Reducing Investment Losses

Readers of this column will invariably have seen television news items over the ING/ANZ Investor meetings. These relate to their two deeply troubled funds, the ING Diversified Yield Fund (DYF) and the ING Regular Income Fund (RIF).

We have had a number of calls from investors who have these funds. None of these people knew what they were investing in, and the risks associated with them. None of the calls were from “do it yourself investors”. These were predominantly calls from people who had either seen an ANZ Bank “Financial Specialist”, or from a Rotorua based adviser. These advisers were not members of the Institute of Financial Advisers (IFA).

The investments were sold on a different basis. The Rotorua adviser used them as part of what was supposed to be a diversified investment portfolio and seemed to use the ING DYF at between 30 – 50% of the portfolio. This is almost an unbelievable exposure to such a fund.

Those people who purchased these funds through the ANZ have a much better recourse. It is likely that they were advised by an ANZ Financial Specialist. It is likely that they would have invested at least $100,000 and that the money had either been on call or in a term deposit at the bank. Most of investors would have been retired. The real level of investment risk most likely was not disclosed to the investor. It seems that the Bank Financial Specialists did not know either. These investors have recourse to the Banking Ombudsman. The ANZ Bank has already admitted that they have advisers who did a poor job and that they have made a significant number of settlements. If you are in this situation, then you should seek assistance to take a claim to the banking ombudsman.

If you are an investor in these funds you should have now received offer documents. By accepting two of the options there will be a settlement into your bank account at the end of August. Do not just sit on the documents. If you miss the acceptance cut off date you most likely will miss the opportunity for compensation.

It is our understanding that those that purchased through the bank have until around the end of July to lodge claims to the banking ombudsman. This is in addition to the settlement offer. You should take professional independent investment advice over this, and the adviser could help you in preparing your case to the ombudsman.

The Securities Commission has recommended that all investors in these products seek independent financial advice over this matter. By independent, they mean advice from an adviser who will not benefit from the “Release” clause in the offer document. As a large percentage of advisers have clients invested in these funds, they will be beneficiaries of the Release.

To minimise their losses, investors in these funds need to make sure that they claim tax losses. This is only available for those who had more than the de minimis thresholds of $50,000 for each individual investor. In many cases there would be around $75,000 of tax losses available. Given that many of the investors were elderly and did not use knowledgeable taxation advisors it is likely that many investors have not utilised the tax losses.

As we write this article, the Commerce Commission has just issued a statement saying its investigation into the sale of the ING frozen funds will take another six months to complete and if it decides to take any further action after that it could add another three years to the process.