Banksia Financial Group bites the dust

[So_Cynical]

When we placed funds from our "regulated" SMSF into these schemes we interpreted the fact that we could do so as an endorsement by the regulators.

Dude seriously...the stock market is regulated do you interpret that to mean you cant lose money? or because your car meets Aust design rules that it wont break down?

 

[Judd]

This is like being in the Storm Financial thread all over again.

I have simply offered an opinion which I hoped would be helpful.

Apparently it is not.

End of attempt for me.

Gets a bit that way doesn't it Julia?

Probably the apparent conflict is that posters who have lost money, which obviously is not something I like to see, propose actions and/or legislation to apply to all investors. The understandable and unstated reaction is “Who elected you to tell us what to do?”

There are many, many individuals, and indeed SMSF's, quietly getting on with following their particular investment strategy and suddenly a group, which have no involvement with and have no knowledge of those people or their investment arrangements, advocate various solutions applicable to problems they encountered. Who is to say those particular issues will be actually encountered by the vast majority of investors?

It is interesting. However, I do wonder though how the regulation of these MIS under APRA will solve poor management decisions by the principals of the respective organisations. Got a sneaking decision that it will not.

Like you I am out of this thread.

 

[k.smith]

Dude seriously...the stock market is regulated do you interpret that to mean you cant lose money? or because your car meets Aust design rules that it wont break down?

Geez... I think everybody knows that there is a risk that their car can break down. And the very nature of the stockmarket being that stocks rise and fall in value.

We invested in MIS to avoid the obvious volatility of such investments. They were marketed as safe, secure, reliable, as first mortgage funds, and in fact, they still are.

When Westpoint fell in 2005, did investors realise they faced comparable risks in other MIS?
The regulators obviously did with the flurry of activity that followed. But rather than a mass exodus out of the funds where investors identified the risks that they face in these MIS schemes, the reverse happened.
With disasterous consequences for so many. And it continues to this day.

With more and more people electing to roll into SMSFs, how many will fall for the representations that these funds make?
How many will ever attain the financial literacy to be able to understand the disclosures in the RG45 reports and identify the risks in the Product Disclosures? And how many will attain the skills to discern between one scheme and another?
Perhaps a lot of the posters on these forums will, but do they represent the average Mum and Dad investor who like them have super funds that they need to invest?

 

[ASICK]

Dude seriously...the stock market is regulated do you interpret that to mean you cant lose money? or because your car meets Aust design rules that it wont break down?

Thanks for your input Stud - that's quite an inane argument you've put on the table. I'm quite surprised that you refer to the stock market, but since you do - the market is regulated, and rightly so. And it's risky - in fact, it's speculative with punters in for (hopefully) rapid wins, but when things go pear-shaped, the borse steps in and halts trading - why do that? Why not just let the whole thing collapse? Why not let the market decide the outcome?

Of course, I don't know what's in your head, but I'd guess that if you were a shareholder in a wildly crashing stock, you might find some comfort in supervisory intervention - or maybe, if we take your argument literally, you'll be happy to see the whole thing fall to the ground.

And your argument about cars - that's really crazy. Implementation of a system of quality control does not guarantee perfection, it merely gives rise to an expectation that an average (hopefully, high) value product is produced. Feedback (sample testing) reduces defects. Such a system also gives some degree of certainly that, on failure, there is a process whereby that failure is rectified (be it before or after sale).

I'm sure you're aware that there are folk in our communities who aren't able to make decisions for themselves - those too young to enter into legally binding contracts, certain handicapped individuals, and those who are infirmed (mentally) by age and/or disease.

I agree that education would be a good thing, but without assessment, education is meaningless. Setting aside those 911 pilots, I'd say it's impossible to learn to fly a cessna 150 and then jump into the captain's seat of a 747 and fly off and arrive at any destination (even the one taken off from). So, becoming a pilot of one type of aircraft does not necessarily give rise to the ability to fly other types of aircraft.

So, it's not mere investment education, it has to be specific education (after all, there really is much to learn), and it has to be assessed and following on from such an assessment, there must be some recognition, maybe a certificate - or a badge - then when one invests, one presents a certified copy of that certificate of simply shows the badge. Much like a driver's licence, pilot's licence, boat licence, plumber's licence, electrican's licence, doctor's certificate to practice, lawyer's certificate, etc. etc.. along with all of those we'd have an investor's licence.: Those unable to make financial decisions (those spoken to above) would not be permitted to hold such a licence.

