In 2006 Westpoint, a mortgage trust offering returns of 12% per annum, went belly up leaving their investors with nothing. In 2008 Opes Prime collapsed, resulting in further losses, followed a few months later by the demise of Townsville-based Storm Financial which caused thousands of Australians to lose their life savings. Subsequent investigations revealed that Storm had been charging entry fees of up to 10%, and that Westpoint had been paying a 10% commission to advisers who recommended them.
Naturally, disasters of this scale made headlines, and gave vested interests the opportunity to bag the financial advice industry in general. The paradox is that the actions of these three companies were far removed from the operations of the average financial adviser.
Westpoint was a mortgage trust that got caught in the development business, Opes Prime was a margin lender with shonky documentation, and Storm had a one-size-fits-all model which resulted in many of their clients being over-geared.