report showing that investors’ knowledge had not kept pace with the growing number and complexity of financial products over the past 20 years.

“Many were too embarrassed to talk to their financial advisers for fear of being judged negatively,” Mr O’Neill said.

“The federal government needs to act now – not only to encourage people to become better informed and more aware of the risks associated with investing, but also to ensure that financial advisers are better regulated.”