Then the fully educated individual armed with his/her certificate/badge could launch him/herself head-long into an unregulated market - but now, the risks are apparent, PDSs and financial statements have meaning.

Knowing all about each investment, investors would think as one - there'd be no ignorant and uneducated - there'd be no fragmentation when, say, MIFs are frozen - they'd know how to solve the problem, and they all vote as one - yes, a wonderful world.

I'm really forward to the "University of Finance" where graduates are certifited to have a full understanding of all aspects of each or relevant investment/s thereby giving rise to equal opportunity for all - there will be no more cries of "buyer beware!", but cries of "market beware!".

 

[k.smith]

I'm really forward to the "University of Finance" where graduates are certifited to have a full understanding of all aspects of each or relevant investment/s thereby giving rise to equal opportunity for all - there will be no more cries of "buyer beware!", but cries of "market beware!".

Perhaps the diclaimers should start at the beginning, when we part with our 9% compulsory contributions and read...

....''you are parting with 9% of your wages to provide for yourself in retirement. The choice as to whether you invest this in an industry fund or in a SMSF is yours. If you elect to deposit these compulsory contributions into an industry fund, you may find your funds eroded by fees and low returns. If you elect to roll these funds into SMSFs you may lose ALL of your funds"

I don't think it would take a degree at the University of Finance for wage earners to work out that the whole concept of parting with their wages to provide security for themselves in retirement is flawed.

I just read this...

''....The only thing that has managed to rise in the five years since the global meltdown have been fees charged by those running our funds - up 3.6 per cent per annum.
Now that's a safe bet and a decent return....''


Read more: http://www.news.com.au/money/supera...ce/story-e6frfmdi-1226513987324#ixzz2By9ThoiE

 

[ASICK]

Banksia - some updates

$100m cash paid out:
http://www.theaustralian.com.au/bus...hristmas-present/story-fn91wd6x-1226516942072

Not everyone's happy:
http://www.abc.net.au/news/2012-11-...ppy-with-initial-return/4372920?&section=news

Staff lose jobs:
http://www.smh.com.au/business/bank...ff-axed-as-branches-close-20121113-29a9x.html

(but the link failed when I tried it - did the bad news get axed too?)

It'd be interesting to see some accounts & RG45s if possible - receiver updates would be very interesting.

Any "can do" folk out there?

 

[lusk]

Re: Banksia - some updates

$100m cash paid out:
http://www.theaustralian.com.au/bus...hristmas-present/story-fn91wd6x-1226516942072

Not everyone's happy:
http://www.abc.net.au/news/2012-11-...ppy-with-initial-return/4372920?&section=news

Staff lose jobs:
http://www.smh.com.au/business/bank...ff-axed-as-branches-close-20121113-29a9x.html

(but the link failed when I tried it - did the bad news get axed too?)

It'd be interesting to see some accounts & RG45s if possible - receiver updates would be very interesting.

Any "can do" folk out there?

"McGrathNicol is expected to separate the company's good assets from the bad, package them and put them to the market."

Good luck getting a good price for loans that already have started defaulting.

 

[ASICK]

Banksia - Latest Information

"McGrathNicol is expected to separate the company's good assets from the bad, package them and put them to the market."

Good luck getting a good price for loans that already have started defaulting.

Here we go:

http://www.banksiagroup.com.au/

 

[k.smith]

http://www.afr.com/p/personal_finan...unds_know_the_risks_of_Y6qaU06Xlais1sNue1zFZN

''....The corporate regulator has signalled it is still worried about the way many unlisted property schemes operate.
The Australian Securities and Investments Commission last week released an updated investor guide aimed at lifting awareness of the risks associated with investing in unlisted property schemes.

The regulator has good reason to worry as many retirees are turning to the sector due to their nervousness about the equity markets, but with an insufficient understanding of the risks.....''

''........These steps and ASIC’s own advice rely on consumers being able to assess often complex risks and operators doing the best by their investors. All too often this is not the case....''

 

[k.smith]

Very "to the topic" article in the SMH today..

http://www.smh.com.au/business/regu...-investors-20121116-29i8w.html?skin=text-only

"...But the advertising of debentures on radio and television as bricks-and- mortar investments paying more than term deposits is always likely to have more influence on unsophisticated investors than the risks the issuers must now provide in their disclosure documentation.....''

''....But there are signs ASIC is preparing the way to recommend changes to the law to prevent those not meeting minimum standards from raising money from the public. ASIC says it will establish a "task force" to review Banksia and the regulation of unlisted, unrated debentures. It says the task force's work may involve making recommendations to the federal Treasury about law reform, "given we have pushed the existing conduct and disclosure regime to its limit".....''

