Late in 2020, a woman described in the media as a “financial planner”, Melissa Caddick, mysteriously disappeared following a raid by Australian Federal Police on her Sydney eastern suburbs home, leaving a trail of financial devastation in her wake.
Caddick was no more a financial planner than the rapper Dr Dre is a doctor. Caddick’s firm, Maliver, never operated under an Australian Financial Services Licence, which is required under the Corporations Act to call yourself a financial planner or financial adviser.
This is an open case so we will not rush to premature judgment, but we can take lessons from how similar people attract clients.
Seemingly confident, they strive to feel rich and important, adorning themselves with the trappings of wealth and success. They mimic respectability, which makes them hard to spot. I’m usually cautious of the overly ostentatious – what are they trying to prove? Some of my wealthiest clients drive the cheapest cars.
They dangle the carrot of high returns. They pitch investment strategies with constant returns and minimal risks to play to our greed. They include blue chip investments to remove our fears.
There are no magic pudding, secret investment strategies – you cannot earn higher returns without taking higher risks. Ask lots of detailed questions and then watch as they first deflect, then tell you not to invest and shift to their next target.
They use the veil of exclusivity to overcome your hesitancy. If someone says “I’m not taking new clients but I like you” and then flatter you, run. Run a million miles.
Trusted by loved ones, family, friends and friends of friends are often easy targets. By preying on people they know, trust is already well established, hard questions are not asked and niggling doubts are ignored.
My golden rule is to not accept friends and family as clients – I do not believe it’s in their best interests or mine. You lose objectivity and accountability. which are crucial for a successful client/adviser relationship.
SMSF investors are typical victims. You rarely read “Conman fleeces industry and retail super fund investors out of millions”, but SMSF investors are more susceptible. In the hands of the wrong person, SMSFs’ greatest strengths become their greatest weakness.
Your SMSF gives you greater control and flexibility. But flip that and assume you inadvertently employ a master manipulator hell bent on defrauding you.
With an SMSF, you’ve just given the wrong person far more control and flexibility than they would have in an industry or retail super fund. Those types of institutions require proper authorisations, detailed checks and balances and they communicate directly with the client. Conmen struggle with these higher client protections.
So how can clients better protect themselves?
Ensure you have online access to your SMSF. It should update at least daily and you should be able to view valuations and run reports. Don’t be afraid to communicate directly with your SMSF’s accountant or auditor. Take charge – don’t rely on an adviser controlling the information flow via ad hoc mailed or emailed reports.
Degrees and qualifications don’t necessarily make for a better adviser but they signal they have followed the same professional path as, say, a doctor or a lawyer. They have dedicated themselves to years of professional development; conmen rarely do this. Ensure your SMSF adviser holds a finance-related degree and the CFP (Certified Financial Planner) qualification.
Search the term “Moneysmart financial adviser register”. Follow the Moneysmart link. Enter “Melissa Caddick” in the search function. She’s not there (and never was). That’s a big red flag.
Now enter my name or your adviser’s name. You can see everything about them and it’s all been verified – degrees, qualifications, experience, what they can advise on, the name of their AFSL, professional memberships, disciplinary actions, etc. Encourage others to use this great free tool.
Next, search the term “ASIC connectonline Professional Registers” and select “Browse the professional registers”. You can view everyone authorised by that AFSL to give financial advice. Caddick’s firm Maliver is not listed (it never was) and the AFSL she allegedly claimed to advise under does not list her. More red flags.
There is other great research you can do to find a trusted SMSF adviser but following these will help you avoid employing an unscrupulous one.