Rob and Donna-Rose McAneney had to sell their house after getting bad financial advice. (ABC News: Michael Atkin)
Hundreds of Australians are owed millions of dollars in compensation mostly from businesses that have gone bankrupt, with many of them victims of bad financial advice.
Rob and Donna-Rose McAneney were forced to sell their home of 17 years and left destitute after following dubious advice from financial advisor Peter Spann and his firm Freeman Fox.
They were regulars in the audience during the mid-to-late 2000s as Mr Spann spruiked to novice investors.
“You were walking out of places thinking you are crazy if you didn’t join him in buying the product, because he was that kind of sales person onstage,” Ms McAneney said.
The McAneneys were advised to invest half a million dollars in complex structured products with Macquarie Bank.
“You couldn’t lose money according to Peter,” Mr McAneney said.
Management consultant Tony Wheeler was also encouraged to inject as much as he could.
“You had Macquarie Bank representatives on stage actually presenting the product … and then Peter Spann would come back onto the stage afterwards and basically do the hype which was, ‘can you believe what you’ve just heard?” Mr Wheeler said.
“It was actually marketed as a safe product with lower volatility than both the share market and real estate.”
‘Like tossing money down the drain’
Peter Spann sold his financial advice business to AG Stockbroking, which has gone into administration. (Supplied: peterspann.com.au)
When the global financial crisis hit hard, those so-called safe products collapsed in value and investors were trapped.
“You are locked in for several years. By the time we realised what was happening it was too late,” Mr McAneney said.
“All our resources, all our available funds and our cash had to feed these products.”
“There was no hope for improving. It felt like tossing money down the drain.
“I don’t wish anybody this kind of hardship in their life.”
It has also been devastating for Mr Wheeler, who estimates losing $350,000.
To try and claw something back, Mr Wheeler made a claim with the Financial Ombudsman Service (FOS) alleging his losses were due to inappropriate advice.
The FOS determined he was owed $137,000 but he is still waiting to receive it.
The McAneneys also lodged a claim and the FOS determined they were owed $195,000. They are also yet to receive any money.
Both parties have not received a cent because Mr Spann’s business was sold to AG Stockbroking which has gone into administration.
The firm’s public indemnity insurer Dual Australia has denied their claim because it said the policy did not provide adequate coverage.
In a statement late today, the administrator Korda Mentha said both the McAneneys and Mr Wheeler would receive some money, but it will be far short of the amount ordered by the ombudsman.
‘Tip of the iceberg’
Lawyer Josh Mennen from Maurice Blackburn said his firm had acted for dozens of people with strong claims against their financial advisers since the GFC.
“Unfortunately they have been unable to get access to any compensation because the financial adviser has gone bust, and so they need to be able to get direct access to the professional indemnity insurer,” Mr Mennen said.
There are 200 people owed a total of $17 million in compensation after winning ombudsman decisions, but the business responsible is unable or unwilling to pay.
The real figure for unpaid losses is believed to be much higher.
“That is only the tip of the iceberg because there’s many more people who are unable to have their cases determined in our schemes, because the financial adviser is no longer around,” said Professor Ian Ramsay, chair of the External Dispute Resolution Review.
Mr Ramsay is chairing an independent panel considering what kind of compensation scheme the Turnbull Government should set-up.
“It’s certainly concerning to the panel and that’s the very reason why we are conducting this inquiry into whether or not there should be some compensation scheme of last resort for individuals such as those who you have interviewed,” he said.
The banking industry has offered to fund a limited scheme that would leave out past victims.
“It would be prospective, in other words look forward not look into the past,” Mr Ramsay said.
Another option being strongly considered is already in operation in the United Kingdom.
“It’s compulsory industry funded but it also has a cap so in the case of financial advice the cap, in other words the maximum compensation that could be awarded for inappropriate financial advice, would be 50,000 pounds,” Mr Ramsay said.
The panel would provide its recommendations to the Government next month.
A statement provided by Peter Spann is below.