Another (alleged) financial fraudster: how could this happen again?

You have to wonder how this can happen. Or should I say, happen again?
Despite all the royal commissions and compliance requirements that have come about as a result, somehow a financial advisor has managed to (allegedly) defraud her clients of $25 million.
Sydney financial adviser (except she wasn’t a financial adviser, because she wasn’t licensed) Melissa Caddick has been accused of using investors’ money to fund her lavish lifestyle, including luxury goods and jewellery.
The Sydney Morning Herald has reported that from 1 January 2018 until 18 September 2020 a total of $20.279 million was deposited into Caddick’s accounts and she has since withdrawn all but $700,000 of that.
She vanished in November last year when ASIC froze her accounts and seized a million dollars worth of bling.
As a 25-year licensed financial adviser and 21-year Certified Financial Planner, stories like this send a shiver down my spine. So as an investor, how do you protect yourself against falling into a scammer’s trap?
The answer is pretty simple, but absolutely critical: do your homework.
Have you Googled your adviser? Checked their qualifications? Sought references? Spoken to their clients? Checked their LinkedIn profile? Looked them up on Advisor Ratings? Inquired with their licensee?
It’s very easy to be lulled into a false sense of security by people using fancy words and sounding smart, but if you fail to do your due diligence the results can be catastrophic, like they have been for the poor people whose money has been (allegedly) stolen in this case.
And the same applies to anyone you might engage as a service provider or adviser – accountants, lawyers, real estate agents. In all cases, there are big sums of money at risk.
By asking these questions and digging a little below the surface, you can be more confident that the adviser you’re engaging has done all the relevant qualifications, compliance and ongoing professional development (like the Ethics and Professionalism in Financial Advice exam I’m currently studying for).
Failing to go through this process could see you sitting in a courtroom, like Ms Caddick’s (alleged) victims will be when she goes before the courts in April. But they’ll have to find her first.


Posted in , ,