E-mail reveals Netwealth’s 2023 First Guardian ‘soft close’
Major investment platform company Netwealth Limited moved to ‘soft close’ now-collapsed First Guardian funds on its superannuation platform in January, 2023, according to e-mail correspondence sighted by Financial Newswire.
As Sequoia Financial Group managing director, Garry Crole continues to press for the activation of Operational Risk Financial Requirement (ORFR) compensation mechanisms for investors in both the Shield Master Trust and First Guardian, the e-mail between Netwealth’s State Manager for Victoria and Tasmania, Damian Soraghan and the principals of Venture Egg sheds new light on how the funds remained on platforms.
Soraghan’s e-mail, dated 16 January, 2023, advises that Netwealth had closed off the First Guardian Diversified Strategics fund and the First Guardian Growth Strategies Fund “as they do not hold a sufficient rating from an approved research house which is a requirement under our Investment Strategy for the Netwealth Super Master Fund”.
“The fund requires a minimum rating from SQM of at least 4 stars however First Guardian were only rated as 3.75 stars. There was also some issues with redemptions that bought them to our attention,” the e-mail said.
“In these circumstances, rather than enforce a sell down of these funds, we are enforcing a soft close whereby no NEW monies can go into these funds for existing or new clients.
“As such, if you have set up any ongoing Regular Contributions Plans into these funds, they will be rejected. Please let me know if you need any assistance in administering these going forward,” Soraghan’s e-mail said.
The history of SQM Research’s rating of the funds show that it was never higher than 3.75 stars from 30 June, 2020, through to it being placed on hold in March, last year, before the being downgraded in April, 2024 and then ultimately being withdrawn in March, this year.
Saroghan’s e-mail to Venture Egg’s Ferras Merhi states that as part of Netwealth’s ongoing compliance and due diligence of the Netwealth Super Master Fund “it is our duty to ensure members are protected and so we undertake regular reviews of all investments available to members of the Fund (many of which are your clients)”
“As part of this review it has been identified that First Guardian Diversified and Growth funds (as below) no longer meet the agreed research rating required to be available on the Super Accelerator PLUS menu,” it said without noting when the fund had actually been rated about Netwealth’s 4 stars minimum rating.
Sequoia’s Crole said he had seen a copy of the letter send from Netwealth to the adviser.
“I continue to believe Netwealth is a platform provider of the highest integrity and believe they will discuss the circumstances of an ORFR event with APRA in the best interests of impacted members,” he said. “This information whilst separate to our submission may be considered an additional event that triggers an ORFR remediation.”
“Our initial request did not include this additional source information as sent to Netwealth and APRA on August 29.
Venture Egg was formerly an authorised representative of Sequoia-owned financial advice licensee, Interprac.
These super funds have had very little to say about what they did to allow Shield and First Guardian onto their investment menus. This article highlights that they removed First Guardian, on a ‘soft close’ basis as it was no longer 4 stars, however it was never 4 stars. If that is the case then why did they put it on the investment menu in the first case. It is time to explain your actions.
In terms of responsibility the platforms are way lower than interprac, the advisers and the funds
Ironic that Netwealth is so heavy handed with their auditing of adviser service fees.
But the super fund doesn’t get anything out of an adviser fee so hence why that is not a priority
Please explain ?
We dont have problems
If you don’t have any problems in relation to the said issue, why would you want to know about it ?
So we can avoid the same fee problems or address them with NetWealrh.
Why so secretive on these supposed problems?
Your fees must be excessive
That’s great insight Alan.
Given that they most certainly are not – It makes Netwealth’s approach even more draconian.
So let me get this right – Netwealth break their own rules in placing First Guardian on the super platform. After it all blows up, they then throw SQM under a bus. Great work Netwealth. Real classy.
How much red carpet did Netwealth and Mr Saroghan roll out to Venture Egg to attract an uplift in FUM? Every time these investment platforms report their results to the market being ASX listed they bang on about an uplift in FUM and the administration fees they attract. There are conflicts of interest everywhere here in this debacle. Sure, advice to recommend a client place all their money into one high risk investment option is highly questionable but why didn’t Netwealth flag this with ASIC? ASIC has to hold these investment platforms accountable.
Aren’t there usually platform limits of % of super account in a single fund ?
Not for IDPS / SMSF but yes for Super / APRA funds.
Did NetWealth use such limits ?
Yes, there are % limits imposed by superfunds to ensure they meet s52 and SPS 530. They are required to ensure there is diversification in the portfolio held. Netwealth would need to justify why the limit of 100% was set. They need to explain how it would provide sufficient diversification and be in the best financial interests of clients offering the fund.
I met with a First Guardian client in late 2024. I said it was $@%@$. How is it my wage as a stupid adviser is about 10% of these guys/CEO’s research hourses, and platforms like Netwealth, and I can spot this rubbish and tell the client to cashout and run. If that’s not proof someone’s been turning the old blind eye for some $$ I don’t know what is.
When it’s time to pass the buck and blame advisers they all seem to get into line and Advisers end up doing 9 hours of ethics a year for their sins. Given the CSLR, this bill needs to be fully charged to anyone but Advisers.
Cool story,bro. The fund had already suspended some months prior to late ’24..