Donna* and her husband, Theo*, were in their mid-forties when they decided to meet with an adviser they had known for several years through various contract roles Donna had completed for him in a freelance capacity.

The couple felt comfortable having Simon* manage their finances because of the trusting working relationship Donna had established with him.

“I’d worked with Simon as a contractor long enough to have a fair idea of his business practices, and everything seemed above board and legitimate. I had no reason not to trust him,” explained Donna.

Their initial meetings to assess their circumstances and establish a strategy were held in Simon’s office and involved completing an extensive fact-finding document. This process further reassured them that they were working with a professional, and they left feeling satisfied with their decision to proceed with the proposed strategy.

For several years, everything appeared to be tracking well. Donna noted they regularly received statements detailing how their investments were performing. One of these investments was in a particular fund that guaranteed a 7% annual return and operated similarly to a term deposit, with funds locked in for 5 years.

Donna occasionally noticed that interest amounts for this fund were missing from their quarterly statements. However, whenever she raised questions, Simon promptly resolved the errors, giving her no reason to suspect anything was amiss.

In mid-2020, the couple received an email from Simon stating that he was moving his clients away from the parent Australian Financial Services License (AFSL) holder because they were experiencing “troubles” with the regulator (ASIC), and he didn’t want his clients to be negatively impacted.

“He had us thinking he was doing us a favour; however, as we were to discover, this had nothing to do with protecting his clients – he was protecting himself,” said Donna.

Not long after Simon established a new AFSL and moved all his clients across, Donna and Theo noticed their self-managed superannuation fund (SMSF) wasn’t linked in the ATO portal as expected. They also realised their tax returns for the past few years were missing.

When questioned, Simon blamed the accountant responsible for managing his clients’ tax affairs and assured the couple he would resolve the issue and that they wouldn’t face any fines for failing to lodge their returns.

Concerned, Donna contacted the accountant directly to ask why their tax hadn’t been finalised and sought reassurance about potential penalties.

“The accountant told me they hadn’t been paid by Simon for accounting services and were sorry, but couldn’t help us,” Donna explained.

“We started to panic, and in retrospect, all these red flags were popping up in our minds. We knew we were in trouble.”

When confronted, Simon denied any wrongdoing.

“I demanded the return our investment, but he said he couldn’t because the fund was ‘being wound up’ and ‘assets needed to be sold’. We had no idea what sort of assets could be tied up in a cash investment, and when questioned, he avoided giving us a straight answer,” Donna said.

The couple continued to chase Simon for their cash, along with the monthly fees he had been charging to manage their investments and tax affairs. Eventually, Simon became non-communicative.

Donna and Theo lodged a complaint with AFCA and soon discovered they were among a group of around 20 others negatively impacted by Simon’s misconduct.

“AFCA found in our favour on the grounds that Simon misappropriated investment funds, and it was then that we discovered we might be eligible for compensation through the CSLR,” said Donna.

“Fortunately, our claim was accepted, and we received compensation for our full investment amount and the fees we had been paying Simon to ‘take care’ of our SMSF.

“Sadly, many others lost far more than we did, and while some compensation is better than nothing, these people have lost an enormous amount of their retirement funds and it’s simply too late to recover what they lost.”

*Name changed for privacy