Insights for participants
Poor record-keeping makes it more difficult for FSCL to get to the bottom of exactly what was said by a financial services provider to a client. If an adviser has not taken a contemporaneous file note of a discussion, we tend to favour the consumer’s version of events over that of the adviser. We generally consider it to be more likely that the consumer will have an accurate recollection of a discussion that relates to their own finances, as opposed to the recollection of an adviser who may have multiple discussions with various clients on any given day.
Another thing for participants to note is that FSCL’s process is inquisitorial. A dispute resolution scheme is not like a court, where a person has to precisely articulate their claim. With a complaint to FSCL, we sometimes spot issues that a consumer may not have raised in their original complaint (in this case, advice to liquidate an entire portfolio, thereby crystallising a significant loss).
What happened?
In 2020, Stina attended a seminar on retirement planning, presented by a financial adviser. Stina subsequently met with the adviser. The adviser assessed Stina’s risk profile as ‘growth’ and her net wealth at around $2,500,000. On the basis of the adviser’s advice and income projections, Stina retired from her job and sold her house.
Stina had told the adviser that she wanted to buy a smaller home and invest $1 million. However, the adviser advised her to put all her money in the share market. He invested $2,300,000 for Stina, almost the full amount of the proceeds of her house sale.
By early 2022, Stina could see that the adviser’s income projections had been overly optimistic, and she returned to work. She also found a house to buy, so the adviser arranged for her to be paid a total of $1,110,000 from her portfolio. By this time, the share market had declined.
In April 2025, shortly after the announcement of tariffs by President Trump, the adviser asked Stina to phone him urgently. During the call, he advised her to sell her entire portfolio because of the volatility around the tariffs. Stina followed the adviser’s advice.
Stina’s overall return on investment was a loss of $396,267.81 including tax and fees. The fees totalled $101,937.60, with $92,806.13 of that amount being the adviser’s fees – an amount Stina considered excessive. Stina complained to FSCL.
What were the parties’ views?
Stina said that funds for a house purchase should have been kept in cash or similar, rather than invested, because she had been very clear with the adviser from the outset that she wanted to buy a house and only invest $1 million.
After FSCL raised this with the adviser, the adviser’s insurer accepted Stina’s view, and made a settlement offer of $221,000 to settle Stina’s complaint. That figure was made up of $216,000, being the investment loss suffered on the funds used to purchase Stina’s new house, and $5,000 of compensation for non-financial loss (stress). They later increased their offer to $247,000.
What was FSCL’s view?
Although Stina had not specifically complained about this, FSCL considered that the adviser’s advice to Stina in April 2025, to sell all her investments in response to news of President Trump’s tariffs, was not the advice of a prudent financial adviser. Stina told us that the adviser had not explained the potential risks or consequences of withdrawing funds, and that he did not explain that doing so would crystallise her loss. The adviser disputed this, but he did not have a file note of his conversation with Stina. FSCL accepted Stina’s account of the phone call.
FSCL thought the settlement offer should be increased.
However, we also considered that it would not be reasonable to require the adviser to reimburse Stina for the full amount of her loss. There had been warnings in the adviser’s Statement of Advice about volatility of a portfolio, and Stina may have suffered a loss anyway, depending on when she decided to exit the investments.
The adviser’s fees seemed high, but they were set out in advance and they were within a range that is acceptable within the industry, albeit that they were at the higher end. However, some of the fees were for poor advice, and it was understood that an unspecified portion of any settlement would be in recognition that Stina should not have incurred those fees.
How was the complaint resolved?
The adviser’s insurer agreed to increase the settlement offer to $320,000. Stina accepted this offer.
