Financial planners were either blind to the dangers with Westpoint or grossly failed to put their clients first, financial services lawyers have told the FPA.
In a paper submitted to the FPA's national conference last month, Slater and Gordon's Steven Lewis and Ben Whitwell said the 70 advisers who recommended the products did not know what they were selling or were acting in self-interest as a result of commissions.
"While individual investor experiences vary, Westpoint investors provide the most poignant example of financial services industry participants that grossly failed to put their clients first," they said.
Slater and Gordon has commenced class actions on behalf of investors who are suing Professional Investment Services (PIS), Masu Financial Management and Quantum Securities.
One investor who approached the law firm never received a statement of advice or a financial services guide, while another had his entire superannuation savings placed with a Westpoint product.
The lawyers said much good would come out of the unhappy experience because planners would be less inclined to act outside of their authority.
They said dealer groups would also ensure their planners were registered as authorised representatives (AR) and were appropriately trained.
The collapse has prompted ASIC to launch an investigation of high-risk retail products.
The regulator recently called for planners to take out higher levels of professional indemnity insurance to cover planners acting outside their authority.
"As a result of ASIC finally rousing from its slumber and the Westpoint legal proceedings, the investing public will see a stronger, more transparent and truly accountable financial services industry," Lewis and Whitwell said.
In a recent document filed with ASIC, PIS defended its advisers' actions, saying Westpoint had received positive reports from independent researchers at the time of the investments and there had been subsequent allegations of fraud on behalf of Westpoint company officers.
"The directors believe it is unreasonable for PIS to be expected to guarantee one part of a larger portfolio," the dealer group said.
To date the collapse has caused ASIC to ban several advisers and the FPA to ban one.