''...If the law cannot be amended to allow ASIC to stop debenture offerers playing fast with other people's money, then consideration should be given to handing regulation of them to the Australian Prudential Regulation Authority....''

 

[ASICK]

"Everything's Relative" / APRA to the Rescue?

http://www.heraldsun.com.au/busines...torians-millions/story-fndgp8b1-1226521527700

"FAILED lender Banksia made an $11 million loan to its parent company before it collapsed owing $660 million to thousands of mum-and-dad investors in country Victoria.

Receivers working to claw back money for Banksia's 15,000 investors are trying to recover the loan, which was made to a related company that is majority-owned by Banksia's directors and executives.

McGrathNicol has confirmed to the Herald Sun it is seeking to recoup the money from Securities Haldco Limited, the parent company of the 11 businesses which made up The Banksia Financial Group"

http://www.businessspectator.com.au...w-banks-pd20121121-29PDB?opendocument&src=rss

''In the wake of the $650 million collapse of financial group Banksia Securities, Financial Services Minister Bill Shorten has asked the Australian Prudential Regulation Authority (APRA) to help regulate the $4.5 billion unlisted debenture industry, which would likely result in minimum capital and liquidity standards for the sector, according to The Australian Financial Review.

Such reforms would require APRA to co-operate with the corporate regulator, the Australian Securities and Investments Commission (ASIC) to bridge a regulatory gap relating to the shadow banking system.

The sector has come under sharply increased scrutiny following the collapse of Banksia, as well as the collapse of Australian Capital Reserve, Provident Capital and City Pacific.

Currently capital benchmarks for the sector are voluntary, but ASIC wants to make them mandatory to put them roughly on par with banks in terms of regulation.''

 

[ASICK]

Banksia's Lesson: investors, you are essentially alone

http://afr.com/p/personal_finance/s...sson_investors_you_are_sRwTQeTdekT71dJdj9nobP

"Jonathan Shapiro

They said it would never happen again. The collapse in 2005 of property financing firm Westpoint was branded a “national shame” and sparked a royal commission that was meant to overhaul the local regulatory framework and prevent a repeat.

But it has happened again.

The collapse of Banksia Financial Group, which has left $650 million of funds in jeopardy, is irrefutable proof that money lost by investors in Westpoint was largely in vain. More important, it is a timely reminder that individual investors cannot lean on the regulator to protect them."

 

[k.smith]

http://www.theaustralian.com.au/bus...ns-on-debentures/story-fn91wd6x-1226524502573

''...REGIONAL finance company Southern Finance Group suspended redemptions on debentures worth $277 million yesterday as it negotiated a series of asset sales to Bendigo and Adelaide Bank.

The shock freezing of funds follows last month's $660m collapse of the Kyabram-based debenture business Banksia Securities and arrives just days after ASIC announced it was setting up a taskforce to look into the industry....''

''....ASIC chairman Greg Medcraft has zeroed in on the $4.5 billion debenture sector in recent weeks, setting up an internal taskforce after the collapse of Banksia rocked central Victoria....''


''....Southern Finance was a member of the Provincial Finance Group, an umbrella organisation of mortgage funds which once counted Banksia Securities as a member.
Bendigo and Adelaide Bank told the exchange earlier that the bank had entered into a non-binding heads of agreement to acquire the loan book, certain investments, equipment finance assets and financial planning business of Southern Finance Group for $290m.....''

and this...

https://research.zecco.com/research/markets/news/story.asp?key=100-330i5221-1&lastPage=Index

''...Australian laws prevent other types of financial companies from trying to portray themselves as banks. There are questions about whether Banksia Financial Group, which recently collapsed with debts of $A660mn, had sought to do this. The company offered deposit accounts to customers and had a bank state branch (BSB) number, which had been loaned to it by the ANZ Banking Group. ANZ CEO Mike Smith said it is not for him to judge whether Banksia tried to portray itself as a bank....''

Mum and Dads beware... when is a " Bank State Branch" (BSB) not actually a BANK state branch...! !

 

[k.smith]

http://www.theaustralian.com.au/bus...operty-to-unwary/story-e6frgac6-1226527730061

''...ASIC commissioner Peter Kell recently told The Australian that self-managed super funds should not be "the preferred vehicle for dodgy property spruikers".

To show it means business, the Australian Securities & Investments Commission is establishing a taskforce on aggressive marketing of speculative property developments.

