A year on there is still little joy for Westpoint investors, a point bought home in an article in last weeks Australian Financial Review.
The bottom line is that many investors are struggling to have their cases heard by the compliants scheme - FICS - because their claim is for more than $100,000. Those with less than $500,000 find the cost of litigation too expensive, and find that they have little place to go.
The Australian Financial Review quoted comments from the head of the Financial Services Complaints Scheme (FICS) that said she had noticed financial planners who had recommended Westpoint simply closing their practice and moving to work as an authorised representative of another financial planning practice.
The stories of investors that have been burnt through Westpoint, which we hear about through the press, seem to have been advised by grossly incompetent financial planners who should never be allowed to practice again. This includes:
- Financial planners ignoring the basic rules of risk and return, and suggesting a high return scheme like Westpoint could be low risk.
- Financial planners encouraging investors to borrow against property to invest and still calling it a low risk scheme. Borrowing to invest intentionally increases the risk and return of a portfolio.
- Investors having most of their assets in the one investment company (Westpoint) and the one asset class (mezzanine finance). This ignores the fact that they key tool investors have in reducing portfolio risk is diversification across asset classes.
Of course, some financial planners used Westpoint as 5 -10% of a clients portfolio, which is a much more reasonable approach - and one that has left clients much better off.
Cheers and best wishes for a great 2007 (expect to those disgraceful financial planners who filled up client portfolio with high commission paying Westpoint investments!).