ASIC warned by Financial Advice Association Australia about Shield, First Guardian tactics in 2021

ASIC was warned in 2021 about cold-calling companies using high-pressure tactics to funnel people into the advice firms linked to Shield and First Guardian. It took three years to investigate.

AGAT Business and 5 Point Financial Planning shopfronts in Nambour on the Sunshine Coast in Queensland.

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The corporate cop was warned in 2021 about one of the cold-calling companies that funnelled people into the advice firms caught up in the Shield and First Guardian fund failures. The regulator only started investigating the call centre in 2024.

By then, 12,000 Australians had pumped $1bn of superannuation savings into Shield and First Guardian, both of which have since collapsed amid allegations investor money was mismanaged.

The Financial Advice Association Australia (FAAA) first raised the alarm about Sunshine Coast-based AGAT Business to the Australian Securities & Investments Commission four years ago, after some of its members started to hear of the call centre’s high-pressure tactics to link people up with a financial adviser who would then encourage them to switch super funds, The Australian can reveal.

The FAAA approached ASIC again in 2023 and twice in 2024 about questionable advice it could see was being given to clients by a small number of advisers. These firms are now under investigation by the regulator in relation to First Guardian and Shield.

“ASIC reviews and actions every report of misconduct it receives based on the information and resources available,” an ASIC spokesman said of the reports made by the FAAA.

AGAT’s partners in 2021 included Venture Egg and Miller Wealth, while another advice firm, 5 Point Australia Financial Planning, later operated from the same office.

All three firms, along with a handful of others, recommended clients invest in the Shield Master Fund and First Guardian Master Fund.

Venture Egg founder Ferras Merhi was also allegedly paid millions of dollars by First Guardian while recommending the fund to clients, ASIC alleges.

ASIC chair Joe Longo. ASIC’s investigation in 2024 found large volumes of super savings had flowed into high-risk managed investment schemes. Picture: Paul Jeffers

As revealed this month by The Australian, ASIC’s investigation into Falcon Capital and First Guardian did not begin until almost a year after it first started investigating the Shield Master Fund, despite both funds having exposure to failed property developer Paul Chiodo.

The corporate regulator commenced a formal investigation into the First Guardian funds in September 2024, seven months after it halted investments into Shield and 10 months after it first started probing Shield and Mr Chiodo.

Both Shield and First Guardian were marketed as diversified portfolios that were delivering higher returns than those available in industry super funds. The new funds grew quickly, in large part due to the leads provided by call centres like AGAT.

AGAT went into liquidation at the end of 2024, six months after the regulator finally launched a consumer awareness campaign warning about “industrial-scale” operations that encouraged people to switch their super.

ASIC’s surveillance and investigation in 2024 found large volumes of super savings were flowing into high-risk managed investment schemes but it came too late for victims such as Melinda Kee, who was cold called by a lead generator in 2023 and then linked up to advice firm Reilly Financial, which shared some clients with Venture Egg.

Her adviser recommended she put all of her $320,000 super savings into First Guardian.

“I told them I wanted to be in a balanced fund. I’m 55 years old, I’m not after anything high risk,” Ms Kee said.

A handful of advisers tipped close to $500m of client money into Shield and First Guardian apiece before the funds failed.

In some cases, advisers put client money into the funds without their knowledge, listing one set of investments on statements of advice before switching investor money into the two funds which have since collapsed.

The 12,000 investors bracing for hefty super losses are now going through the process of making claims through the ombudsman, the Australian Financial Complaints Authority.

If AFCA finds in their favour, then the licensee will need to pay compensation. If the licensee cannot pay, then the claim goes to the Compensation Scheme of Last Resort, where compensation is capped at $150,000.

Some victims, such as Peter Spencer-Franks and his wife Heather, have lost $1m in super from the fund collapses.

AFCA deputy chief ombudsman June Smith told The Australian there was still a real concern about cold calling and lead generators working with advisers, as she called on the government to step in and do more to protect consumers.

“We are well beyond black swan events and bad apples, and we need to look at these systemic issues across the industry and prevent them from happening in the first place,” Dr Smith said.
“It’s not enough to have a Compensation Scheme of Last Resort at the end when harm has occurred.”

AFCA saw a 124 per cent rise in the failure of advisers to act in the best interest of their clients in 2024, and a 95 per cent rise in complaints related to self-managed super funds.

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Originally published as ASIC warned by Financial Advice Association Australia about Shield, First Guardian tactics in 2021