Suing a financial advisor

[Jack Payback]

Just out of curiosity, are you still holding the investments? With the adviser?

The best course of action may be to continue to hold the invested funds in the same asset classes to let them recover over time. Transfer the funds into a low cost managed fund provider, that YOU set up - Rabo Plus have a low cost facility to do this, in fact I use them myself, completely over the internet.

At least then the adviser will not be getting any more trail.

It will take a few years for all our investment balances to recover, but they will.

 

[prawn_86]

It will take a few years for all our investment balances to recover, but they will.

Tell that to the people in Japan in the 90's. Look at their index now. Massive assumption made there...

 

[Jack Payback]

Tell that to the people in Japan in the 90's. Look at their index now. Massive assumption made there...

Yes, but the Japanese economy relied on electronics and vehicle exports, in the late 90's a lot of other Asian countries came to the global market with lower cost products and they could not compete.

They don't have commodities, like OZ, to export to a growing global demand
(over the next 20 years) - that will help us out, but that is probably for a different forum...

 

[dupedbyadvisor]

Just out of curiosity, are you still holding the investments? With the adviser?

The best course of action may be to continue to hold the invested funds in the same asset classes to let them recover over time. Transfer the funds into a low cost managed fund provider, that YOU set up - Rabo Plus have a low cost facility to do this, in fact I use them myself, completely over the internet.

At least then the adviser will not be getting any more trail.

It will take a few years for all our investment balances to recover, but they will.

hi jack, yes I'm still holding onto the same investments and have removed my Financial Planner from any involvement. Yes I've heard it could take 5 yrs to get to the same value I originally bought them at. Unfortunately I invested at the worst time when the shares were at their peak in Oct 2007.

There's just not enough protection to stop these greedy Financial Planners gambling with our money the way they do and preying on the vulnerable. Sure, I've reported my FP to the FPA though I'm sure they look after their own.

 

[Happy]

I agree with this. We seem to be living in a culture which is more and more deeming fighting for what's right to be a waste of time.
And so it will be if we all take a passive, accepting attitude to bad professional behaviour.

After all the publicity re Storm, BCSCA and financial advisers in general you'd imagine Joe Average would be at least a bit informed and certainly wary.

.......

So when you have such apathy, it makes for an ideal breeding ground for unscrupulous advisers e.g. Storm.

It is quite funny that we can take T-shirt back for refund if there is something wrong, but cannot make advisor responsible for their educated advice.
Not happy!

It is only this year that we will have LEMON CAR laws in Australia.

 

[beamstas]

I don't want to sound harsh here...............

If you just bought a new car that you worked hard for.. lets say a new bmw.. would you go out friday night and lend it to a group of young p platers who are hooning around the city

All im saying is i wouldn't hand my hard earned $$$ over to someone who doesn't care about it

When i burn my toast i don't blame the bread

Sorry for your loss and i hope for your sake the markets turn around and you get your money back!

Brad

 

[dupedbyadvisor]

thanks brad. It seems the markets are in another free fall, the last few days have been bad.

For those recommending a no win no fee lawyer, it's not possible. No win no fee lawyers only take on clients for medical negligence claims. If you know of any who would take on such a case as mine - feel free to send a message.

Yes I agree it's not wise to hand over our hard earned money to a financial planner. Yet if they are licenced, educated and analyze our objective...naturally we tend to trust them. The reality is, no-one can be trusted. I've learnt my lesson.

 

[beamstas]

thanks brad. It seems the markets are in another free fall, the last few days have been bad.

For those recommending a no win no fee lawyer, it's not possible. No win no fee lawyers only take on clients for medical negligence claims. If you know of any who would take on such a case as mine - feel free to send a message.

Yes I agree it's not wise to hand over our hard earned money to a financial planner. Yet if they are licenced, educated and analyze our objective...naturally we tend to trust them. The reality is, no-one can be trusted. I've learnt my lesson.

It really is a hard thing
As they are in a position of responsibility

I know a lawyer. I'll ask him when i see him next ( in a couple of weeks ) what the chances are of this type of thing being successful in the courts

Brad

 

[Mr J]

Yet if they are licenced, educated and analyze our objective...naturally we tend to trust them. The reality is, no-one can be trusted. I've learnt my lesson.

That's not quite the right lesson. Instead of trusting a licence, education and recognising your goals, you need to trust things like results, responsibility, risk management, honestly, the benefits etc. The lesson isn't that nobody can be trusted, but that people need to earn the trust, and that you have to thoroughly research these kinds of arrangements.