But while ASIC is to be applauded for its proactive stance on the issue, is the federal government guilty of sending out mixed messages about investing in property? I'm afraid that while ASIC is on the lookout for dodgy property spruikers, other arms of the federal government are spruiking dodgy property to unwary investors....''

''...Once again, I fear that investors see the government involvement as a stamp of approval for these investments. It's not.

The reality is that investors are now being wooed by advisers to use their SMSFs to buy DHA and NRAS properties. To my mind, these properties are wholly unsuitable for this investment purpose. If this situation is allowed to continue, we are sowing the seeds of a crisis that may well be reaped during the next property market cyclical downturn. Mr Kell, it's time to turn your attention to the complicity of government in promoting dodgy dealings....''



Also reminds me of the very official looking "seal" represented as that of the Public Trustee of Queensland stamped on the front cover of the PDS of a certain mortgage fund where 12,000 unitholders, many which were SMSFs, have lost around 90% of their $$ ! !

 

[ROE]

SMSF is not for everyone, if you not good with money or cant identify risk in investment then you could do more harm to your money having SMSF...

SMSF from what I see around seem like a trendy thing to do but half the people who opt to open
SMSF has fricken no idea of how they invest that money.

who can regulate stupidity? there will be more of these stories to come.

they need to setup a testing regime to see if the guy/girl open up SMSF is fit to do so.
1. has he/she has any investment experience?
2. has he/she ever invest in the stock/property market and how long?
3. do they know what is the difference between government backed deposit vs Mortgage Back deposit etc...

 

[k.smith]

SMSF is not for everyone, if you not good with money or cant identify risk in investment then you could do more harm to your money having SMSF...

SMSF from what I see around seem like a trendy thing to do but half the people who opt to open
SMSF has fricken no idea of how they invest that money.

who can regulate stupidity? there will be more of these stories to come.

they need to setup a testing regime to see if the guy/girl open up SMSF is fit to do so.
1. has he/she has any investment experience?
2. has he/she ever invest in the stock/property market and how long?
3. do they know what is the difference between government backed deposit vs Mortgage Back deposit etc...

Well, there you go ...! Here's a list of people who are just not as smart as some others...

12,000 investors in the City pacific First Mortgage Fund
10,000 in the MFS Premium Income Fund
15,000 in Banksia
+000s Equititrust, 000s+LM, +++ 000s in so many other funds......

http://www.triapartners.com/triapar...ksia hints at another SMSF disaster&type=NjQ=

''...The really shocking statistic was that of the 15 riskiest debenture issuers identified by ASIC in 2007, eight have since collapsed. Perhaps we need all 15 to go before the Government and its regulators finally get to grips with deposit collection by non-banks....''

''...The reality – long predicted and obvious - is that SMSFs have become a honey pot which is irresistible to capital gatherers of every type, from major banks to property developers. We have also noted increasing awareness of the segment overseas, from asset managers through to fraudsters. I get periodic calls from what is clearly an offshore boiler room trying to get me to set up an SMSF so I can trade stocks with them...''

''... After 20 years in this industry I am convinced that most retail investors do not understand credit risk and never will....''


Most investors burnt in these disasters will never invest in these products again.
But I wonder who in GENERAL really understands even now how many complex issues can make up these schemes?
A look at ASICs webpage gives some clue as to how many new regulation papers have been published re MIS in the last four years.

the bottom line of all this is that in the end....

''...Taxpayers lose too.....''

Taxpayers end up supporting ''... half the people who opt to open SMSF..'' who you say have "... fricken no idea of how they invest that money....'' when as retirees they lose their funds and queue up at Centrelink.

That's AFTER taxpayers having already supported a national scheme which purpose is to provide for retirees.
Many people opt for SMSF in the belief that they can keep better tabs on their superannuation nest egg because they are disillusioned at the returns in the super funds.

http://www.smh.com.au/money/super-and-funds/super-bad-worst-funds-revealed-20111119-1noby.html

''...''What is the point of raising the super guarantee by 3 per cent and then losing 10 per cent of your investment every few years?'' Mr Haratsis said. ''We need to ask ourselves: are super funds too risky for most ordinary people, and are we right to effectively force 12 per cent of people's money into the stock market?''...''

I think Super should only be allowed in APRA approved investments.

 

[Julia]

they need to setup a testing regime to see if the guy/girl open up SMSF is fit to do so.
1. has he/she has any investment experience?
2. has he/she ever invest in the stock/property market and how long?
3. do they know what is the difference between government backed deposit vs Mortgage Back deposit etc...

Great. Let's extend the nanny state.

