Sometimes things go sideways, advice is provided that leads to money being lost either on a small scale or potentially a life altering scale.
For example, you may get advice to invest your savings into a fund, so you put your retirement nest egg or part of it into a short-term vehicle on your financial planner’s recommendation – and it goes bust, you lose the lot. This has happened in Australia, Storm Financial, then insurance provider HIH, which went under leaving many Australian’s not able to claim on their insurance, nor their assets insured at all.
So, it does happen, albeit not regularly so there are mechanisms for both large and small grievances you may have against your financial planner. Wanting to take your planner to court because they said, ‘you could make 20% on your investment’ and you only make 15% will be struck out before you even get there. However, where real losses are incurred, improprieties are perpetrated or you feel your planner has behaved unethically, then there is certainly recourse.
Working out a mutually beneficial solution with your planner
As with most situations, the first step is to air your grievance with your financial planner and see if there is a mutually beneficial outcome. If they have done everything, they can iterate your plan, worked to reinvest to make money back and you are on track, then we would recommend that you collaboratively work with them – rather than against them. However, if the matter is unable to be satisfactorily be resolved, then you have several other places to go.
Financial Planners Association
By working through planners that are registered with an industry body or association, they not only have to adhere to standards of ethics, development and expertise, but they also are subject to the rules and regulations of the respected body.
For example, should you have a grievance, you can speak with members of the association and lodge a complaint, enter into mediation, or potentially have them investigate your matter in an effort to seek a resolution. This will be a much cheaper option than bringing in lawyers and starting legal proceedings. However, if you are not getting a satisfactory outcome, then you can then escalate the matter to the Financial Services Ombudsman.
Financial Services Ombudsman
The Financial Services Ombudsman (FSO) is there to protect consumers rights, and to hold industry participants to account. Although taking your case to the FOS will be cheaper but can be more time consuming and there is a $280,000 cap on compensation.[1] As such, you need to review at this stage – with a lawyer – what the implications of taking the practitioner to court are, if your claim + damages exceed the cap on compensation, then you may wish to proceed further and take them to court.
However, it should be noted, that often in this case, the legal fees eat significantly into any settlement that may be achieved, and if your financial planner or advisor goes bankrupt in the process, you may be left with very little.
The Australian Financial Complaints Authority provides live chat, online and phone access to people dedicated to assist you with your compliant, and work towards a resolution for you as a consumer of financial services.
[1] https://www.mauriceblackburn.com.au/blog/2016/july/11/bad-financial-advice-how-you-can-fight-back/