When Dreams Turn into Nightmares: The First Guardian Collapse

For thousands of Australians, superannuation isn’t just numbers on a screen — it’s their future. It’s the family home paid off, the holidays finally taken, the security that comes from knowing that retirement is a possibility. But for over 6,000 everyday people, that future has been tested by the collapse of the First Guardian Master Fund (FGMF).

What was pitched as a pathway to higher returns has turned into one of the most devastating superannuation scandals in recent years — with as much as $590 million in retirement savings at risk.

From 2020 onwards, Australians were encouraged — often through high-pressure cold calls and slick social network marketing — to roll their super into platforms offering access to the FGMF. Some were even convinced to set up self-managed super funds as part of the process and so they could invest.

Investors thought they were securing a brighter future. Instead, their money was funnelled into illiquid, high-risk property developments and related companies. By mid-2024, withdrawals were frozen, and people found themselves locked out of their own retirement savings.

Let’s delve into the Governance Failures in the First Guardian Collapse

1. Trustee Oversight and Due Diligence

A glaring failure was the lack of robust oversight by superannuation trustees and responsible entities. ASIC has initiated legal proceedings against Equity Trustees for alleged due diligence failures, accusing them of not properly vetting the investment schemes before allowing them on platforms

Consumer advocacy group Super Consumers Australia has called for trustees to compensate victims directly, arguing they failed in their gatekeeping role.

2. Regulatory Gaps and Enforcement Delays

Despite prior collapses like Trio Capital and Mayfair 101, regulators did not act swiftly enough. ASIC and APRA have acknowledged that warning signs were missed repeatedly, and APRA is now preparing a governance report to examine how products were added and removed from platforms.

3. Licensee and Platform Accountability

Licensees such as InterPrac (owned by Sequoia) were implicated for their relationships with firms like Reilly Financial, which were under investigation for their role in promoting the failed funds. InterPrac has since cut ties, but questions remain about how these firms were allowed to operate unchecked.

4. Lead Generation and Anti-Hawking Loopholes

Lead generator companies exploited loopholes in anti-hawking laws, aggressively pushing consumers to roll their super into high-risk products. The Federal Court extended travel bans on individuals like Ferras Merhi and Osama Saad, who were central to these schemes.

Consumer groups are now demanding legislative reform to close these loopholes and prevent similar marketing abuses.

5. Failure of Internal Governance Structures

Internal governance within the funds themselves was weak or non-existent. There was no transparency about how investor money was being used, and many clients were unaware their super was being funnelled into a “cash hub” controlled by fund directors.

6. Delayed Communication and Member Services Failures

Some investors only learned months later that their super withdrawals had been frozen. This delay in communication reflects a broader failure in member services and disclosure obligations, which ASIC is now investigating in other super funds like Mercer Super.

7. Inadequate Professional Standards and Adviser Vetting

The collapse also exposed weaknesses in adviser vetting and professional standards. The Financial Advice Association Australia (FAAA) claims the advice profession helped expose the failures, but the fact that fraudulent SOAs were issued suggests deeper issues and more work to be done.

What Happens Next?

• APRA’s governance report is expected to scrutinise how platforms select and remove products, and the role of researchers in those decisions.
• ASIC’s legal actions and corporate plan for FY26 will focus on enforcing accountability and reforming AFSL compliance.
• Industry leaders like AMP’s Alexis George are calling for a “watertight” regulatory framework to prevent future collapses.
  
  
  

How is Strategy First Financial Planning (SF) different?

It starts with independence. Strategy First is owned by staff, is self-licensed, is free from conflict and receives no financial reward or incentive that impacts the advice provides or the investments recommended to our clients.

While this does not necessarily protect you from fraudulent behaviour, a small business with less than 20 staff, 2 Directors & Responsible Manages that sign off on all client advice, qualified and experienced staff, robust processes, external governance and over 20 years of providing advice with ZERO claims from clients of inappropriate advice, should.

Even when it comes to our Approved Product List and vetting stakeholders we entrust our client’s money with, we have a thorough process, and understand the buck stops with Strategy First and our Fiduciary Responsibility.

We do not outsource the decisions or accountability of this process, which can sometimes be more conservative than our peers. It also means that we avoid such disasters and have done so over many years – Storm Financial, Basis Capital and Mayfair 101, which we’re offered to us as “great investment opportunities” for clients. Even Basis Capital (pre the Global Financial Crisis in 2007) spent 6 hours in our office trying to convince us of their “equity like returns from bond like risk”. Thankfully for our clients and our business, we said no.

And while we were never offered the First Guardian and Shield managed investment schemes, I am certain we would have said no to them as well.

In fact, credit to our stakeholder – BT Panorama – who did say no to First Guardian and Shield and did not allow them onto their platform of approved investments. Both funds failed to make it past the first of many compliance checks.

Like all these events, the tragedy is that the money lost is normally from people who cannot afford to lose it. And as a result, the human impact is often great. It also stains our industry and increases both the compliance and the cost of advice.

With the baby boomers retiring and the demand for advice at all record highs, it is imperative that we get this right. As an industry, we must build business models that allow profitability through independence and being a client fiduciary. We must work with our clients, and we must act ethically. It starts with each individual adviser, and stakeholder in the value chain.

In the end, advice is all about trust. The Adviser must prove that they are worthy of trust, and the client must be patient and diligent as they seek the truth. There is no silver bullet, no free lunch. Investing and long-term wealth creation/management is a marathon, not a sprint, and if it sounds to good to be true, it probably is.

The information provided is factual only and does not constitute financial advice. If you need to speak with a Financial Adviser before making a decision, you can contact us via the button below.