How Not To Become An Investor
In early 2014, the looming death of my long‐term relationship motivated me to tinker with designing a new life. I took extended leave from my job to pursue healthier, happier ways to live and work and reconnect to my long neglected writing aspirations. The time was nigh to transform into a prosperous, self-sufficient, creatively-fulfilled woman.
With luxurious time on my hands to investigate potential roads to financial security and wealth creation, so began a fact-finding mission via Google. 1,850,000,000 hits for ‘finance.’ 23,500,000 hits for ‘wealth creation.’ A daunting overload of experts, opinions, plans and pathways.
I self-educated as much as my tired brain could handle. The concept of creating passive income streams to subsidise my fledgling, entrepreneurial business aspirations, resonated strongly. I reasoned that that if I sought the guidance of financial specialists to set me up and help me further my education, skill and understanding about the finance and investment world, what could go wrong?
As it turned out, everything.
Along Came homebusiness.finder.com
“We will assist you to find and review a legitimate and real online home business. So you can work at home, in your time and earn an income.”
Perfect. I registered with homebusiness.finder immediately. Nothing ventured, nothing gained. When my phone began to ring, a legion of intriguing conversations with a diverse group of enthusiastic business spruikers ensued. The most impressive call came from Sydney based investment company The ATP (Australia) Pty Ltd, a Corporate Authorised Representative of Audrn Financial Group Pty Ltd (the Licensee).
“The ATP stands for Achievement, Trust and Prosperity – at ATP we believe in fairness for our members. Our aim is to provide an open and honest signal service to our clients.”
Steve Anderson*, a slick, friendly salesman, informed me that the ATP was ‘Australian Securities and Investments Commission (ASIC) approved’ and had to ‘jump through many strenuous hoops’ to be awarded a licence. He directed me to the ASIC website and walked me through the ASIC register search process to confirm their company’s legitimacy. He even had the nerve to audaciously criticise investors who ‘fell for financial scams’ because they didn’t check the ASIC register.
Following an impressive online presentation of their ‘advanced trading system’, he convinced me that passive income streams would become my new reality. And better still, I could pay the $14,999 membership fee and open a $10,000 trading account with my superannuation funds by establishing a Self Managed Super Fund (SMSF).
Too easy. And 100% legal. Really? Yes. Really. It has the Commonwealth Government stamp of approval.
TIP: Always request a copy of an online investment presentation, or a transcript on company letterhead. It serves as valuable evidence when the Financial Ombudsman Service (FOS) registers your dispute and later requests documentation.
Anderson referred me to Glenn Jones*, Financial Advisor, A. Dip FP/SMSF Specialist at Real Wealth, an affable guy who harshly criticised government authorities for using scare campaigns to discourage Australians from setting up SMSFs.
To be perfectly honest, I felt OK about risking my superannuation from a seven-year stint in the public service because I didn’t have an emotional attachment to it. Before signing anything, several more conversations ensued and I also Googled the net for reviews and scam alerts about ATP and Real Wealth but produced nil negative results.
Sadly, it was after the unforseen big rip-off that I discovered the helpful Aussie Scam Alert community and numerous posts from other ATP and Real Wealth victims.
Fortunately, I had the sense to rule out risking any personal savings until the investment opportunity proved its worth.
In hindsight, Real Wealth should have vehemently advised against starting up a SMSF because my superannuation balance would rapidly be devoured by exorbitant fees and taxes. Sure I had plans to generate plenty of income but it wasn’t forthcoming at that particular time. Instead, Jones glossed over the fees and also failed to mention the 15% tax I would have to pay on my rolled‐over super. Had I been made aware of the following fees at the outset, I would have declined the joint venture with The ATP and Real Wealth:
- $1800.00 ‐ Real Wealth set‐up fee
- $2500.00 ‐ Real Wealth 2014 fin. year tax & audit
- $2500.00 ‐ Real Wealth 2015 fin. year tax & audit
- $1589.00 ‐ PAYG instalment
- $8221.00 – Tax Payable bill (due to 15% rollover tax)
Several months after the establishment of my SMSF, I heard a finance commentator argue that a minimum of $100,000 is required to set up a SMSF because of the excessive management and audit fees. More recently, a commentator stated that a SMSF is only viable if you have a minimum of $1M to invest. I had just under $50,000 to invest.
