*Details have been altered for legal and privacy reasons

Gary was the victim of a Financial Advisor not acting in his best interest.

Gary was called one evening by a Financial Advisor who had just arrived in Brisbane to work with an established Financial Advice firm, and was wanting to engage with new clients. The advisor was offering initial, obligation free meetings, to talk to Brisbane residents about an exclusive investment that he just been made aware of.

Gary had never met with a Financial Advisor before, so wasn’t sure what to expect. At the onset of the initial meeting Gary was reassured by how friendly the advisor was. He was immediately relaxed, and felt he could trust the advisor after a wonderful and lengthy conversations about mutual interests.

During this meeting, the Financial Advisor explained the exclusive investment, which was done through Options Trading, and how he would be making a lot more through options trading, than though any APRA regulated super fund. The advisor told him that to access the investment, he needed to rollover his existing superannuation into a new Self-Managed-Super-Fund (SMSF), and use the SMSF funds to engage in the options trading strategy.  

Even though Gary had limited investment experience, the advisor insisted that he was an experienced investor, as he had been contributing to his super fund for over 50 years. The advice was presented in a way that made Gary feel like he couldn’t lose. So he followed through with the advice.

It wasn’t long before Gary realised he was losing a significant amount of money on this “exclusive investment”, and was also unable to afford the SMSF fees on his current wage. After working his whole life to save for retirement, Gary was expecting to lose his entire life savings in less than a year.

Gary felt humiliated and became depressed. He withdrew from seeing his family and friends, thinking he had been left with no money, and no options. That was until Gary’s daughter saw a Facebook post, of a story that was similar to his. This family too, had been ripped off by a dodgy financial advisor, and were able to recover their financial losses with the help of Financial Rescue.

Gary’s daughter made the appointment with Financial Rescue, and forced him to go with her. He was reluctant to engage with anyone regarding his money, because of how badly he had been ripped off. It was at this first meeting that Financial Rescue were able to identify that the the advice given by the Financial Advisor to establish an SMSF and engage  in options trading was inappropriate and not in his best interests given his personal circumstances and financial situation.  

Financial Rescue was able to lodge a complaint with the Financial Advisor on behalf of Gary. However the Financial Advisor disputed these claims, and said they did not provide advice to Gary to establish an SMSF and  rollover existing superannuation funds to the SMSF. The Financial Advisor claimed they provided general advice in  relation to trade suggestions and Gary decided his own trades. They also claimed to be acting in Gary’s best interests at all material times. 

Due to it being clear that the advisor did not act in Gary’s best interests, Financial Rescue then pursued this case and lodged a complaint with the Australian Financial Complaints Authority. Gary was seeking compensation to place him in the position he would have been in, had he remained invested in his APRA-regulated superannuation fund.

Key findings from this case determined that while the Financial Advisor did notify Gary of the general nature of the financial advice, the financial advisor did not act efficiently, honestly and fairly, as they knew Gary was an inexperienced investor with limited income. As such, they were objectively aware of the significant risk the strategy posed to Gary, and nonetheless facilitated the establishment of the SMSF without directing him to obtain personal financial advice.  

After a number of months, it was deemed that the Financial Advisor was responsible for most, but not all of the losses Gary experienced, and was order to compensate him appropriately, plus foregone earnings if the super had remained in the APRA-regulated fund. This outcome was deemed fair, as it recognises that even though a general advice warning was provided, the Financial Advisor did not provide services to Gary in a manner that was efficient, honest and fair.