Timbercorp investment scheme victims call for strict financial adviser laws to stay

Updated

Victims of the failed Timbercorp investment scheme are calling on the Federal Government not to change strict regulations governing financial advisers.

The Government has committed to winding back the Future of Financial Advice (FOFA) reforms, which will allow bank staff to be paid bonuses for selling financial products to customers.

Stephen Munchenberg of the Australian Banking Association says the proposed government changes "are broadly about making sure that staff in banks are able to provide general information about products - and they have an incentive to provide general information about products".

However Naomi Halpern, one of many who lost their life savings when Timbercorp failed, says the changes are due to pressure from the four major banks.

"The Government is now trying to dilute the FOFA reforms, and this is under pressure from the four major banks and of course they want them diluted so financial advisers will push their products," Ms Halpern said.

The tough laws banning all conflicted payments were introduced by the Rudd government following a series of investment disasters, including the collapse of Storm Financial and Great Southern.

The Government's changes will moderate the requirement that an adviser must act in the best interest of their client, and review fees with the client every two years.

The Timbercorp scheme promised investors significant returns on timber plantations as well as tax deductions.

It also paid huge commissions to financial advisers like Melbourne's Peter Holt to rope in investors.

The more people invested, the more money the advisers made. So Peter Holt recommended clients borrow money against their houses and invest that too.

"Peter Holt and his associates operated as predators," Ms Halpern said.

"They groomed people, sometimes over many years, seducing them into buying products with assurances that what they were doing was safe."

As well as losing the money they put up, investors caught up in Timbercorp's collapse are now facing the prospect of losing their homes.

The deadline has now arrived for Mr Holt's Timbercorp victims to either repay their loans to the ANZ Bank or face losing the houses they borrowed against.

Ian and Meredith Byrne are among them.

"The situation is critical," Ms Byrne said, struggling to stay calm.

"There's 300 of us who are going to lose our homes."

While the victims are pleading for mercy from the banks, Mr Holt is still able to operate his business via a partnership, despite being banned from financial planning for three years by the Australian Securities and Investment Commission (ASIC), and supposedly being bankrupt.

His comfortable lifestyle only rubs salt into the wounds of those former clients whose homes are about to be foreclosed.

"Don't let people like Peter Holt trade. Don't let people get sucked in. I just want to keep my house," Ms Byrne told 7.30.

Sham bankruptcies 'a significant issue'

Slater & Gordon solicitor Mark Walter is preparing to launch a series of class actions against financial planners.

He says sham bankruptcies are a national phenomenon.

"There's a fairly significant amount of this activity around the country," he said.

"The planners are closing down and liquidating and re-emerging under a different name, and corralling the losses on bad advice they've given in old entities. It's a very significant issue."

Australia's big four banks control three quarters of all financial planning in the country and they are pushing hard to be allowed to pay financial advisers to spruik their investment products.

"Staff in branches are able to provide general information about products, and they have an incentive to provide general information about products," Mr Munchenberg said.

"There is always risk associated with investments, and where there are situations where customers have got into difficulty, we will often work through some sort of settlement with the customers."

But Peter Collins, a former New South Wales treasurer and now chairman of Industry Super Australia is urging caution on changing the rules.

"Strip away some of those protections put there after the collapse of Storm and others, it's almost the perfect storm," he told 7.30.

"I'm making a genuine pitch to the Government to think about this very carefully."

Topics: business-economics-and-finance, consumer-finance, fraud-and-corporate-crime, australia

First posted