The failures in financial services have been substantial and extend across the value chain, says Phil Anderson, the FAAA’s GM Policy, Advocacy and Standards.
Writing on the FAAA site he states that the Shield Masterfund and First Guardian collapses have had hugely negative consequences for more than 11,000 clients who are potentially exposed to combined losses of up to $1.1bn.
“For many of these clients, the losses are in the hundreds of thousands of dollars and particularly for people in retirement or approaching retirement, this is devastating,” he says.
“There are some important immediate changes that can be made to the client complaint regime to help ensure fairer recourse for these impacted clients.”
He says the failures have impacted on:
- The responsible entities and fund managers who built these products and managed them
The research houses who assessed and rated these products
Phil Anderson. - The superannuation funds, who agreed to add these products to their investment menus
- The advice licensees who added these products to their Approved Product Lists thereby giving permission to their advisers to recommend these products, while also operating with limited adviser oversight
- The advisers who recommended clients invest in these products
- The telemarketers and cold calling companies who identified potential clients and convinced them to take action
- The auditors who it seems failed to call out the warning signs and likely misconduct within these firms in a timely manner
…those who have done the wrong thing need to be held to account…
Anderson states: “ASIC has made it very clear, including during a presentation to the Parliamentary Joint Committee on Corporations and Financial Services on 18 September 2025, that all of the above sectors are in the spotlight and are likely to be the subject of regulatory action and potentially contribute to client remediation.
“That is important, as those who have done the wrong thing need to be held to account.”
However, Anderson makes it clear the bigger issue is compensating impacted clients and putting them back into the position that they would have been in had these failures not occurred.
“Macquarie has taken the lead, in agreeing to compensate their clients who invested in Shield,” he said. “This is a great step forward. However, this response may not be replicated by others who may be implicated.”
Deep flaws
Anderson points to what he terms “deep flaws” in the financial services complaints regime.
“These flaws result in impacted clients being encouraged to direct their complaints against financial advisers only,” he says.
“This option should always be available to clients when adviser wrongdoing is evident. However, the system must provide clients with the right to complain with respect to other providers in the value chain that were involved in this failure.
…Consumer protections and compensation regimes are critical for consumer confidence in the superannuation system…
“Importantly, if chasing a claim against a liquidated financial advice firm is the only option, then it leaves clients in a position where their compensation is likely to end up coming from the CSLR, which is subject to a cap of $150,000.”
He says the Shield and First Guardian collapses highlight the need for reforms to the financial services complaints regime, including:
- For complex, multi-facetted matters such as Shield and First Guardian, there needs to be a mechanism to negotiate a settlement across all of the contributing parties, in order to deliver a timely solution that does not simply rely upon the CSLR
- Significant modification of AFCA Rule C.1.5 is essential to better allow complaints against investment funds and superannuation funds. Complaints about the operation of the fund, including with respect to the decision to include an unsuitable investment fund on an investment menu and failure to take sufficient action in the context of warning signs related to investment products and business practices are seemingly excluded by Rule C.1.5. This must change
- Changes to the law to allow complaints involving financial advice to attribute loss to other parties, even where there are breaches of the core advice obligations, such as the Best Interests Duty and the appropriate advice obligation
“We cannot waste this opportunity to fix these issues and to deliver an acceptable outcome for those clients who risk losing everything,” says Anderson.
“Consumer protections and compensation regimes are critical for consumer confidence in the superannuation system, and the financial system more generally – the current regime is not fit for purpose, and must be fixed.”
