Steve Navra on ABC 7:30 report

If you understand the full story and history of these cases, I think you'll see it's a lot more complicated than that.

 

Doesn't seem like they've uploaded this video to the ABC website yet, so I've uploaded it to the media gallery - Supreme Court battle prompts call for 'retrospective' fund for financial victims

 

Is that on your phone? Works fine for me on my desktop machines and my Android phone?

 

Try turning your phone the other way around?

 

Again, you don't seem to understand the full history here and are just commenting on headlines rather than having an appreciation for what actually happened.

Nobody is claiming the investment was insured - it's the liability insurance provided by the planner in case they are proven to have given bad advice, which was inadequate. We're not talking about someone taking the ideas presented at a seminar and implementing them themselves - we're talking about a financial advice company who managed their clients money for them (taking a large cut of the proceeds along the way) who managed to send a large percentage of their clients broke (not just lose money on their new investments, but end up losing their existing houses and still owe money they can't afford to pay). We're not talking about market failure, we're talking about bad advice.

For the record, I built and operated the Navra Financial Services website for them and provided other services to the business such as recording seminars and presentations and making it available to their clients online. I was not a client (nor an employee) of their financial services business, but I got to know it very well and I got to know a lot of their clients personally - many of them were members of Somersoft and are on PropertyChat too.

I also set up a private discussion forum when the businesses collapsed so that people had a way of remaining in communication and helping each other - that site still operates today and there are still battles being fought on multiple fronts over products that NFS invested their clients in. I know intimately the tragedy that many of these people have faced. The GFC started 8 years ago and these people are still fighting battles that resulted from it, today.

Let's see - giving inappropriate advice on highly leveraged products (warrants); on tax schemes that proved to be nothing more than government approved ponzi schemes (Great Southern); on investment loans they were told were non-recourse only to have them sold to a bank and then actively pursued through the courts for money they didn't think they owed - after receiving bad advice that they shouldn't pay the loans (Great Southern / Bendigo Bank); on structured investment products (which they invented themselves) which proved to be completely illiquid and they are still fighting to get something like 40c in the dollar of their capital back something like 6 years later (Structured Property Fund); on a highly leveraged product (again which they invented themselves) where the planners got paid up front and took no responsibility for the ongoing performance (Asia Pacific Fund). The list goes on and on.

Then there was the shares in the (related) unlisted funds management company they were encouraged to borrow money to invest in (which provided an opportunity for Steve to cash out a large percentage of his own shares - which I suspect he never paid a cent for himself), which subsequently collapsed and left people with nothing - and still to this day they can't claim that as a capital loss because the company has not yet been wound up by the administrators.

The parts you hear about in the 7:30 Report are just a very very small aspect of the whole story - it would take a mini-series to cover the whole saga, you simply can't appreciate the enormity of the tragedy in 10 minutes.

As I said - it's complicated.

Read the link posted by Terry_w above - this is a senate inquiry into the Great Southern debacle - just one aspect of the saga.

At the end of the day - these people went to a financial planner for advice on how to invest to secure their financial future. While the advisors can't predict the markets - they can and should know how to structure their clients investments to be able to survive a market crash and never put their clients at risk of losing everything. They failed completely at this - and continued to leverage their clients higher and higher in an attempt to recover their failed investment until the point where it all collapsed leaving many of them with nothing. The fact that the liabilities they incurred from giving bad advice (bad advice, not market failure) proved to be orders of magnitude greater than they had insurance for, just compounded the problem.

While I am all for educating yourself and making informed decisions (hence my websites PropertyChat and InvestEd) and I personally would never rely on a financial advisor to make decisions for me - I am the kind of person who will learn about something and make my own decisions - I think it is completely reasonable for people who don't have a deep understanding of investment products to seek advice which is appropriate to their circumstances and to let an "expert" guide them. But there also needs to be protection for the outlying cases where everything goes pear-shaped because of bad advice (not because of market failure), and where liability insurance proves to be ineffective.

Everything collapsed when Navra Financial Services was denied liability insurance because of outstanding claims against it by clients - the cost of obtaining insurance became too high and they were forced to wind up the business. This was just the first step in a cascade of following events which caused huge financial losses to a large number of people (notwithstanding the market collapse and failure of Great Southern which was out of their control), but the liability from bad advice had already been incurred and was inadequately insured for.

Typically insurance is intended to cover isolated cases where individuals have received bad advice - it is not intended to cover for systemic failure of advice for a large number of people at once - which is what has happened here. There was a common strategy employed across many clients which turned out to be really bad for a large number of people. If you look at most financial planning companies - none of them likely have sufficient insurance to cover their entire client base making a claim at the same time - but then, most of them wouldn't be giving the same advice to all of their clients either

 

No actually - I was in a fairly unique position of having quite direct exposure to the situation without having a financial exposure to it.

Yes, I was an investor in the funds management company - but that was a completely separate issue and unrelated to the advice side of things. I was largely a very interested observer in what happened with the financial advice side of the business and I learned a lot from being able to dispassionately analyse the products being recommended without any personal financial risk.

No, we won't

 

It's not a guarantee - it's insurance of last resort for extreme situations not covered by standard insurance policies.

It's not about poor investment choices - it's about negligent advice, for which there is supposed to be insurance, but for when insurance doesn't cover it for some unusual reason.

FWIW, I'm not actually saying I agree with what they are proposing (I'm undecided) - but I can certainly understand the reasons behind it given what I've seen unfold over the past 8 years.

I'm not the one being judged here - I'm just reporting my experience and what I observed.

As I said - I'm not actually advocating for the proposed insurance policy - I'm just trying to explain a bit more of the justification behind it.