NICK BRUINING: How to know if you’ve got a claim against your financial adviser

Life can sometimes dish up disappointments. But disappointment can turn to anger when you are paying someone to manage your financial affairs and they fail to deliver.

While mistakes do happen, the long-term nature of the financial planning process means errors or failings, if not corrected, often take time to reveal themselves.

It’s often too late to take remedial action, particularly when retirement is just around the corner.

If you’re in that position, there are steps you can take to deal with the problems and, in many cases, receive compensation if the advice was inappropriate for your circumstances.

The starting point is to look back at the original documentation provided to you and see if the recommendations at the time aligned with what then happened.

What sort of risk were you prepared to accept, and did the recommendations reflect that risk? For example, if it was agreed that you were a conservative investor yet most of the investments ended up in growth assets like shares and property, there may be an issue.

A conservative approach would normally see 60-80 per cent of your money invested in “safe” investments like cash and bonds, with only 20-40 per cent exposed to growth assets.

A very high exposure to growth assets normally aligns with an “aggressive” investment portfolio and is probably more suited to a younger investor with time on their side to recover from any major market corrections.

Were promised reviews and reassessments conducted, and were they constructive in re-affirming that the objectives of the plan were being realised?

A good review typically and proactively assesses the performance of the investments and strategies, and then makes the necessary changes. While changes won’t occur at every meeting, it would be highly unusual for no changes to be made over a number of years.

If you’re the one that has to bring questions about performance to the table, that could indicate an issue. After all, you’re paying good money for the adviser to be looking after things for you.

If you’re not happy, the first step is to let the adviser know of your concerns. You can do it verbally or in writing. Make it clear what you are complaining about and what you expect the adviser to do.

Ideally, complaints will be nipped in the bud in most cases.

If you fail to receive a satisfactory response within a reasonable period of time, you need to make a formal complaint to the adviser’s australian financial services licensee.

The contact details for complaints will be included as part of the Financial Services Guide or the AFSL’s website

While this can be done verbally, it’s best to follow up with a letter or email, making sure it is dealt with as a complaint by including that word in the subject line or at the start of your letter. Make sure you include supporting documents and other information relevant to your complaint.

All AFSLs must have an internal dispute resolution scheme, and they must acknowledge your complaint within 24 hours of its receipt.

In most cases, the company must provide a response to you within 30 calendar days. If rejecting your complaint, the full detailed reasoning must be included in their response.

If you are unhappy with the response, you can choose to start legal proceedings against the AFSL or make use of the free dispute resolution service provided by the Australian Financial Complaints Authority.

All AFSLs must be members of an external dispute resolution scheme, and the largest is the AFCA.

The AFCA can make binding decisions on an AFSL but this does not stop you taking matters further in the courts if you are unhappy with their decisions.

The AFCA has an indexed financial cap on complaints relating to financial advice, which is currently $1,263,500 per claim, and can award compensation for up to $631,500 per claim.

The AFCA will help you prepare your complaint and attempt to mediate a solution. If this doesn’t work, it can make a judgment and award compensation up to the indexed limits.

And again, if unhappy with the outcome, you can still take the matter to court.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association.