July 2014, an email from ATP zealously advised they had been granted a Managed Discretionary Account (MDA) license through Jade Capital Partners and as of 2nd August 2014, would ‘step up’ to an MDA Financial Services Licensed Firm.
“These ‘golden ticket’ licenses are extremely difficult to obtain and only a few dozen have ever been granted by ASIC.” The ATP.
In late August, I emailed ATP with concerns about nil returns. Nil passive income. No response.
September, 2014, an email from Real Wealth director David Orth reiterated the laws against accessing superannuation for personal use or gambling. Savvier than I was at the outset of this doomed journey, I queried why the ATP’s trading scheme wasn’t classed as a form of gambling given the volatile nature of trading and small print warnings about investing money ‘at your own risk’.
David Orth assured me, “the ATP is fine. It’s a financial service.”
Late February 2015, I emailed Jade Capital regarding my nil returns since taking out membership with ATP a year ago. I exchanged several emails with Orth:
“Yes, it’s a total mess at the ATP. I know a lot of people are complaining and jumping up and down over it. Keep pushing them!” David Orth
16 April 2015: With the assistance of a new Real Wealth consultant, I lodged a complaint against ATP with FOS.
21 April 2015: FOS confirmed a dispute had commenced with Jade Capital Partners.
24 April 2015: An apologetic ATP operations manager contacted me and negotiated a full membership refund. I signed a Deed of Settlement which stated that the company would pay me the sum of $15,000 before 1st January 2016.
7 May 2015: FOS advised the dispute against Jade Capital Partners was closed.
13 May 2015: The ATP requested my fund account details and deposited $200 of the $15000 membership refund.
9 September 2015: I contacted ATP to ascertain why no further payments had been made.
“It is of the best interests for the company to see that a resolution be made and we want to assist all of our current, and former clients. We will continue to assist you as best we can, because we care. We are currently in talks with the licensee to ascertain an action plan for moving forward and create a resolution which will be in the best interests of all parties involved.” The ATP
22 February 2016: I heard a whisper that ATP had been taken over by administrators and emailed them for an update. My email bounced. Their contact number was dead. Their website was shut down. I emailed Jade Capital Partners with my concerns that same day and so began the next phase of this long and winding road.
Let’s Play Pass The Buck
“If you have lodged a FOS complaint, under the guidance of Jade (Capital Partners) please let me know. In the past they have told some clients the wrong AFSL holders, which has drawn out the process even longer. It is a textbook stall tactic which has been used.” Brian Stevenson*, Real Wealth
4 February 2016: An email from Stevenson advised that he was looking after tax and audits for the 2015 financial year and strongly recommended I wind up my fund as soon as possible.
I asked for a breakdown of all of the fees, charges and taxes that had been siphoned from my SMSF account. My SMSF balance in the Macquarie and HUB24 account was $5,364.14. Adding insult to injury, the Real Wealth accountant charged an extra $1,500 to wind up a self-managed super fund.
Not only had I lost money to ATP and Real Wealth, I was disappointed to learn that the federal tax man also took a lion’s share:
“When you moved from an untaxed environment to a taxed environment with your funds this attracted a very large tax payable of $6,632.58 and $1,589. This large tax payment would of occurred if you moved to any normal super fund as well, not just an SMSF.”
By that stage, financial-drama fatigue set in and I had other ‘twists and turns’ to tend to. I expressed my disappointment at Real Wealth’s foolish advice to set up a SMSF when I clearly didn’t have adequate funds after paying the ATP membership plus $10,000 trading money.
This was evident at the outset but my rose-tinted glasses helped me block that particular view. In hindsight, how foolish of me.
TIP: If you are feeling exhausted and vulnerable, if life as you know it is on the brink of collapse and you accept it is unfolding for all the right reasons – please set aside your financial aspirations until you have the energy and focus to make sensible decisions.
