Westpoint collapse

[Julia]

We are all familiar with the Westpoint debacle.

What has astonished me is that so many people put their entire life savings into this one investment. i.e. $500,000 was not uncommon. Should we really feel sorry for these people, even if they were indeed given shonky advice.

I hate cliches but two are unavoidable in this case:

1. Never put all your eggs in one basket

2. If something looks too good to be true, then it usually is.

Just asking if I'm being too hard on these naive would-be investors?

Julia

 

[Smurf1976]

It's never a wise move to put all your eggs in one basket. The risks are just too high no matter what the potential rewards might be.

But then I did invest a large portion of my money in three managed funds, all run by the same funds management company (big name). And I took the professional advice and used borrowed money too. I put the last funds in during early 2000. It turned out the the funds weren't as diversified as I had thought. They were heavily invested in tech stocks. Needless to say what happened...

Whose fault? Mine for not checking out the funds more thoroughly and relying on someone else's advice rather than doing my own research.

On the positive side, by the end of this financial year my net worth in $ terms should be back to about where it was in March 2000. And I've learnt an awful lot about financial matters that I never would have learnt if the managed funds had simply risen at 20% or so per year as I was expecting. From disaster comes opportunity...

I do have the feeling that quite a few are about to learn the hard way as I did in the very near future. Indeed some are already effectively bankrupt, they just don't realise it yet. I'm seeing just a few too many "priced for quick sale", "price reduced" and "must sell" properties, many of them empty and seemingly owned by "investors", to believe the spin about house prices not falling.

But house prices aren't falling I hear the masses cry. On average selling prices that's technically true, but a closer look at the market reveals that the houses selling are getting better. That is, people are spending about the same money but getting a better house for it. Better as in 3 bed brick 15 square for the exact same money as a 3 bed weatherboard 10 square house 5 minutes walk away was selling for just 12 - 18 months ago. If you look at the SAME house then it's lost quite a bit of value.

Now, if those investors followed the popular opinion and borrowed 90% or so of the purchase price then they're losing big. Those who bought at the top are in serious trouble. And we haven't even seen the banks tighten credit to any significant extent yet... (The above is based on observations of the housing market in Hobart and may not apply elsewhere.)

 

[markrmau]

I think most of the people caught up in this were not as 'investment savvy' as people reading ASF.

I know of one lady, about 55 or so whoose husband was dying and so sought financial advice on how to survive financially after her husband died. They ended up putting thier combined life savings into westpoint. She has now lost her husband and all her money. I am sure there are many other hard luck stories out there.

Unwise? To us, yes. But she did seek financial advice so her actions wern't unreasonable. Greedy? Perhaps, but we are all greedy here.

On the whole, it pales into insignificance to the mass starvation in africa though. Please consider a donation to Medicin Sans Frontiers.

 

[Duckman#72]

Just asking if I'm being too hard on these naive would-be investors?

Julia

Yes and No

If these people knew the risk they were taking and knew fully what they were doing then - No.

If these people relied on the advise of others and believed they were investing in a safe, respectable and low risk investment - Yes.

Unfortunately a lot of people fall into the second category. Are they gullible, ill informed and illiterate when it comes to all things financial - definately.

As Tech touched on in another thread - there are no life skills taught to people about risk. Why don't kids at school learn some of these life skills. There should be a compulsory subject for all Year 12's that deal with banking, investment, legal studies etc.

Duckman

 

[macca]

People who come to this and other investment forums, are a VERY minor, minority.

Even in my family circle of about 30 people, I am the only one that even takes an interest in the financial world.

Some of them just can't understand it, some are terrified of it, others are too busy spending their money to have any left to even contemplate investing.

Yes , I agree money management should be a complulsory part of each childs education.

The financial advisors who advised anyone to put more than 10% of their investing money into this should be fined and then banned for life IMHO.

 

[RichKid]

There was an ABC Four Corners story on the Westpoint collapse today, basically criticised ASIC and interviewed a few of the poor victims, one of the directors is still in business apparently selling similar schemes.

 

[krisbarry]

My Mum has just lost $50,000 thanks to Westpoint :swear:

Lock these crims up for life and throw away the key

By the way the ABC will be repeating the Westpoint story for those that missed it on Wed. Night around 11pm ish.

 

[krisbarry]

The sad fact is that people have lost homes, entire life savings, marriages, and even their lives (suicide).

My mum was told by financial advisers that Mezzanie finance was as safe as house :swear:

She is joining all the class actions...here lawyers will be taking on Westpoint and 75+ financial advisers who told investors that it was as safe as houses, and low risk :swear: :swear:

 

[krisbarry]

Ohhh well I have just lost $50,000 of my future inheritance

 

[krisbarry]

On another note stay well away from this company....

Powerloan :swear:

http://www.powerloan.com.au/

This is the company that recommended Westpoint to my mother, how ill informed were their financial advisers. They took my mothers money just days b4 the collapse :swear: :swear:

 

[Knobby22]

Not all of the money is lost.
They kept 10% commission for selling a dud!

Demand it back or join the lawsuit!

 

[bullmarket]

:iagree: with the Duckman below

Yes and No

If these people knew the risk they were taking and knew fully what they were doing then - No.

If these people relied on the advise of others and believed they were investing in a safe, respectable and low risk investment - Yes.

Unfortunately a lot of people fall into the second category. Are they gullible, ill informed and illiterate when it comes to all things financial - definately.

As Tech touched on in another thread - there are no life skills taught to people about risk. Why don't kids at school learn some of these life skills. There should be a compulsory subject for all Year 12's that deal with banking, investment, legal studies etc.

