Suing a financial advisor

[dupedbyadvisor]

I'd like to open a topic about the type of action we can take against a Financial advisor who failed to follow instructions. My advisor put me into long term investments when I clearly asked for short term in Oct 2007. Then gave misleading information such as "the market will recover in a few months"...don't cash it in. No such information should be given.
I've lost over $190,000 (and currently not employed). The financial ombudsman cannot do anything for losses over $100,000.

So I'm taking measures to sue him. Has anyone taken this step? Any advice?

 

[Julia]

I'm sorry to hear of your situation.

Do you have a written record of your instructions to the adviser?

 

[Garpal Gumnut]

I'd like to open a topic about the type of action we can take against a Financial advisor who failed to follow instructions. My advisor put me into long term investments when I clearly asked for short term in Oct 2007. Then gave misleading information such as "the market will recover in a few months"...don't cash it in. No such information should be given.
I've lost over $190,000 (and currently not employed). The financial ombudsman cannot do anything for losses over $100,000.

So I'm taking measures to sue him. Has anyone taken this step? Any advice?

Contact a non fee, no win no fee solicitor.Check the Storm financial thread on this forum for details.

gg

 

[skyQuake]

You can have free consultations with solicitors, and see if you have a cause for action (judging from the limited facts you most likely do if you have stuff on paper).

A smaller or mid tier law firm should do, no point wasting money on Mallesons or CBP for a case like this.

DYOR

 

[GumbyLearner]

Contact a non fee, no win no fee solicitor.Check the Storm financial thread on this forum for details.

gg

My advisor put me into..

Oh really ?

So what coaxed you to believe in him in the first place?

 

[Sir Osisofliver]

I'd like to open a topic about the type of action we can take against a Financial advisor who failed to follow instructions. My advisor put me into long term investments when I clearly asked for short term in Oct 2007. Then gave misleading information such as "the market will recover in a few months"...don't cash it in. No such information should be given.
I've lost over $190,000 (and currently not employed). The financial ombudsman cannot do anything for losses over $100,000.

So I'm taking measures to sue him. Has anyone taken this step? Any advice?

Duped,

I'm sorry to hear of your predicament. That said, I have said it before and I will say it again...you should never cede control of your investments to someone with a conflict of interest.

Of course the FP would say don't cash it in - how's he expected to get a trailing commission if you don't have your money invested all the time?

It's pretty much SOP for the larger FP firms to have acknowedgement forms that they get clients to sign before commencing investment. If you have signed one of these documents - you are probably completely out of luck. If you haven't signed one of those forms designed by flesh eating lawyers, what do you have in writing? If he's placed you into managed funds (which is highly likely), you would have needed to sign some documentation for that...once again you would be out of luck there.

As for his assertion that the market would recover in a couple of months...when exactly did he make this assertion? It was a widely held belief in the industry in January that the market was merely having a dip and he could make a case that the information he had at hand at the time lead him to the conclusion that the negativity was short-term and the market would bounce.

If you do have written instructions that you passed onto you FP about investing in short-term and he actualy has acted without your signatures or instruction in placing you into these long term investments you may have a chance.

Personally, from the information you've given - sounds like you are without much of a chance in recouping the money from his professional indemnity insurance.

Cheers
Sir O

 

[tech/a]

Good money chacing bad in my view.

If its not in writing its hear say.
Even if it was whats the difference (Or mitigated loss) had the instruction been followed.
Whats it in now?
Why did you not demand alteration to your longterm investments well before now--IN WRITING.

If you have a string of requests to alter investment and a string of letters from the F/P telling you to hold---then you may well have a case.

The less you have in writing the less you have in a case---any case!

 

[numbercruncher]

Sounds like yet another criminal " financial advisor " - good luck which ever avenue you choose.

 

[metric]

financial advisers are no more than used car salesmen, and know even less about their products.

im sorry you got involved with such petty gangsters. its a lesson for everyone.

go to a 'no win no pay' solicitor. if they win you pay no more than half your winnings.....you pay nothing if you lose. they wont take the case if they think they will lose....

you will need some evidence to support your claim. word of mouth usually counts for not much.....

 

[startrader]

Duped,

If your financial advisor put your money into long term investments in 2007 instead of short term and when you tried to retrieve the money he told you that "the market will recover in a few months" I would say that he honestly believed that it would recover in a few months. The financial industry has been completely clueless about this whole financial crisis and, regardless, if the market had recovered you would be happily sitting here not threatening to sue. You obviously made the decision at the time not to push it and leave your money there and see what happened.