There are plenty of people who resist the tax advantaged status of Super (whether SMSF or public fund) because they do not trust governments not to plunder their savings in Super before they reach retirement, or to continue to push out the retirement age so those with their savings in Super will be precluded from accessing their own money when they want to retire..

Instead, they invest separately in stock markets, trade forex, buy property, whatever they decide, in order to ensure they can access their funds at any time. The overriding aim, however, is to provide for a comfortable retirement.

What is to say these people will not stuff up their decisions as much or more than those holding their assets in SMSFs?

Are we then going to require some sort of licence be attained by every person investing in every potential avenue of investment?

Why single out SMSFs. most of which are producing returns which are superior to public super funds?
The idea of more and more legislation to protect people from themselves ultimately has the effect of reducing the human drive to take responsibility for their own outcomes. The end result is potentially a nation of zombies.

 

[k.smith]

Great. Let's extend the nanny state.

..Nanny state? No, let's maintain the national objective that superannuation was designed to provide security for the population in their retirement years.

....There are plenty of people who resist the tax advantaged status of Super (whether SMSF or public fund) because they do not trust governments not to plunder their savings in Super before they reach retirement, or to continue to push out the retirement age so those with their savings in Super will be precluded from accessing their own money when they want to retire......

People who part with their compulsory 9% contributions are not in the category of which you speak.
They have to place their compulsory contributions into an approved superannuation scheme.
Talk of tax advantages just doesn't apply to a lot of them as they are often not in the financial position to make those tax advantaged extra contributions.
They part with 9% of their income with the understanding that it will be there for their retirement, and that should be protected.

...Instead, they invest separately in stock markets, trade forex, buy property, whatever they decide, in order to ensure they can access their funds at any time. The overriding aim, however, is to provide for a comfortable retirement.....

Yes, I am aware that some people invest privately for those reasons.
And that within super there are more favorable tax advantages.
And that for those on the top end of the tax scale, those favorable tax advantages are increased.

Super should not primarily be about a wealth creation vehicle for the financially literate (with the undefined certificate from the University of Finance! ) while the unsophisticated (without the undefined certificate !) are exposed to risk.

.....What is to say these people will not stuff up their decisions as much or more than those holding their assets in SMSFs?

Are we then going to require some sort of licence be attained by every person investing in every potential avenue of investment?....

Super contributions are compulsory for all ... passing licence tests (whatever they may be) are failed by many.
Gold star awards, passes, failures...they will keep happening in the financial marketplace.
But both your taxes and mine support superannuation and not the private investments that we or others choose to make.

....Why single out SMSFs. most of which are producing returns which are superior to public super funds?
The idea of more and more legislation to protect people from themselves ultimately has the effect of reducing the human drive to take responsibility for their own outcomes. The end result is potentially a nation of zombies.

For many working people the funds that they accumulate over their working lives in their superfunds is often the largest amount that they will accumulate in their lifetime.
It should be protected and not exposed to risk so that it's there for them when they are retired.

...The idea of more and more legislation to protect people from themselves ultimately has the effect of reducing the human drive to take responsibility for their own outcomes. The end result is potentially a nation of zombies.....

People who have worked hard all their lives and fulfilled their legal obligations by contributing to their super schemes have taken all the responsibilty for their outcomes that was required of them, and don't lack human drive. There should be legislation to protect these ordinary working people from the often very sophisticated exploits of others.

 

[So_Cynical]

SMSF is not for everyone.

who can regulate stupidity? there will be more of these stories to come.

they need to setup a testing regime to see if the guy/girl open up SMSF is fit to do so.
1. has he/she has any investment experience?
2. has he/she ever invest in the stock/property market and how long?
3. do they know what is the difference between government backed deposit vs Mortgage Back deposit etc...

You cant regulate stupidity, the simple fact that its often successful people with lots of money to lose that are the victims of shonky investments would seem to indicate that they are not dumb, just bad decision makers when they step out side their financial comfort zones...switch from making money (familiar) to investing money (different).

I would hate to see any sort of SMSF appropriate intelligence test set-up, i hate how everything seems to get turned into an industry now so university leavers can have cushy jobs...look at the crap you have to go thru now just to drive a car in some eastern states.

 

[Julia]

..Nanny state? No, let's maintain the national objective that superannuation was designed to provide security for the population in their retirement years.

So all the more reason for people to know what they are doing with it.

k.smith: we will perhaps agree to disagree. You apparently prefer to feel that someone else should protect you from making your own decisions. I take the opposite view.
Pretty much end of discussion.