 

[Junior]

When i burn my toast i don't blame the bread

Did you watch Arj Barker on the Comedy Gala the other night? He used this analogy to illustrate that Global Warming is caused by the sun not the Earth!

 

[watsonc]

Hi watsonc... could you please send a pvt message of where you work or a similar company/contact ??

Have you lodged an official complaint? You must lodge an official complaint in writing and send it to financial planner's disputes resolution department.

The financial planner (or fp organisation) must send a reponse in writing to your complaint.

If you were not happy with the Financial planner's reponse then his organisation must repond to you in writing.

What did their reponse say?

 

[beamstas]

Did you watch Arj Barker on the Comedy Gala the other night? He used this analogy to illustrate that Global Warming is caused by the sun not the Earth!

Yep

Brad

 

[dupedbyadvisor]

Have you lodged an official complaint? You must lodge an official complaint in writing and send it to financial planner's disputes resolution department.

The financial planner (or fp organisation) must send a reponse in writing to your complaint.

If you were not happy with the Financial planner's reponse then his organisation must repond to you in writing.

What did their reponse say?

They responded mostly with justifications about how they acted within the FPA Code of Ethics and that I recieved the best service, and attention. He also refuted my allegations and said, "At no time during the interview stage did I mention short term". So a flat out denial.

I then refused to communicate with him further. My initial complaint to his office was so I could make a complaint to FOS through ASIC. FOS has closed my case due to the loss going over 180,000. It was suggested on here to break the complaint up into segments and thus show a smaller claim. However, FOS are aware of such practices and don't take them on.

The FPA are currently reveiwing a complaint I made. They can't claim any losses though. I'm not going to let this ride, justice needs to be served.

 

[Julia]

.

For those recommending a no win no fee lawyer, it's not possible. No win no fee lawyers only take on clients for medical negligence claims.

According to several who have posted on the Storm thread, Slater and Gordon are taking action on behalf of these clients on a no win no fee basis.
Nothing medical about that mess.

I think any lawyer will assess such an approach on an individual case basis.

Sounds a bit as though you have decided no one is prepared to co-operate with you and perhaps as a result have stopped investigating possibilities.

However, if it comes down to a case of "I said", "No he didn't say that", and you have no written record of anything, it would seem pretty difficult to go forward.

Yes I agree it's not wise to hand over our hard earned money to a financial planner. Yet if they are licenced, educated and analyze our objective...naturally we tend to trust them. The reality is, no-one can be trusted. I've learnt my lesson.

That seems rather an over-generalisation to me. Maybe consider the responsibility is as much yours as the adviser's, in that if you had insisted on a written account of all your transactions with him, he wouldn't be able to deny responsibility.

I'm not trying to 'get at you' but just hoping you'll not swing from one extreme to the other. There are still good people out there.

 

[Investment Guy]

Hi All,

I only just stumbled across this discussion topic, and having read a number of the responses, I felt compelled to contribute in order to clarify what appears to be misguided - though undoubtedly well intended - "legal" advice given by a number of people to our good friend Duped. My agenda here is simply to ensure that everyone reading these threads had a clear understanding of what their legal rights actually are and what they can do to actually enforce those rights.

To give you an idea of where I'm coming from, I am a corporate lawyer with over 10 years' post-admission experience, and have specialised within the financial services industry. I have also worked inhouse within financial services institutions as their head of legal, risk and compliance departments. I have acted both for and against - for mostly for - various participants in the industry, such as financial planners, stockbrokers, research houses, lenders, insurance companies, accountants, real estate agents and the like. I have acted in numerous compensation claims, Financial Ombudsman Service (FOS) complaints, legal proceedings and even ASIC investigations. For the most part, as indicated, I have spent a great deal of my professional time defending/protecting the financial services participants against investors such as yourselves.

But I am also an avid investor myself.

So given my background, I thought I might be able to offer some unique insight into this particular topic of discussion, which hopefully might be of some benefit to many of you here. As a fellow investor, I felt that this is the least I could do. [But first, an obligatory warning: the following is general advice only, and should not be necessarily be relied upon as it may not suit individual people's circumstances. ]

(1.) The law offers considerable protection to investors, so much so that I believe it is actually heavily biased in favour of investors. It may not seem like it to the non-lawyers among you, but this actually the case. You have more power than you might realise. That is, as an aggrieved investor, you are actually in a stronger bargaining position than you think.

