While financial services would not survive without lending, the latest financial services company collapse has really given prescience to Shakespeare's words.
Opes Prime has been the main topic focused on and it's brought up a number of issues pertinent to financial planners.
The latest collapses have started savvy investors participating in group litigation to recoup some of the money lost from investments.
It's questionable in some cases whether they really have been deceived about the risk or whether they are just wanting a better deal.
In the case of Opes Prime, there were experienced stock market participants, such as Praemium's Arthur Naoumidis, who didn't realise the inconsistencies and conflicts in its business model and lost more than 200,000 of his own stock.
In all, the accounts of 1200 Opes clients were frozen with some choosing to take legal action to prevent the sale of the shares, which they claim still belong to them. It is estimated the losses range between $200 million and $300 million.
The collapse has now expanded into an investigation into the false accounting and manipulation of their six top accounts, which it has been alleged were artificially plumped so they did not have margin calls where they may have had to sell shares. Opes was alleged to have moved shares between the accounts of clients with margin loans in a 'round robin' fashion.
Its secured creditors, ANZ and Merrill Lynch, are owed $1 billion, which will have call on investors' shares currently with the company. The deal is another example of complex financing arrangements that are unsuitable for most investors.
If most investors understood the arrangements under which Opes was lending, it's unlikely they would have invested, and as the market undergoes further calamity, financial planners will again struggle to come out clean.
