Tim, financial adviser, approached Amy and Carl offering to review their insurances and provide a no obligation, free quote. Amy met Tim and provided him with Amy’s and Carl’s details. Tim later met both Amy and Carl and presented his proposal matching their existing cover at a lower cost. Amy and Carl agreed to Tim’s proposal and signed an application form for the new insurance and Tim’s terms of engagement. A couple of weeks later Tim confirmed the insurance had been accepted.
However, without telling Tim, Amy and Carl decided to remain with their existing insurer. Amy and Carl did not pay the new premiums when due. When the new insurer contacted Amy and Carl about the missed premiums they said they had never wanted the new insurance. The insurer contacted Tim, who tried to contact Amy and Carl. Amy and Carl did not return Tim’s telephone calls. Tim wrote to Amy and Carl advising that because they had not proceeded with the insurance they owed him a $2,012.50 fee. The fee was for the cost of Tim’s time in twice meeting with Amy and Carl, carrying out a fact find, consulting with potential insurers and presenting his recommendations to Amy and Carl.
When Amy and Carl did not reply Tim advised he would have to refer the debt to a debt collection agency. Amy and Carl still did not reply and Tim referred the debt to a collection agency. When the collection agency contacted Amy and Carl about the debt Amy and Carl complained to us.
Amy and Carl said Tim had offered to provide a no obligation, free quote. They said Tim had no right to recover any debt and should not have referred the debt to a collection agency.
When Tim presented the proposal to Amy and Carl they signed a terms of engagement. Immediately above Amy and Carl’s signature on the terms of engagement, under the heading ‘Advisor Remuneration’ was information about the costs that would be incurred if the new insurance policy lapsed within 18 months. Tim’s diary notes recorded that he had explained if the insurer accepted the application the insurance would be in place and that costs would be incurred if Amy and Carl cancelled their insurance within 18 months.
It seemed to us that after committing to the new policy Amy and Carl had ‘got cold feet’. Instead of talking to Tim they went to another financial adviser who approached their existing insurance company and negotiated a better deal, possibly by telling their existing insurer of the new offer. However by this stage the relationship with Tim had gone beyond preparing a quote, and Amy and Carl were contractually committed to the new policy. Although they were able to cancel the new policy, that cancellation came at a cost, because Tim would no longer be paid commission by the new insurer.
We then looked at the invoice and noticed Tim included a $300 charge for a cancelled meeting. The terms of engagement did not include a charge for cancelled meetings and we considered meeting cancellations to be a business fact and risk.
We were satisfied the relationship between Amy and Carl and Tim had moved beyond the stage of providing a quote and that Tim was contractually entitled to invoice Amy and Carl for his time and expenses associated with preparing the new insurance. However we did not consider it reasonable to include a $300 charge for the late cancellation of a meeting. We recommended Tim reduce the debt owed by $300, but otherwise did not uphold the complaint.
Tim accepted the recommendation but Amy and Carl did not.