The recent collapse of Fincorp in March 2007, and the 2005 collapse of Westpoint have resulted in ordinary Australians reportedly losing almost $500 million worth of hard earned savings. The demise of these schemes demonstrate yet again, three important facts of investing:
Don’t put all your eggs in one basket
In the media, we continually hear stories of Australians
losing everything – whether it be to Fincorp, Westpoint,
or another investment. If you put everything into one investment,
you also expose yourself to the potential that you can lose
everything if the investment sours.
Know what risk you are taking
Highly geared investments can be very dangerous –
and property is no exception. This is especially so when
the promoters are more concerned about the quantity of sales
and fees earned, rather than the quality of the underlying
investments. In the case of Fincorp, investors’ money
(together with bank loans) was used to invest in property
developments that ultimately did not provide the sought
after returns.
After a collapse such as this, secured creditors like banks are the first to get their money back, while investors are the last, if they get any back at all. In many cases, investors are not aware of, or don’t have sufficient knowledge of, the investment they are putting money into. Before investing, you should try to gain an understanding of the underlying investments and the risk you are taking. If you are not comfortable with that risk, don’t take it, and seek a professional’s opinion.
Don’t rely on advertisements or hearsay –
seek professional advice
Many Fincorp investors responded directly to advertisements,
which promoted the potential to earn high interest returns.
On the other hand, Westpoint was promoted via fi nancial
planners, who would then go on to receive high commissions
from selling this scheme to their clients. Whilst this is
unfortunate, it only highlights the fact that you need to
do your own research on planners too!
You should only rely on someone holding an Australian Financial Services Licence and who is backed by a reputable organisation.
In the case of Count Financial Limited, we hold such a licence, are listed on the Australian Stock Exchange and have an unblemished 26-year track record. A Count adviser will be qualified and licensed to:
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Provide investment recommendations based on your own needs and risk profile; |
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Provide upfront information about any fees and commissions they receive; |
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Provide detailed information about the investments they recommend, in Product Disclosure Statements; and |
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In addition, they will only recommend investments that are of good quality and thoroughly researched. |
Unfortunately, Fincorp and Westpoint were never low risk investments. Whilst there is always a risk to investing, you don’t have to, and should not be cajoled into, putting money into something you are not fully aware of, or not comfortable with.
Many Australians have lost their life savings because they did not seek advice from an experienced professional. Unfortunately, Fincorp will not be the last loss for many Australians, so before your next investment, don’t doubt the value of advice – talk to your Count adviser.
Barry Lambert
Founder and Chairman
Count Financial Limited
Next: Time is running out to reduce your tax liability this financial year... |
As at 16 May, 2007 |
