MenuOn 22 June 2025, the AFR published an article on “Lessons from $1.2b funds collapses”, referring to the recent collapses of Shield Master Fund, First Guardian and Australian Fiduciaries, which evidently involves a combined exposure for 12,400 clients of $1.2bn. The article refers to the failings at multiple levels of the financial services industry, including research houses, product marketing, super funds and platforms and also financial advice. There is a reference to the funds and platforms that have included these products on their investment menus, however there is no reference to the financial advice licensees who have promoted these products, which ASIC has previously published.
This article goes on to reference the CSLR and even mentions a $250m potential cost. It is important to make the point that client losses, do not automatically flow through to CSLR costs. Firstly, there needs to be a connection to personal financial advice and there needs to be evidence of inappropriate advice. Importantly, it needs to be personal financial provided to retail clients, or at least that needs to be the basis for an AFCA determination. General Advice and Wholesale client advice should be excluded. Even when we have a number of AFCA Determinations related to these matters, it would only end up with the CSLR if these firms were already in liquidation, or the scale of the cases was sufficient to force a licensee to be placed into liquidation. It is true to highlight that some of the licensees that ASIC have identified as being involved in the Shield Master Fund and First Guardian matters are already in liquidation. At this stage we do not know what the exposures are at the level of these three investment businesses, nor do we know the exposure at the licensee level. ASIC have referred to the extremely complex nature of these matters. It will take time to better understand what the exposure is.
This AFR article follows a LinkedIn post last week by Phil Anderson, FAAA General Manager Policy, Advocacy & Standards about whether Shield and First Guardian are the next black swans to hit the financial advice profession. Only time will tell, however whilst it is appropriate to be concerned, we need to also be cautious about assuming the worst.
One fundamentally obvious point that Shield Master Fund, First Guardian and Australian Fiduciaries all demonstrate is that it is unreasonable, where so many different stakeholders have been involved in these failures and clients being stuck in these products, for financial advisers to take full responsibility for such large losses. That will continue to be a core part of our argument on the CSLR as we seek to advocate for changes to the scheme to make it more equitable and sustainable.
Please email policy@faaa.au if you have any comments or questions on this matter.