(2.) The financial services industry is a highly (overly) regulated industry. This is particularly so for the financial advisors such as financial planners and stockbrokers. These advisors need to do so many things perfectly in order to comply with the many applicable laws and regulations. Even if they give you the right advice, they can still get into serious trouble if they don't strictly comply with what the laws and regulations expect of them (for example, if they quote fees or costs as a percentage (%) instead of dollars ($)). The sorts of things they are required by law to get right include:

- That they ask enough questions to ascertain your situation, needs and objectives;
- That they act in accordance with your instructions;
- That they provide you with an SOA if they give you personal advice;
- That they give you an SOA in a timely manner;
- That the recommendations they make meet your situation, needs and objectives (or if they don't, then explain why not);
- That their recommendations include advantages and disadvantages:
- That they conduct a risk profile of you as an investor;
- That the recommended asset allocations are consistent with your risk profile;
- That the products they recommend have been properly researched;
- That they keep full records of all communications and research;
- That they fully and clearly disclose any conflicts of interest;
- That they fully and clearly disclose any fees and commissions received.
- That costs and fees are disclosed in dollars ($).

There are actually a lot more than this, but you get the idea: there are quite onerous obligations imposed by law on financial advisors.

(3.) Suing a financial advisor - by that I mean suing them successfully - is so much easier than you might think, for the reasons explained earlier. It just takes time and effort. For those of you who have received a "Statement of Advice" (SOA) , you will see how detailed those things generally are. Much of the detail you see in there - colloquially known in the industry as "guff" - is mandated by the Corporations Act as well as by ASIC through its various "Regulatory Guides". It is, however, rare to find an SOA with no defect of some kind - and under the Corporations Act, even a seemingly minor defect technically equates to a contravention of the law. Any competent lawyer with experience in reviewing SOAs will generally have no problems identifying non-compliances, largely because many financial advisors themselves still don't seem to grasp the importance of strictly complying with the numerous and seemingly trivial, requirements of the legislation.

(4.) Most investors are plodding along blissfully unaware that they might well have a legitimate case (known in legal circles as a "cause of action") against their financial advisors if ever they decided to sue. You don't even need to have experienced a decline in the capital value of your investments or returns generated - you may, for example, claim for the recovery of advice fees paid, trail commissions and hidden commissions paid by product providers directly to the advisors. You may claim for any interest paid on investment loans. You may even claim "opportunity cost", which is the profit you would have theoretically received if you had invested your funds elsewhere.

(5.) Some 99% of cases against financial advisors settle quietly out of court....eventually. That is, the investors who have lodged a claim get a pay out. Don't quote me on that percentage because, frankly, I just made up; it is however consistent with my own experience, both as acting for and against financial advisors. Of course, you will never hear about those settlement arrangements as they are usually made subject to a strict confidentiality agreement.

(6.) Even those cases with little or no prospects of success, it is not uncommon for dogmatic claimants to receive some (nominal) payout. The reason for this is that the financial services organisations are aware that they will incur considrable costs - such as FOS fees which can be as high as $5K to $8K - if they choose to defend such cases. Their professional indemnity insurers (when they do get involved) generally adopt the same approach as they would prefer to settle informally than have to invest considerable time and incur considerable costs in defending matters at a trial. For investors wanting to sue, particularly those who have not had much to do with the legal process, I know it will require quite a leap of faith to accept all of this.

(7.) So if you genuinely believe that your financial advisor had done something wrong, or suspect that they might have done something wrong, I would suggest that you pursue it. Naturally it would be better to go to a lawyer (better still, one specialising in financial services), but even without a lawyer there are a number of options you can take to secure a favourable outcome, such as:

- Lodge a complaint/claim to the financial advisor
- Lodge a complaint/claim to the financial advisor's dealer group (AFSL holder)
- Lodge a complaint through the relevant industry body (eg. Financial Planning Association)
- Lodge a complaint through ASIC
- Lodge a claim through FOS
- File a claim in court (even if only in the Magistrates Court).

(8.) The key thing is to prepare your case logically, rationally and in great detail. It is important that you leave emotion out of the picture - I have seen too many legitimate cases fail (usually in FOS) simply because the investors have littered their written submissions were far too much emotion thinking it would bolster their case.

