Financial Planners are hurting.
- Arnold Shields
- Oct 30, 2009
- 2 min read
Updated: Jun 24
The Real Cost of Failed Agribusiness Schemes
The fallout from the collapse of Timbercorp and Great Southern has left the financial planning industry licking its wounds, particularly those who missed out on lucrative commissions. One prominent firm reportedly skipped their end-of-financial-year party after losing over $15 million in advance commissions from agribusiness Managed Investment Schemes (MIS).
But let’s ask the hard question: Who should we really feel sorry for?
Financial Planners or Investors?
While some financial planners are disappointed by the loss of future income, many Australian investors have suffered devastating losses, some losing their life savings, homes, and retirement security.
These investors were often sold on the promise of tax benefits and high returns. In reality, what they bought were high-risk, commercially unviable investments riddled with fees, commissions, and operational risk.
Why These Schemes Were Doomed to Fail
At Dolman Bateman, we've analysed a number of these tax-driven MIS structures. Not once have we found one to be commercially sustainable. Here’s why:
High Upfront Commissions: Often 10% or more of the investment went straight into the pockets of financial advisers.
Exorbitant Management Fees: Fees were layered and ongoing, draining returns even in good seasons.
High-Interest Loans: Many investors were encouraged to borrow at high interest rates to fund their contributions.
External Risk Factors: These projects were vulnerable to bushfires, drought, pests and falling commodity prices.
Minimal Investor Control: Investors had no say in how the scheme was run, despite bearing all the risk.
By the time the scheme managers, advisers, and financiers took their cut, there was little. if any, profit left for the investor. In short, the product simply didn’t work.
Lessons for the Future
Financial planners must be held to a higher standard of due diligence and client-first ethics. And investors? They must question any opportunity that prioritises tax benefits over commercial viability.
Because if the only thing keeping a business afloat is the tax treatment, it’s not a business, it’s a time bomb.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
