‘Millionaire’s factory’ hits a hurdle

‘Millionaire’s factory’ hits a hurdle

For Macquarie, it may have seemed that the undertaking put an end to controversy over its financial advisory arm - the group says it ‘‘has been working closely with ASIC to make the necessary improvements to the business’’. ‘‘MPW takes its obligations to clients and regulators seriously,’’ Macquarie says. ‘‘MPW has carried out extensive work on the EU over the past 18 months.

Nationals Senator John Williams, who was a driving force behind the Senate inquiry, told BusinessDay he still had serious concerns over Macquarie, the progress of the enforceable undertaking and ASIC’s oversight. ‘‘When we tabled the report I said Macquarie should have a good look in the mirror at themselves,’’ he said. ‘‘I’m concerned about the standards and quality of their financial advisers, and on September 5 at the parliamentary joint committee I will be asking ASIC for an update on the progress of the enforceable undertaking and whether things are improving.

Waller’s adviser, who still works at the bank, told him his already devastated financial portfolio had gone up just 4 per cent and he had not been able to take advantage of the $96 billion equity issues corporate Australia was raising at rock-bottom prices. ‘‘’It was gut-wrenching,’’ Waller says. ‘‘’It wasn’t until I got home and read the annual review document that I realised the managed funds I had been put into had a heavy exposure to foreign currency movements.

He says the problems at Macquarie, taken together with those at the Commonwealth Bank, point to systemic problems across the financial planning industry. ‘‘This indicts ASIC as the utterly ineffective regulator and makes an overwhelming case for a wide-ranging royal commission into the sector,’’ he says. ‘‘Again, as at CBA, so at Macquarie, a lot of the problems seem to be due to vertical integration, whereby product manufacturers own financial planning groups and use them as sales channels to shift product.

The low point of the disastrous investment advice was tipping $238,303 of the Wallers’ money into a series of funds run by Australian group Basis Capital - funds that were, via a company in tax haven the Cayman Islands, pumped into one of the worst investments in the world: complex collateralised debt obligations issued by the financial wizards at Wall Street’s ‘‘vampire squid’’, Goldman Sachs.

About the time Morris was hatching a plan to blow the whistle on the Commonwealth Bank‘s financial planning scandal, an internal review at Macquarie in 2008 revealed ‘‘compliance deficiencies’’ within Macquarie Private Wealth that were so bad that 80 per cent of its advisers were not up to scratch.

All up, Waller estimates total payments were in excess of $1 million. ‘‘’We suffered every possible worse scenario imaginable,’’ he says. ‘‘We had a margin loan account and so got caught out with margin calls, and we were transferred into managed funds that were invested in a number of non-equity, derivatives-based, currency-exposed managed funds - the risk of which was not properly explained - and didn’t help us when the markets rebounded.

The misconduct inside Macquarie’s private wealth division occurred about the same time that Jeff Morris, a whistleblower inside the Commonwealth Bank’s financial planning division, approached ASIC warning it of a ‘‘high-level conspiracy’’ to conceal the ‘‘corruption and gross incompetence’’ of some of the bank’s star financial planners, including Don Nguyen.

He has spent the past 14 months bashing his head against the wall trying to get his file with Macquarie reviewed with a view to getting financial compensation for the $1. 4 million losses he says arose from “negligence’’ and ‘‘breach of contract’’.

He first wrote to Macquarie on May 31, 2013, saying he understood that this mandate period covered the global financial crisis. ‘‘However, the investment recommendations from MPW precluded us from participating in the recovery in equity markets in 2009 - our losses became permanent, which has had a material ongoing adverse impact on our financial position - just at the time I was entering retirement.

And when Macquarie came to defend the Federal Court action, it claimed that the ‘‘double counting’’, which it knew was against company policy, gave the clients ‘‘an advantage resulting in an increased risk to MEL [Macquarie Equities Limited] and the bank’’.

Read more here: SMH


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