Adviser pays woman $80K over loss of investment
A WOMAN who lost $200,000 in a growth fund investment has been given $80,000 compensation because her financial adviser did not have the records to prove it was what she had asked for.
The woman’s case was heard by Financial Services Complaints Ltd (FSCL), a disputes resolution scheme that deals with complaints that cannot be resolved between financial services providers and their customers directly. It said she had $900,000 to invest and went to a financial adviser her brother used.
She had never owned shares before but her brother had done well.
In June 2021, she asked adviser to invest $500,000 growth funds.
She invested 70% of the rest of the money in a growth fund and 30% in a more conservative fund. In September 2021, she asked her advisers to put the full $900,000 into growth funds.
But markets were volatile and the value of the funds dropped. When she asked her adviser to get her out of the investments, she had lost $200,000.
She complained she should not have had all her money in growth funds because these are more suited to longterm investment. She said that did not suit her because she had health issues and wanted $400,000 to be able to buy herself a home.
She said her adviser had not talked to her about investing longterm.
The adviser said they knew about her health issues but she had not told them she wanted to buy a house, or that her investing horizon was short term.
They said her decision to invest fully in growth funds was contrary to their advice and was because her in she saw how well her brother had done.
FSCL said it was hard to establish the facts because the adviser did not keep adequate records of what the client said or what she was advised.
‘‘We found some evidence that the adviser knew, before they gave advice to [the client] that she had it in mind to buy property. ‘‘Although the instructions to invest in growth funds came from [the client], we also found some evidence that [her] instructions may have been prompted by some suggestions or pressure from the adviser.
‘‘For example, we could see that, behind the scenes, the adviser was putting together information to show [her] how much she could make if she invested all her money in growth funds.
‘‘It wasn’t clear that the adviser had included an assessment of risk in that information.
‘‘We also thought that, if [the client] had decided to invest in a way that was contrary to the adviser’s advice, the adviser should have carefully documented it.’’
FSCL said it worked with the woman and adviser to find an agreed settlement.
The adviser paid $80,000, which left the client with about what she would have lost if she had invested all of her money in more conservative funds.
FSCL said it was a reminder for financial advisers to be mindful of their recordkeeping requirements.
‘‘Where a client has complained to FSCL but the adviser’s recordkeeping has been inadequate, FSCL may place more weight on the recollections of the client — whose finances and goals are being discussed — rather than the adviser . . .’’ — RNZ
❛ It wasn’t clear that the adviser had included an assessment of risk in that information