Three unnamed financial planning licensees have been targeted with more than 30 consumer disputes claiming financial losses of more than $5 million due to investments linked to Astarra Asset Management.
In its submission to the Trio Capital inquiry, which began last week, the Financial Ombudsman Service (FOS) said it had received 32 disputes from applicants who were advised by their planner to invest in Astarra.
Of this figure, 28 of the disputes have been filed against one licensee, with the remaining four disputes split between the two other licensees.
The disputes are a mixture of self-managed superannuation funds, direct investors and corporate superannuation funds.
The claims investors are making against the licensees include inappropriate advice, misleading or deceptive conduct, failure to disclose matters that may be reasonably expected to be capable of influencing the adviser, and failure to adequately disclose the risks associated with geared investment strategies.
FOS said the applicants were all retail clients, had $500,000 or more to invest, were assessed as having a long-term investment horizon of five years or more, were assessed as having an “assertive” or “aggressive” risk profile, and were said to be comfortable with geared investment strategies.
“Applicants allege the risks associated with Astarra were understated by their advisers. A common theme is that the Astarra investments and the gearing strategies used (where a gearing strategy was recommended) were presented as being ‘safe’,” it said.
It said it did not have sufficient information to comment on the level of commissions paid by Trio to advisers, but most applicants argued the commissions were “higher than usual”.
“In disputes lodged against the insolvent licensee, applicants also allege Trio paid a marketing allowance which was calculated as 3.3 per cent of client monies placed with Astarra,” it said.
“The implication of the above is that the commissions and marketing allowances paid by Trio were a significant incentive for the licensee to not only recommend Astarra but also recommend gearing strategies.”
Sixteen disputes had been closed, with most of the closed disputes withdrawn by applicants after they were notified the licensee was being wound up as insolvent, FOS said.
“One dispute was closed after the parties agreed to a commercial settlement,” it said.
“FOS has not received any disputes against the responsible entity of Astarra, Trio Capital.”
Fifteen of the 32 Astarra disputes are in the final stage of the FOS process, with determinations expected to be issued by 31 December.
“FOS has not yet issued any determinations for any of the disputes related to investments in Astarra Strategic Fund (Astarra). FOS is therefore not in a position to make any comments in this submission about the merits of allegations made by applicants,” FOS said.