Duckman

unfortunately some people with large amounts to invest and with little or no previous experience earlier in their lives in investing simply take the easy way out and put most if not all their eggs in the one basket and then in the unfortunate case when the :fan all hell breaks loose and people end up losing their life/retirement funds.

There was a similar situation when the Pyramid Building Society collapsed here in Victoria many years ago.

The main reason I can think of for people putting all their eggs in one basket is firstly they believe it is 'safe' and secondly they don't have the aptitude and /or desire to take care of all the paper work (routine and at tax time) involved in maintaining multiple investments.

cheers

bullmarket

 

[sarahmeehan3]

Before I entered the Stock Market World I was in Real Estate.
Although I enjoyed my work the long hours took its toll.

What also took its toll and made me feel sick was the millions of millions of dollars I would actually see changing hands on a daily basis.

I suggested to many of my clients to stay way clear of units. I was suggesting to them by houses than units.

I was approched by Westpoint in 2001 to sell their units on their behalf with a 5 % commission. I turned them away along with many other large corporations.

What was upsetting to me during 2002 through to 2003 was the fact that although I advised clients not to buy units, they went ahead anyway after attending the seminars.

One client I know of came to me with 4 million to spend. That same client is now on the verge of bankruptcy.

Can I suggest to all who are thinking of buying units, to think carefully and please please do your homework.

May I suggest that if you are interested at all in Property please go to the following website where you can read and learn all that is needed to know about property.

http://wwww.somersoft.com.au

Go to the bottom where it states forums and click on that and follow the instructions.

Last Note : Do not blame the people who lost their money. The corrupt people know how to play the game and try and suck in as many people as they can.

Regards

Sarah

Note : I have no affiliation with somersoft.com.au, and only suggest this site to everyone who is considering buying property.

 

[Treasurer]

These people made nothing less than poor investing options and the way i see high rise apartments is basically being sucked into a scam. But they should have their apartments, which unfortunately they don't.

 

[RichKid]

One of the problems is that even if people know all the risks things like greed and excitement can make them make poor decisions, where some of it is induced by fraud or negligence then the spruiker should be liable too. Eitherway there are always people who will get into trouble, look at us traders, we still make mistakes when we know we're doing it (eg not following a stop), it's in our minds.

What I really dislike is the plain deception which even reasonable people are not able to see, that is just wicked and Westpoint appears to have loads of it.

 

[ctp6360]

Holy **** a light bulb just blew up in my head spraying glass everywhere!!! About 2 years ago now my to-be brother-in-law invited me to come along to a small seminar this financial guru who had seduced him (emotionally) was running.

He dressed up in a nice suit and told me to do the same and we went along to a small room in Paramatta where a weedy, accountant-looking guy (come on you know the look) talked about the marvel of Mezzanine and what a great investment it was. Basically "there is no risk and you can make hundreds of thousands"....

So I thought AWESOME and immediately handed over a bank cheque for my entire life savings....

Ah, no, the whole time I was sitting there saying over and over in my head "ask him how much HE has invested in it", but I didn't speak up because I didn't want to offend my brother-in-law who's reputation would have been on the line if I made out this was a ridiculous situation.

Thankfully he saw through it too and realised it was bull****, I'm just glad now that this (and I'm assuming I'm talking about the same thing, if not the same sort of thing) has been proven to be a scam.

What scares me though is how people I know who seem perfectly sane can be seduced by thoughts of a better life, financial freedom etc. And its funny how different mentalities lead people into different ways of expressing that emotion;

eg Some people buy books and read about techniques for building wealth and others just look for ways to get rich quick....and a whole myriad of permutations and combinations of those in between...

If only, as someone else in this thread suggested, children were taught concepts of risk vs reward or at least some basic "street smarts" in school, I remember Zig Ziglar once said that 99% of all time spent on teaching children a positive mental attitude was placed on sporting teams, and my god can you imagine how much time is spent on teaching kids useful things they can use in life...and this coming from someone who did WELL at school, I feel like I was duped for playing their game!

 

[krisbarry]

Stay away from this company also... Ferntree Financial Services, this is their latest venture....

Bastards, how can they be able to trade again, when they collapsed Wespoint!

ASIC you should be ashamed of yourselves....first you let Westpoint go under, knowing full well that Westpoint were in financial troubles far back as 2004.

Then you let them start up a new business venture.

....also don't trust KPMG, these are the auditors that allowed Wespoint to lie. Looks like they fiddle the books!

Its all one big fat lie and plenty of corruption right throughout some of the most trusted private/government organizations :swear:

 

[krisbarry]

You see the scary fact is that investors can no longer trust ASIC to do the job they are supposed to do (its just a tax payers rort) and no-one can trust an audit done by KPMG anymore!

Ohhhh there is blood all over the floors with this financial mess!

....and the CEO's of Westpoint just washed their hands clean and are ready to do business once again....

 

[Treasurer]

Finally saw the doco. My parents nearly invested 600 grand in Westpoint..Luckily they didn't. In the office they had boxes of files everywhere and it looked dodgy my mom asked the guy "what did you do before this" and his reply was "I did developments in Asia before i went broke" Well it seems to be honest guy but my mom straight away went whoops thats it i want nothing to do with this.

The report was good on going through the lives of soem of the investors especielly the chinese guy who felt so ashamed that he had lost $260 000 of his parents money. Also the divorce that followed for the other guy who had now worked all his life for a nesty retirment was getting a pension.