April 16, 2011
The clowns came out to play when the federal government shelled out $55 million in compensation for certain investors in Trio Capital.
The clowns include the former Wollongong financial planner Ross Tarrant, on the front page of a rival newspaper this week moaning about how DIY super investors should be paid compensation.
And that bloke Peter Johnston, the head of the Association of Independently Owned Financial Planners, was out there whingeing about the same thing.
A quick recap: Trio Capital, a fund manager in Albury, was seized by regulators in December 2009. It has now been revealed to have been operating a big fraud in two particular hedge funds it managed: Astarra Strategic and ARP Growth.
On Wednesday the Assistant Treasurer, Bill Shorten, said government compensation would cover 5000 members of super funds overseen by the Australian Prudential Regulation Authority with money in Astarra Strategic. All up, they will be paid $55 million.
But 295 self-managed super fund investors in Astarra Strategic and 70 investors in ARP Growth were essentially told to nick off. Collectively, along with some direct investors who are not being compensated, these investors lost up to $120 million.
Now, this should be a big warning bell for the self-managed super investors that account for $420 billion in Australia’s booming $1.3 trillion superannuation industry.
It’s a bell these pages have been ringing for a while. As we wrote here last April, people being ushered into DIY super should receive documents with large red letters on the front reading: ”You could lose the lot.”
My position is not a Ross Tarrant-style pitch for broad-based compensation for DIY super fund investors. For example, I wouldn’t include him in any compensation scheme.
Additionally, there are good reasons for the government’s current position to let people in DIY super look after themselves. The current setting, as played out in Trio Capital, is that government compensation looks after mainstream investors in funds regulated by the Australian Prudential Regulation Authority.
I am alive to arguments of moral hazard that a broad-based compensation scheme for DIY super could create. I am also alive to the ridiculous situation of bailing out a DIY super husband in a case against a DIY super wife.
The reason I am sympathetic to the Astarra Strategic and ARP Growth DIY super investors is they found themselves in a managed investment scheme where a fraud was perpetrated. They entered those schemes on the advice of a trusted adviser. That trusted adviser failed them, often with a flurry of associated fees.
So, when Shorten considers the merits of broadly based compensation for investors, I believe there are grounds for a limited compensation scheme for DIY super investors.
At the same time, many problems will be addressed by forthcoming financial advice reforms that remove conflicted remuneration received by planners.
That brings me neatly back to Ross Tarrant. His business, Tarrants, received $840,000 from Trio Capital in commissions termed a ”marketing allowance”. That same “marketing allowance” was paid as about 200 Tarrants clients set up DIY super funds that invested $20 million in Astarra Strategic.
And Tarrant reckons he deserves compensation? It is beyond audacious.
Then there’s Peter Johnston. Johnston’s members in the association, including Tarrants, Dominion and Seagrims, were wildly overrepresented in the fallout of Trio Capital.
Johnston is the clown who squired around Shawn Richard – also known as Shawny Cash – proclaiming his innocence early last year. Shawny ended up being the front man for the Hong Kong mastermind of the scam, and now faces a lengthy jail term.
I am uncomfortable about the large number of association members who found themselves investing money in the Trio Capital scam. I am uncomfortable about the credulousness of the association’s leader.
Shorten’s reforms promise to make it more difficult for Trio Capital to happen again, and keep some of the clowns at bay. But there should also be consideration of compensation for DIY super investors sucked in by the clowns.
The clowns include the former Wollongong financial planner Ross Tarrant, on the front page of a rival newspaper this week moaning about how DIY super investors should be paid compensation.
And that bloke Peter Johnston, the head of the Association of Independently Owned Financial Planners, was out there whingeing about the same thing.
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Really, who are these jokers? How anyone could quote them with a straight face is beyond me. They have zero credibility on the issue of Trio Capital. The fact they are presenting themselves as part of the solution is staggering; they were part of the problem. Worse, they are muddying the waters for DIY super investors who have what appear to be genuine claims for compensation.A quick recap: Trio Capital, a fund manager in Albury, was seized by regulators in December 2009. It has now been revealed to have been operating a big fraud in two particular hedge funds it managed: Astarra Strategic and ARP Growth.
On Wednesday the Assistant Treasurer, Bill Shorten, said government compensation would cover 5000 members of super funds overseen by the Australian Prudential Regulation Authority with money in Astarra Strategic. All up, they will be paid $55 million.
But 295 self-managed super fund investors in Astarra Strategic and 70 investors in ARP Growth were essentially told to nick off. Collectively, along with some direct investors who are not being compensated, these investors lost up to $120 million.
Now, this should be a big warning bell for the self-managed super investors that account for $420 billion in Australia’s booming $1.3 trillion superannuation industry.
It’s a bell these pages have been ringing for a while. As we wrote here last April, people being ushered into DIY super should receive documents with large red letters on the front reading: ”You could lose the lot.”
My position is not a Ross Tarrant-style pitch for broad-based compensation for DIY super fund investors. For example, I wouldn’t include him in any compensation scheme.
Additionally, there are good reasons for the government’s current position to let people in DIY super look after themselves. The current setting, as played out in Trio Capital, is that government compensation looks after mainstream investors in funds regulated by the Australian Prudential Regulation Authority.
I am alive to arguments of moral hazard that a broad-based compensation scheme for DIY super could create. I am also alive to the ridiculous situation of bailing out a DIY super husband in a case against a DIY super wife.
The reason I am sympathetic to the Astarra Strategic and ARP Growth DIY super investors is they found themselves in a managed investment scheme where a fraud was perpetrated. They entered those schemes on the advice of a trusted adviser. That trusted adviser failed them, often with a flurry of associated fees.
So, when Shorten considers the merits of broadly based compensation for investors, I believe there are grounds for a limited compensation scheme for DIY super investors.
At the same time, many problems will be addressed by forthcoming financial advice reforms that remove conflicted remuneration received by planners.
That brings me neatly back to Ross Tarrant. His business, Tarrants, received $840,000 from Trio Capital in commissions termed a ”marketing allowance”. That same “marketing allowance” was paid as about 200 Tarrants clients set up DIY super funds that invested $20 million in Astarra Strategic.
And Tarrant reckons he deserves compensation? It is beyond audacious.
Then there’s Peter Johnston. Johnston’s members in the association, including Tarrants, Dominion and Seagrims, were wildly overrepresented in the fallout of Trio Capital.
Johnston is the clown who squired around Shawn Richard – also known as Shawny Cash – proclaiming his innocence early last year. Shawny ended up being the front man for the Hong Kong mastermind of the scam, and now faces a lengthy jail term.
I am uncomfortable about the large number of association members who found themselves investing money in the Trio Capital scam. I am uncomfortable about the credulousness of the association’s leader.
Shorten’s reforms promise to make it more difficult for Trio Capital to happen again, and keep some of the clowns at bay. But there should also be consideration of compensation for DIY super investors sucked in by the clowns.
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