It is estimated that up to $15 billion in savings has been blown up in mortgage funds in Australia, much of it by Gold Coast entrepreneurs such as Drake.
The spiel was simple: invest with us in property. Look at our 8 per cent returns. Can’t go wrong with property – we are talking ‘bricks-and-mortar’. Drake’s salesmen even used words such as ‘bank-like’.
But it was never property that his clients were really buying. As the global financial crisis loomed, they were buying loans to property developers – often associates of Drake and even Drake’s own companies – loans in highly leveraged funds.
The peoples’ savings came in – mostly from financial advisors - and they went out in loans to developers, after the manager LM had taken its clip. And a mighty clip it was too, tens of millions every year in assorted fees, all up.
While most of his investors had their savings frozen with no return, Drake and associates were going for the proverbial doctor on the fee-front.
Not only were the financial advisors still being paid “trailing fees” on their client funds they had already placed in LM – frozen or not – but the banks were making off with penalty interest payments, and LM was ratcheting up its management fees while forking out money on expensive lawyers.
Read more: http://www.smh.com.au/business/when-...#ixzz2O4BCR400