The First Guardian failure is a cautionary tale about structure, alignment, and trust.

There’s something quietly powerful about doing the right thing.

​

Not because it’s expected. Not because it’s rewarded. But simply because it feels instinctively right — a commitment to act in someone else’s interest, not because you have to, but because you know you should.

​

In investment management, that instinct matters. Investors hand over their trust — and with it, their financial future. The responsibility that comes with that trust isn’t symbolic. It’s structural. It shows up in how products are designed, how risks are shared, and whose interests are prioritised when trade-offs arise.

The collapse of the First Guardian Master Fund is a stark example of what happens when that instinct — to do right by others — isn’t built into the system itself.

Each year, Australians entrust more than $150 billion in new superannuation contributions to the investment management industry. For most, that money is handled prudently — diversified, regulated, and preserved for retirement. But for the thousands of investors caught up in the collapse of the First Guardian Master Fund and its associated schemes, trust has been severely eroded. Their stories are not just financial losses; they’re a warning about what happens when alignment is claimed but not structurally delivered.

The numbers are confronting: more than 12,000 Australians, mostly retail investors, were exposed to high-risk schemes that promised diversified returns but allegedly delivered self-dealing, offshore transfers, and losses likely totalling hundreds of millions. One director reportedly spent $548,000 of investor funds on a Lamborghini. A further $68.9 million flowed into related-party entities. Liquidators estimate $446 million remains unaccounted for.

While this case is exceptional in scale, the structural failures at its core are uncomfortably familiar. These schemes were offered through regulated super platforms, backed by licensed financial advisers, and operated under the oversight of a Responsible Entity and trustee. And yet, every layer of governance — intended to protect investors — failed to act as a backstop.

The schemes were structured as registered managed investment schemes (MIS) — a widely used and legitimate structure regulated by ASIC. Many MIS are responsibly governed. But without the additional prudential oversight that applies to APRA-regulated super funds, the quality of governance can vary sharply. In this case, retail money was raised and deployed with limited scrutiny over valuations, liquidity, or conflicts of interest.

​

​What made the First Guardian case particularly concerning was the close relationship between the investment manager and the trustee. 

​​​

What made the First Guardian case particularly concerning was the close relationship between the investment manager and the trustee. While the entities were nominally separate, they were functionally aligned — with overlapping directors and shared control. ASIC alleges that the responsible entity, Falcon Capital Limited, invested in businesses associated with its own directors, and failed to manage the resulting conflicts of interest. That failure struck at the core responsibility of a trustee under the Corporations Act: to act honestly, exercise care and diligence, and put the interests of investors first. The separation that should have existed between oversight and execution was, in practice, blurred. The structure gave the appearance of governance — but not the substance.

​

The failure of First Guardian wasn’t about performance, fees, or market risk. It was about misplaced accountability. The systems that should have protected investors were technically present — but structurally hollow. The result was a framework where the manager’s interests came first, by design or by default.

​

This is why alignment matters. And not just alignment in principle, but in design.

​​

​Investors deserve more than reassurance — they deserve a system that puts them first in how decisions are made, how responsibilities are assigned, and how risks and rewards are shared.

​

​It’s not enough to say “we act in our investors’ best interests” if the structure doesn’t support it. Investors deserve more than words — they deserve a system that consistently puts them first when it matters most.

That kind of investor-first mindset is becoming more visible in parts of the industry. Some investment managers are now designing products where governance, transparency, and accountability are embedded from the outset — not as compliance obligations, but as deliberate, structural choices. Frontier Advisors’ 2023 Investment Governance Survey found that institutional investors are placing growing emphasis on governance quality when assessing managers — with a shift from policy documents to tangible practices and board-level oversight.

​

Others are going further, offering mechanisms that allow long-term investors to share in the growth of the manager itself — not through listed equity, but via tailored unit classes or co-ownership structures that link capital support with firm-level value.

​

Others are going further, offering mechanisms that allow long-term investors to share in the growth of the manager itself — not through listed equity, but via tailored unit classes or co-ownership structures that link capital support with firm-level value. These models deepen alignment by giving investors a stake in both portfolio outcomes and the manager’s success — where trust is built into the structure, not just the pitch.

​

These practices are still the exception. But when they appear, they resonate. Investors recognise them — not in what’s promised, but in how capital is treated, decisions are explained, and outcomes are shared. Increasingly, sophisticated investors are asking not just “what’s the performance?” but “how is this built — and for whom?”

​

Of course, structure alone is not a safeguard. ASIC is now investigating the full chain of conduct that enabled the First Guardian schemes — from lead generators and financial advisers to platform trustees and research houses. Reforms are likely, including:

• Tighter registration standards for MIS targeting superannuation investors

• Expansion of the Compensation Scheme of Last Resort to reflect modern advice and platform structures

• Stronger accountability for those enabling fund distribution without robust due diligence

But alongside regulation, there must be leadership. Investors are watching — not just for returns, but for signs their capital is genuinely respected. They want alignment that’s structural, not symbolic. Governance that’s active, not passive. And managers prepared to lead not just with performance, but with principle.

These are the qualities that will define the next generation of trusted investment managers. And for those seeking to be part of that future — as investors, advisers, or allocators — the question is shifting.

Not just “who has the best product?” but “who is truly building for the investor first?”

Or as Marcus Aurelius put it: “Just that you do the right thing. The rest doesn’t matter.”

In this industry, that mindset — quiet, consistent, structural — may be the most powerful form of leadership there is.