KEY POINTS:
Dom Timmon thought he had done his homework when he looked for a reliable investment for $185,000, all the money he had left after a bad experience in the English stock market.
Mr Timmon, 49, said Hanover Finance appealed because of its lower interest rates, compared with many
other financial companies, which he had read as lower risk.
He was also impressed it had been rated BB+ on the Fitch credit rating system, the rating reissued just a month ago.
"I know it's not stratospheric but it gave me huge confidence."
However, the Palmerston North resident still had a niggling feeling, having read on a website last year about the need for a "strong stomach" to go with Hanover.
When the news broke this week Mr Timmon's anxiety was confirmed.
"I was gobsmacked that it had got into such difficulty."
Mr Timmon, a retired police officer, said he and his wife, Kate, a nurse, did not have a lot to come and go on.
"That money is important to us."
The sum was due to mature in September, but Mr Timmon was at least thankful he had managed to get $35,000 out a year ago.
Another English immigrant was similarly burned but less confident of a satisfactory outcome.
Mike, who wanted only his first name used, said he had come out from Britain six years to take early retirement due to a health problem.
After buying a house in Albany, he had some cash left over and thought Hanover Finance had a good reputation, given it had been in business for a long time.
Over the years the 59-year-old had invested about $75,000 which he now thought was money down the drain.
"Today's news means I will have to sell my home in order to live ... I live on a very small pension."
Jeff Matthews, senior adviser at Spicers Portfolio Management, said it was inevitable that many finance companies would not last the distance.
"We put out a report in December four years ago warning about this situation ... about some of the things these companies were doing, like inter-company debt and debt to related parties.
"It was all common sense but no one wanted to hear it."
He said investors forgot the golden rule of investment - diversification.
Many thought that by placing chunks of their money into a few different finance companies they would be shielded from any problems.
Mr Matthews said a few years ago when interest rates were low the extra 2 or 3 per cent return offered by finance companies "looked bloody attractive."
"While things were good they were piling money into finance companies, but spreading your money around five finance companies is not diversifying and it's not spreading risk."
* Shocked investors ask 'when will it end?'
Other upset investors who contacted the Herald related their shock at the bad news.
"Our hard-earned [money] was going towards our children's uni fees."
"I am shocked at the news of repayments being frozen, especially given that senior managers of Hanover have recently been advising me that the company was coping well with the difficult trading conditions."
"My mother and father have put money into Hanover Finance. The adverts saying that they have the ability to withstand any market conditions made them (and me) think it was completely safe."
"It seems we didn't do a very good job in picking who to invest with. We lost money to Bridgecorp - investing two weeks before they collapsed ... now Hanover ... we still have $7500 invested which is meant to be used to make the final payment on a new car we have purchased."
"These days, it seems the safest place for your money is either in the bank or under your bed."
"My wife has invested since 2004 and we had been led to believe that Hanover Finance had been a safe and low-risk finance company."
"It is really distressful to be let down by the company advertising attractive returns to invest and at the same time using prominent people to vouch for its credibility."
"I have part of my inheritance from my parents in Hanover Finance which was to be a large part of my retirement fund in five years' time."
"When will it end?"
