Inappropriate Financial Advice Leads to $500,000 Payout, Says AFCA

The Case

Following the passing of her husband in 2015, the complainant was referred to The FinancialLink Group Pty Ltd for assistance with her financial affairs. The complainant had limited investment experience and had previously relied on her husband to manage their assets.

She was introduced to Mr L, an authorised representative of the financial firm, and said she wished to obtain a secure annuity stream to meet her anticipated expenses of $50,000 per year. Mr L liquidated a range of assets in the portfolio and recommended a $700,000 investment into a managed investment scheme, Fund I.

While it provided some benefit to the complainant over the life of the scheme, Fund I subsequently collapsed in July 2018. The complainant has suffered a net loss of $541,188 as a result. The complainant says she would not have invested if she knew of the risks inherent in Fund I or Mr L’s conflicts of interest in making the recommendation.

The financial firm said the advice to invest was appropriate and in the complainant’s best interests. It denied any liability to pay compensation.

AFCA’s Findings

AFCA determined that the advice Mr L gave was not provided in the best interest of the complainant.

Although Mr L provided the complainant with a Statement Of Advice, he failed to:

• Conduct a reasonable investigation into Fund I regarding the failure to meet the loan portfolio and diversification benchmark or the related entity benchmark, or alternately, to communicate the results of that investigation properly;
• Base his judgement on the complainant’s circumstances when he recommended reducing the diversification of the complainant’s portfolio and committing $700,000 to a single investment; and
• Take any other steps to act in the best interests of the complainant, such as:
• disclose his conflicts of interest or
• investigate other suitable products which may have met the complainant’s objectives.

The Determination

This determination was in favour of the complainant with The FinancialLink Group being required to pay $500,000 to the complainant, as well as interest.

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.