Call us: 0800 347 257

Promises, promises

Tess, her brother James, and her husband Alexander own a home together and had started renovations. Tess had also loaned James $400,000 so that he could buy into a business.

James wanted to repay the loan from Tess and borrow $100,000 to pay for the renovations. A business associate recommended a financial adviser to James, who discussed options and asked for information so that he could take the loan application further.

Because the house securing the lending was jointly owned, Tess and Alexander joined James as co-borrowers in James’ application, wanting to borrow $500,000 – $400,000 to pay to Tess and $100,000 for the renovations. The family gave the financial adviser all the information he asked for to support the loan application. At around this time, Tess took over as the contact person for the family.

Between July and November 2022, Tess and the financial adviser were in regular text contact, with Tess asking for updates and the financial adviser reassuring her that the application was progressing and looked promising. In late November the financial adviser said that approval had come through. He repeated this advice in January, and said he was just waiting for the documentation.

In April 2023 another financial adviser from the same company called Tess to say that the original financial adviser had left their company, and he would be taking over. It transpired that the original financial adviser had not submitted a loan application to the bank, and the family needed to start the whole process all over again.

The new financial adviser was able to arrange a $140,000 loan for the renovations, but the bank was not prepared to lend the $400,000 to repay James’ loan from Tess. The bank explained it viewed this as a ‘start-up’ loan and the family did not meet the bank’s lending criteria.

Tess, James, and Alexander were very disappointed about the service they had received from the first adviser and, when they were unable to resolve this complaint with the financial advice firm, Tess complained to FSCL.


Tess said that the family had trusted the financial adviser when he said the loan application was progressing and had suffered emotional distress, financial loss, and lost opportunities because the financial adviser had done nothing. Market conditions had shifted in the year they had been waiting for finance, meaning that their house was worth less and their income had also reduced. In addition, interest rates had increased.

The financial advice firm accepted the adviser had let the family down but did not accept that they had caused the family a financial loss.


We were satisfied that the adviser had led the family to believe that they had provided all the information needed for the bank to assess the loan application, and that the application was progressing.

As the family had embarked on the renovations and Tess had already loaned James the money, we were satisfied that the family had not made any decisions relying on the adviser’s misleading advice. It was our view that the adviser had not caused the family a financial loss, but his service fell far short of what is expected of a financial adviser. The adviser made promises he did not keep and did not meet the family’s reasonable expectations, all culminating in the distressing news that the bank would not lend the full $500,000.


It was our view that the financial advice firm should pay the family $4,000 as compensation for the stress, disappointment, disruption to plans, and the lost opportunity to borrow at a lower interest rate. The financial advice firm and Tess agreed, resolving the complaint on this basis.

Insights for consumers and participants

The financial advice firm had not caused the stress and inconvenience but, because the adviser who caused the problem had been working under their licence, the firm was responsible for his actions.