Noel Whittaker: How this couple lost huge sums through super scam

The email made me feel sick to the stomach. It was penned by a woman whose husband (let’s call him Jack) worked as a fly-in, fly-out worker. Unfortunately, it looks like the nest egg his wages funded may be lost to the couple due to an unfortunate combination of circumstances.

One evening, the husband was having a beer with his mates on site, and the conversation turned to self-managed superannuation funds. A co-worker spoke glowingly about them, assuring those gathered they were a sure-fire way to make more money than traditional super funds. This piqued Jack’s interest and he started trawling through the internet, wanting to learn more.

During his search, he came across a website called Compare Your Super. He made contact and got a call from someone purporting to be from Australian Fiduciaries Limited (AFL). Jack said his preference was to buy an investment property, but the caller told him there were much better options available.

They suggested he start a SMSF, which would offer freedom and control over his super. Once he had his own fund, they assured him, he could withdraw money whenever he wanted, free from the usual preservation rules. It seemed ideal! They then convinced him their own funds were a far better option than real estate or traditional investments.

The upshot was they talked him into investing in their grandly named Ethical Alpha Fund (now known as Global Diversity Fund).

Jack explained it to his wife and they went ahead and set up a SMSF with AFL, rolling all their superannuation into the new fund.

Their dreams were crushed when two weeks ago they read an article revealing AFL had been hit with an interim stop order by ASIC “to protect retail investors” and that Compare Your Super had been liquidated. Information is still hard to find, but it appears some of AFL’s investments have been frozen. At this stage, Jack and his wife cannot find out if any of their super funds might be refunded to them.

It’s a tragic but all-too-familiar tale. Searching the web for the “best” investments is like diving into a lake filled with alligators. It’s dangerous and you rarely know what’s under the surface. Fake sites are prevalent and scammers are clever at designing names very similar to well-known and highly regarded institutions. You can never be certain exactly who you are dealing with.

The scammers work hard, because the payoff can be huge. I got an email from a woman in Sydney who had been cold-called. By the time she contacted me she was about to start a SMSF to build an investment property in Perth. Of course, this would be constructed by the scammers to maximise the amount of money they could extract from her. Luckily, I got her out of that trap before the deed was done. SMSFs are fine in the right context and can be extremely good for the acquisition of business premises, or to allow investment in quality property syndicates not available through a normal fund. But they are not for most people. Any suggestion from someone — other than a financial adviser you have an ongoing relationship with — to start a SMSF with a vague goal, such as “getting better control of your finances” is a red flag.

Another red flag is a cold call. If you are contacted out of the blue, the proposal is far more likely to serve the caller than you. And a promise that’s too good to be true — like a SMSF with no preservation restrictions and quick access to your money — should always raise red flags.

Sadly, this FIFO worker and his wife have learnt that lesson at a heartbreaking cost.

Ask the expert

Q: You recently responded to a question from a 65-year-old regarding whether he could contribute money to his super fund by taking funds from his 69-year-old wife’s retirement account. You suggested that doing so would increase her Centrelink pension. But wouldn’t any funds withdrawn from her account be considered “gifting” and thus be assessed as part of her assets for the next five years? I’d appreciate clarification as I’m concerned I may have been overly transparent with gifts I’ve made to my daughter.

A: You are partially correct. Money transferred from one partner to another is not subject to the gifting rules because the total assets of the couple is the figure used to assess pension eligibility. However, money transferred to other people, such as your daughter, are subject to the gifting rules.