I would say you wouldn't have a leg to stand on and you should really be taking some responsibility for what happened instead of trying to deal with a very unpleasant situation by putting all the blame on someone else.

 

[prawn_86]

I would say you wouldn't have a leg to stand on and you should really be taking some responsibility for what happened instead of trying to deal with a very unpleasant situation by putting all the blame on someone else.

Agreed.

Did you want to sue him when you had made money?

Every product comes with 'buyer beware' so its either up to you to educate yourself, or to shop around to find an advisor you trust and who has a good track record. Take responsibility for your actions (or lack of) and look to the future to see how you can avoid the same mistakes in the future.

 

[cuttlefish]

To me it depends.

I don't know what 'dupedbyadvisor's scenario is, but lets say someone sold a house, planned to buy another one in 12 to 18 months time and wanted the cash invested over that 12 to 18 month period.

They're not financially savvy so they go to a financial advisor and say: "I've got X hundred thousand, I'd like it invested in short term investments, I'll be wanting the cash back in around 12 to 18 months time".

If the financial advisor then placed the money into a majority equity portfolio they have not acted according to the advice. Short term would be possibly a small equity component but predominately a mixture of interest bearing products (I'm assuming - I'm not an FA).

The other factor is whether they wanted the capital guaranteed or not or how much capital protection they wanted and whether they expressed this.

By the sounds of some of the previous comments by Sir O in other threads - the financial industry is already heavily regulated - I'm assuming it is regulated enough that these two simple criteria should be documented somewhere in the original engagement process.

If so then you'd hope its possible to take some sort of action if the clear instructions weren't followed.

 

[metric]

failed to follow instructions. My advisor put me into long term investments when I clearly asked for short term in Oct 2007.

at what point did you realise that ? have you any evidence that he failed to follow instructions.?

others here who are saying 'bad luck' musnt believe their instructions to their broker is worth crap either......? so if your broker doesnt sell when you tell him...its bad luck??? lol

 

[cuttlefish]

Just read Sir O's comments above in this thread again - regardless of what unfolded verbally, and the fairness or otherwise of it all, it sounds like the FA's will be well protected against this sort of action.

 

[dette]

I'd wonder if it would be worth approaching FOS with a limit on your claim to $100K, or if there are separate claims for separate incidents each with a limit of up to $100K which might allow you to reach the $190K you believe you have lost.

They have a different standard of proof to the traditional legal system as I understand it and may be more inclined to review whether what has taken place is "reasonable" rather than technically allowable.

Might be worth finding a "compliance specialist" to discuss your situation.

 

[watsonc]

I'd like to open a topic about the type of action we can take against a Financial advisor who failed to follow instructions. My advisor put me into long term investments when I clearly asked for short term in Oct 2007. Then gave misleading information such as "the market will recover in a few months"...don't cash it in. No such information should be given.
I've lost over $190,000 (and currently not employed). The financial ombudsman cannot do anything for losses over $100,000.

So I'm taking measures to sue him. Has anyone taken this step? Any advice?

I work in compliance, vetting and complaints for a large financial institution at Circular Quay - Sydney. The financial advisor should have completed a Fact Finder (FF) document, as well as additional file notes regarding your situation and needs. For the advisor to recommend managed investments (as well as possible gearing) the investment sections of the FF, as well as the risk profile questionnaire section MUST be completed.

The FF should have documented what "risk" you were prepared to take e.g. conservative through to Aggressive, and the time frame you were prepared to invest. More aggressive investments are only recommended for longer periods of time i.e. 5-10 years. So if the FF clearly indicates that you only had a short time frame to invest, as well as a lower tolerance to risk - the financial planner may be liable.

Please note that financial planners are not permitted to second guess the market, and cannot make recommendations to cash in investments if they simply feel that the market is going to tank. Ideally a financial planner will recommend a 5 year investment, and then review your situation after 5 years.

Please note that gearing investment recommendations MUST be reviewed by the planner anually.

Please also note that with gearing plans, other guidelines must be adhered to i.e. debt to asset ratio, 2% rule (cash flow), the Statement of advice (SOA) must also clearly document an exit strategy and demonstrate a "reasonable basis for the advice".