I just wanted someone to help me create a financial plan that would ensure my security later in life. At 50 years of age, I left it all a bit late but was assured by David Orth that first-time financial planning is commonplace in this age group.
A smarter finance advisor would have politely encouraged me to take off my rose- tinted glasses and consider realistic pathways to wealth creation.
From Bad To Worse
29 February 2016: I successfully negotiated a refund of $2,500 tax and audit fees for the 2014 financial year given that my newly opened account was only a couple of months old at that stage. It was the least Real Wealth could do.
I was also determined to track down the ATP gangsters who got away with selling me their dodgy membership. Why were they not pursued as robustly as Jade Capital Partners and Audrn? I didn’t care about who was licensed to do what. I just wanted my money back.
1 March 2016: A Compliance Director advised me in writing that The ATP ceased to be an Authorised Representative of Audrn Group on 19 May 2014.
“We note that the Settlement Deed dated 24 April 2015 (Deed) between you and The ATP was executed while The ATP was under the AFSL of JCP. Audrn is of the opinion that it is neither a party to the complaint nor a party to the Deed. Audrn Group was not involved in that process and was not aware of any terms contained in the Deed. You may wish to enforce this Deed by lodging a complaint against JCP with FOS.”
2 March 2016: I submitted another complaint to FOS requesting that Jade Capital Partners as the AFSL holder at the time of deed of settlement, pay in full the agreed amount in remuneration of $15,000, now $14,800.
3 March 2016: FOS advised that they had registered my dispute with Jade Capital Partners.
Further discussions with FOS led to registering a dispute with Audrn Group, who were the AFSL when The ATP sold me the membership.
20 June 2016: Real Wealth advised that the balance on my Macquarie SMSF account was $13,060.94. I’m not sure where the extra $7,698 came from but didn’t question it. Perhaps Orth had a moment of moral consciousness.
5 August 2016: FOS queried if Audrn had resolved my dispute. The answer was a resounding no.
8 August 2016: FOS advised they were progressing my dispute against Audrn to Case Management stage.
11 August 2016: FOS advised that Jade Capital Partners had agreed to pay me $838.97 to resolve the dispute. This represented the total amount I lost due to trading while ATP was under the AFSL of Jade Capital.
29 August 2016: FOS informed me that my dispute was moving to the next stage of the process and requested specific information from both myself and Audrn.
20 September 2016: FOS advised that the file has been passed on to the ombudsman so FOS could make a final decision on the matter.
The FOS Determination
28 October 2016: FOS emailed me the Determination which decreed that: “Within 14 days of the applicant’s acceptance of this determination the FSP (Audrn) must pay the SMSF (or other superannuation account in the applicant’s name) $12,499 plus interest in accordance with section 2.2 of this determination. The above compensation is a settlement amount and not a contribution or benefit.
The FSP is responsible for the refund. The product agreement was dated 31 January 2014 and the membership fee was paid on or by 9 May 2014. A Pty Ltd ceased as a corporate authorised representative of the FSP on 19 May 2014 and transferred to a different licensee. As a Pty Ltd received the full membership fee amount at the time it was the authorised representative of the FSP, it is reasonable that the FSP is responsible for the refund of the fee to the applicant.”
Corrupt and Untouchable
I couldn’t thank the FOS case manager and ombudsman enough for their wonderful work and support. 4 November 2016, I received a phone call from the FOS Team Manager. He gently broke the bad but not surprising news.
“FOS advised that it was unlikely Audrn would ever be held accountable for their actions and I also learned that ASIC does not have jurisdiction to investigate foreign directors.” (I said, what?)
Despite frequent attempts by FOS to contact Audrn, there had been ‘limited response’ which may have been due to the fact that new directors were only appointed on 1 July 2016, and one resided in China. I also learned that the corrupt, untouchable Audrn group operated from a suburban house in Adelaide, South Australia and had not lodged any financial reports since 14 October 2013.
Consequently, FOS formally reported Audrn to ASIC for serious misconduct. Audrn had its licence revoked in September 2016.
