In yet another cautionary tale to consumers, financial advisory firm United Global Capital (UGC) and its associated Global Capital Property Fund (GCPF) were shut down by the Federal Court in Victoria recently due to serious issues in their operations.
UGC’s business model involved several practices that created a clear conflict of interest, with the firm prioritising its own financial gain over the interests of its clients.
It included cold-calling people to offer a “superannuation health check” and then persuading them to move their retirement savings into self-managed super funds (SMSFs) to invest in related products, like the CGPF.
… But the investments turned out to be highly risky – and mostly unprofitable – leaving many investors without returns and with their money tied up.
The firm also ran promotional campaigns to influence people in their decision-making, like offering prizes such as iPhones to prospective clients, and then using their contact details to ascertain their suitability for referral to UGC.
The financial regulator, ASIC, had already issued stop orders against GCPF to prevent it from raising more funds from the public, contributing to the court’s findings that directors were conflicted and the advisory firm posed a significant risk to public interest. As a result, liquidators were appointed to manage the winding up process, and GCPF ordered to cover ASIC’s legal costs.
The story is yet another cautionary tale of ‘buyer beware’. It highlights several red flags that consumers need to be wary of. For example:
1) Conflicted advice. Ensure your financial adviser is always acting in your best interests, not theirs.
2) Before investing money, do your research – especially when it comes to investing in SMSFs and related-party products. Be wary of any unsolicited attempts to influence your financial decision-making, including unsolicited calls offering financial services, or “superannuation health checks”.
3) Know what’s important to you and find an adviser who listens. Integrity matters. Make sure your financial adviser knows what’s important to you and make sure you’re a good fit before taking any financial advice.
4) Pay attention to regulatory actions and warnings – for example, stop orders from regulatory authorities like ASIC can indicate underlying issues with a company.
5) Assess the risk before you commit – highly speculative investments can lead to significant losses, so know your risk profile. Make sure you understand the risks around how you invest your money and how much risk you’re prepared to accept.
Remember: if a financial scheme sounds too good to be true, it probably is.
Never feel rushed or pressured into making financial decisions. The bigger the financial decision, the more consideration it deserves.
As we like to say here at Align Financial: ‘Your money – your values – your happiness.’
If you’d like help aligning your financial decisions with what matters most to you, speak to a financial adviser at Align Financial on (02) 9913 9995.