(9.) My strong recommendation is to seek the assistance of a lawyer [Disclosure: The author has a conflict of interest in making such a blatantly self-serving recommendation!]. But, seriously, at least go and have a quick chat with one or two before you do anything - most will agree to meet with you at a first interview at no charge. Just ask them. Some legal guidance is better than no legal guidance at all.

(10.) If you do decide to formally engage a lawyer, there may be those who will act for you on a "no win, no fee" basis. Unfortunately, such an arrangement is rarely offered in the financial services industry (unlike personal injury cases), but if your case is worthwhile enough, I am sure there will be those who will agree to accept your case on a speculative basis. Ideally, you should shop around for a lawyer who specialises in financial services law (because this is a highly technical and specialised area), but if not, then one who has experience in corporate or commercial litigation will do just fine.

There is only one parting comment I would make: I noted that a few of the forum members were critical of "suing" on the basis that people should accept personal accountability. Personally, as an investor, I too am a proponent of the personal accountability argument. However, the comments/guidance above are not intended to address that debate. Rather, my comments were intended to assist people to make a more fully informed decision as to how the legal process actually works in practice if ever they find themselves in the position of questioning the service provided to them by their financial advisor. Ultimately, none of us here are the authority on whether it is or isn't "morally" right for a particular investor to sue their advisor: that is a matter that is ultimately for the legal umpires to decide (ie. FOS, ASIC or the courts).

I know this has been a long read, but I hope it has been helpful. (Some feedback - good or not-so-good would be much appreciated!

-INVESTMENT GUY

 

[tech/a]

IG

Great stuff.

You know the one thing that aggravates me more than anything else are these managed Fund Salesmen who tout themselves as Financial advisors when in fact all they have is licence from a dealer principal.

They cant advise on anything more than that which their dealer principal is involved in.
They cant talk about and indeed advise on Property/Stock trading individual portfolio's/Futures/Forex,or any other investment tool. They are a waste of good office space.

These guys should not in my view be able to call themselves anything to do with Financial advising OR planning.

 

[breaker]

Great stuff Mr Advisor,
I to have been caught up in advisory misgiving and got paid buy the advisor not to pullout as he would lose his kick back,an investment he has put us into has gone pear shaped and we have decided to cash out and pay any fees owing [20k] which we did. The institution then pulled another 20k [which we didnt have, put account in red] from our account [thought we cancelled that] they still reckon we owe them and are charging interest .We have been on to FOS who claim we have a case .The institution has been very quiet it is also one very well known.
Any more trouble and I, with your permission would like to PM you as to a suitable lawyer in QLD

 

[Julia]

IG, many thanks for such an erudite and useful contribution

 

[Investment Guy]

Thanks guys. I probably revealed far more "insider secrets" than many of my colleagues in this industry would have been comfortable with, but I just felt that a re-alignment of forum members' understanding of the legal process was in order.

BTW, sharing all that information might well make my job a lot harder in defending financial advisors in future, but I also believe that if advisors genuinely do the right thing by their clients - and comply with all the legal requirements - then they should have absolutely nothing to fear if ever they are called to account.

-INVESTMENT GUY

 

[princeplanet]

Hi, I just read your great post about what to do if you've been duped by the FA. I've been with mine for 10 years, and still am. Been far from happy most of that time as I'm still trying/hoping to claw back losses. The biggest came in 08 of course and my main complaint is that I have emails to my FA saying I wanted to get out by the end of 07 and into property. Infact he'd known this for years and we have documentation to support this. Mid December 07 is when I instructed I wanted to pull out $1M to cash. There was no-one in the office, all on holidays. There was clearly no warning from them in any way that they would be on holidays so early and they have since put measures in place to stop the situation recurring when investors need advice/action over that period. The short story is I lost over half my holdings after severe pressure to not sell in January, and for the next few months after that. Of course once the serious losses set in it was too late to get out. My mid term plan had now become a lifelong one, ruining all my plans for myself and my wife.

The company (who I'm happy to name upon request) have had 5 names in as many years it seems. Apparently they were going to be sued by several disgruntled investors in 09 but settled out of court, using up the $2M insurance cap they had. Seems they did a "Pheonix" a few times since and have other grieving ex clients. I heard there's a 6 year period before a possible claim would lapse, but have also been told that since the company have renamed, they bear no responsibility for the past company's sins.

In your understanding, is there any recourse left? I tried one pay if you win laywer and they said ASIC was my only (slim) hope. Any thoughts?

Thanks.