I was also advised that unless there were substantial assets remaining in the company, it was unlikely there would be any distribution made to unsecured creditors such as me. In a nutshell, Audrn would not be able to meet its obligations and pay me the award made under the determination.
FOS would continue to monitor the situation and advise me if anything changed but there was nothing more that they could do to assist me in the recovery of my losses. I expressed my sincere gratitude for their hard work and empathised with the limitations imposed upon the investigative powers of all concerned.
Meanwhile, back at the Real Wealth ranch, the lone accountant took five months to close my SMSF account. On 25 November 2016, the total amount rolled over to my new superannuation fund: $18,128.52.
My grand loss, thanks to Real Wealth, ATP and Audrn: $28, 957.40.
Reasoning that I would rather face the challenge of losing money than my health, I accepted that I would never recover the money owed to me and vowed to be more discerning and patient in the future. While the overall experience left me feeling disappointed and disillusioned, I innately knew that I wasn’t done yet. Deciding to let sleeping fleas lie for awhile, I focused my energy on creating more joyful stories in my blossoming new life.
Waking the Sleeping Fleas
April, 2018, a welcome email woke the sleeping fleas from their slumber by way of an Aussie Scam Alert informing me of an ASIC announcement:
“ASIC has accepted an Enforceable Undertaking from (Real Wealth) director Mr David Orth under which he will cease to provide financial services for five years. In addition, Mr Orth will make a community benefit payment in the amount of $400,000 to Financial Literacy Australia to support the financial capability of vulnerable people.”
It has since been alleged that Real Wealth has morphed into a new ‘advisory’ business with the same street and PO Box address. The ATP scammers have probably reinvented themselves as well. For all I know, they are on the phone to a new, naive customer as I write this story.
The Royal Commission the Oz Government Didn’t Want to Have
This experience has left me feeling that Australia is a breeding ground for silk-suited gangsters who prey upon decent Australians seeking guidance to help them take control of their financial future. The fall-out from the Financial Services Royal Commission is probably just the tip of a melting iceberg.
For what it’s worth, I submitted my story to the royal commission and encouraged Aussie Scam Alert subscribers to do the same. Although royal commissions give people the opportunity to tell their stories, they are often deemed an exorbitant waste of time and money because governments of the day are known to ignore key recommendations instead of implement them.
The current Australian government behaves like an overgrown, royal banking family, so it will be interesting to see how they respond to the final recommendations.
As of 16 August 2018, the Royal Commission has received 8223 submissions. Top three: Banking 65%, Superannuation 11%, Financial Advice 9%.
This journey has taught me how easy it is for immoral finance gangsters to repeatedly slip the net and reinvent themselves behind front lines of eager, new gangsters-in-training, glossy websites, AFSL partners and ASIC approvals – ready for their next round of attacks on decent, financially naive Australians.
It’s unacceptable that predatory financial operators like The ATP and Audrn Group simply get away with their thieving schemes.
As for Real Wealth and other SMSF spruikers, it would be wise for politicians to consider legislative changes that mandate a realistic minimum balance at the outset for would-be investors, be it $100,000 or $1,000,000.
I can’t help but imagine that licensed rip-off cases like this end up at the bottom of overflowing, political too-hard-baskets.
One would think that ASIC and FOS investigating officers would be be granted wider powers and appropriate funding to enable them to nail corporate and public sector gangsters.
But what does the Federal Government do in 2018? Cut the ASIC budget by $26m. Slash the jobs of 30 investigators.
The Financial Review aptly described the move as “an unheralded budget cut described as shocking by insiders as the Hayne royal commission adds to the regulator’s workload.”
Ain’t Hindsight Grand?
While I feel that I was grossly misled by The ATP and Real Wealth and a bit of a klutz for going ahead with any of it in the first place, I take full responsibility for my impulsive actions and decisions which culminated in these most unfortunate events.
It would have been wiser to seek further advice from reputable financial planners in person before making any decisions. I have learned my lesson well.
*Real names not used
Linda Summer, Lost For Words