Compliance can be a really grey area. But I hope this helps.
If you think the planner's documentation and SOA would support your claims, your best bet in this case would be to lodge a complaint with planner through your solicitor. Planners will generally be a bit more co-operative once they no you are serious. Planners also must carry Professional Indemnity insurance through CGU. If your claim is legitimate, CGU will pay the damages.

 

[Glen48]

A mates Accountant told him to sell a house in to his Super then the ATO tried to tax him on the deal he found out he can't do that and is suing his account and look like he has a case..but this one has a paper trail....just shows how hard it is getting to survive these days I now sleep like a Baby , sleep for 2 hours cry and go back to sleep could be worse if we didn't have Rudd at the Wheel.

 

[Jack Payback]

If you want to make a complaint, you need to go to FICS - the Financial Industry Complaints Service - all advisers that operate under a Financial Services License have to be a member of this organisation. It is a dispute resolution service regulated by ASIC.

As the last contributor stated, the adviser must undertake research to ensure the investment is within your risk profile and goals, otherwise they have breached the FSRA and Corporations Act and you have a case.

You are much better off by seeing a fee for service adviser, particularly who does not take commissions or rebates them back to you. A good adviser would have told you to keep your cash in a high interest bank account for short terms and not charged anything, most advisers like to avoid the possibility of complaints such as these, let alone the licensee.

 

[dupedbyadvisor]

Thanks, really appreciate everyones views. Just to clarify more information for a few who’ve asked…

The FP did place me into managed funds with investments in property (APN property, RREEF Paladin Property and SG Hiscock Listed Property). Other assets in the portfolio he put my money into are Perpetual Industrial, ING, Lazard, Schroder,, etc.

I’m unemployed and it’s cost me $2,000 in lawyer fees for one consult, a letter to the FP and a few phone calls.

Unfortunately I don’t have a written record of my instructions to the advisor, it was all by word of mouth. I do however have notes from 2 previous advisors I’ve seen. They’ve both stated my short term objectives on record. With regards to the FP in question, there is no much paper work suggesting “short term”. I made the mistake of “trusting” he would be doing the right thing. I knew little, if anything about what the “assets” were about and he knew it!!! I believe he took advantage of my lack of knowledge.

What coaxed me to believe in him? Because he is licensed and has been an FP for nearly 20 yrs. He seemed to know his stuff….but in hindsite it was all an elaborate ploy to depart me from my cash.

When did I first realize he had placed me into long term investments? When I received my first statement in February 2008 and noticed a $60,000 loss.

The FP made the assertion that stocks would rise in another few months (he made this claim in late February 2008). By then I had only lost $60,000… now it’s climbed to over $180,000 loss. No…he should NOT have made such an assumption. This is nothing less than gambling peoples money away.

Before I signed anything with the FP, I do recall a meeting where I noticed a few “longer term” assets on the SoA. Some were international shares that wouldn’t show profit for 4 years. I set up a meeting with him and got him to change the portfolio around to closer match a “short term” investor. I saw him shift a few things around and he announced it’s “geared for a short term investor”. Unfortunately he didn’t do that at all. Perhaps he didn’t expect such a financial disaster was close ahead?? He relied on the “long term investments” he had placed me into to perform well.

I have complained to FICS and ASIC. They referred me to FOS who now have dropped my case since it’s passed the $100,000 loss limit. During the complaints period we obtained my FP’s notes and I cannot see where he has documented my meeting with him (prior to me signing the SoA) to adjust it to a more “short term investment” strategy. He had omitted it from his notes.

Where does that leave me? They suck us in, use our lack of knowledge against us, give misleading information and are protected by the law via signatures whilst they gamble with our hard earned money.

Thanks dette your idea on breaking my complaint into a few small ones to get around the FOS limit of $100,000 is certainly worth looking into.

Watsonc - you work in compliance, vetting and complaints? where do I find such a service?…and I wasn’t too clear with your last sentence. I already have had my FP served with a “letter of demand” by my lawyer, the FP responded by putting the matter into the hands of his indemnity insurance. We haven’t heard from his insurance yet.

 

[James Austin]

dont mean to be rude,
but was this a case of easy come, easy go?

if you had worked your butt off for that cash, would you have let it slip away so easily? just curious!

alternatively, were you a little starry-eyed?

not suggesting its your fault,
if you are entitle to recompense, best of luck to you.