The recent collapse of the Shield Master Fund and First Guardian Master Fund has highlighted the importance of due diligence when selecting investments, and the critical role independent advice plays in safeguarding investors.
What happened?
These funds were made available through several superannuation platforms, including those operated by Macquarie, Netwealth, Equity Trustees, Diversa, and others. While they were accessible to investors via popular wrap accounts, the product issuer promised stable, high returns whilst significantly understating the associated risks, lacked a meaningful performance track record, and were not subject to the level of scrutiny typically expected for retirement-focused investments.
Collectively, the collapse of these funds has resulted in estimated losses exceeding $1.2 billion, from over 12,000 investors.
ASIC has since launched investigations into the trustees and platform providers involved, examining whether appropriate due diligence was conducted by them before these products were approved and offered to retail investors.
Why due diligence matters
The situation serves as a timely reminder that the presence of an investment on a reputable platform does not guarantee its quality or suitability. While trustees and platform providers have a responsibility to assess the appropriateness of investment options, investors and their advisers also play a critical role in evaluating:
- The fund’s investment strategy and risk profile
- Historical performance and transparency
- Liquidity and redemption terms
- Fee structures and governance
Even in well-regulated environments, oversights can occur, making personal due diligence an essential part of the investment process.
At Capital Partners, this responsibility is taken seriously. Capital Partners was the first firm in Australia to achieve CEFEX Certification, a globally recognised fiduciary standard. CEFEX-certified firms are audited annually to ensure they meet rigorous benchmarks for fiduciary excellence. This certification provides a structured decision-making and reporting framework, helping ensure that clients, advisers and investment managers operate with clarity, accountability and integrity.
The value of independent advice
One of the key lessons from the Shield and First Guardian collapse is the importance of truly independent financial advice. Advisers who are not affiliated with product issuers – and who operate under a transparent, fee-for-service model – are better positioned to provide objective, client-focused advice.
In this case, there were numerous conflicts of interest between the fund managers, digital marketers and the so-called ‘advisers’ promoting these products. These relationships left investors exposed to products that were not appropriate or in their best interests.
Independent advisers are important as they help clients:
- Align portfolio construction with long-term goals
- Avoid conflicts of interest
- Navigate complex investment choices
- Identify red flags
- Conduct ongoing reviews to ensure suitability
While the Shield and First Guardian collapse is concerning, it also serves as a timely reminder that transparency and independence are essential to sound decision-making. By staying engaged and working with trusted, conflict-free advisers, investors can continue to build well-structured portfolios that will enable them to achieve their goals.
