AFCA Rules on SMSF Case: Financial Firm to Pay $185,000

The Case

In 2016, Ms C and Mr O sought advice from The FinancialLink Group Pty Ltd to establish a Self-Managed Superannuation Fund (SMSF) and purchase property through the SMSF. Following the implementation of advice received from the financial firm, the SMSF suffered several losses, and the complainants have attributed those losses to inappropriate advice and wrongful conduct by the financial firm’s authorised representatives.

The financial firm was engaged in providing financial advisory services to the complainants and was inextricably linked to the real estate agent and other entities involved in the investment strategy recommended.

A recommendation made by AFCA’s Case Manager found that the financial firm is liable for these losses as the adviser had failed to properly address the complainants’ goals and advise on the risks of the strategy. As well as this, the advice was given and implemented before the adviser had prepared a full statement of advice (SOA).

The financial firm rejected the recommendation on the basis that all relevant disclosures had been made, the advice had been appropriate, and the complainants had set their strategy.

AFCA’s Findings

AFCA found that although some of the advice was appropriate for the complainants, the manner in which the advice was developed and implemented breached several of the adviser’s obligations. Moreover, the property investment advice was inappropriate due to the high level of borrowing and the conflicts inherent in the property selection and sale.

AFCA also noted that the adviser did not fulfil his disclosure obligations, nor were the services provided sufficient to justify the fees charged by the adviser and firm.

Determination

AFCA’s determination was in favour of the complainants. Accordingly, The FinancialLink Group was required to:  

• Pay to the SMSF: $172,960.12 to recompense it for losses, along with interest.  
• Pay to the complainants: $7,689.00 for fees paid for the preparation of the 2017 SOA as well as interest.$5,000 contribution to the winding-up costs of the SMSF.

Getting Financial Help

Contact us if you’re questioning the advice you received from a financial advisor and are thinking about taking steps against them. We are committed to ensuring our clients receive the best possible advice and guidance on their situation, especially in financial matters. You can contact us online, call us at 1300 433 533 or email us at enquiry@fdlegal.com.au.