Juliet had investments in a workplace savings scheme. In February 2020, she became concerned about Covid-19’s impact on the sharemarket and her investments. Juliet contacted the savings scheme to discuss moving her investments from a growth fund to a conservative fund to avoid potential losses.
After discussing the options with a staff member from the savings scheme, Juliet decided to move her investments to the conservative fund. Despite this, Juliet’s investments started decreasing. Juliet wasn’t sure if she should ride it out and wait for her investments to regain the losses in the long term, or move them to an even lower risk cash fund which would cap the losses, but mean the investments would be unlikely to increase much in the long term.
In March 2020, after speaking again to the savings scheme staff member, she decided to move the investments to a cash fund. The loss on her investments crystallised at $16,000.
Juliet felt she had received bad advice from the savings scheme to move the investments into a conservative fund instead of straight to a cash fund. She wanted the savings scheme to compensate her $16,000 because she said she would not have lost that money if the savings scheme had advised her to move the investments straight to a cash fund.
The savings scheme declined to compensate Juliet $16,000 because they said they had not provided any personal financial advice to her about what to do with her investments. The staff member Juliet spoke to was a salesperson who simply gave Juliet general information about the different options. The savings scheme said Juliet had made her own decisions about what to do with her investments.
Juliet didn’t agree with the savings scheme and brought her complaint to FSCL.
Dispute
Juliet felt the savings scheme led her to believe the conservative fund would return a better investment than the cash fund, and that her investments wouldn’t decrease in value if she moved them there. She said she moved the investments to the conservative fund relying on this advice.
Review
Neither Juliet or the savings scheme took a file note or recording of the conversation about moving Juliet’s investments to a conservative fund. We reviewed the other evidence available to determine whether it was likely the savings scheme had given Juliet unauthorised and poor financial advice.
The March 2020 discussion where Juliet had decided to move her investments from the conservative fund into the cash fund had been recorded. After listening to the recording, we found that the staff member was clear that Juliet needed to make her own decisions about what to do with her investments. The staff member gave Juliet general information about the options but didn’t express a view or advise Juliet about what she should do.
We decided that given the staff member clearly knew about the difference between giving information about the different options (permitted) and providing personalised financial advice (not permitted), it was unlikely they would have crossed this line in the initial conversation in February 2020.
We also considered it relevant that Juliet said she had understood the staff member was not authorised to give financial advice and that she knew the conservative fund could still return a loss on investments.
Resolution
We suggested to Juliet that she discontinue her complaint. It was unlikely the staff member had given Juliet unauthorised financial advice to move her investments to the conservative fund. It was more likely that Juliet made her own decision based on the information provided to her. Juliet accepted our view and discontinued her complaint.
Insights for consumers and participants
Financial advisers must be registered to give personal financial advice to consumers about investments, and they have duties and obligations to comply with. Consumers should contact a financial adviser if they are seeking personalised advice about their investments. Personal advice takes into account the consumer’s personal circumstances. It’s also a good idea for consumers to check the type of advice your adviser is registered to provide.
Salespeople are not under the same obligations and should be careful to make the distinction to consumers that they are providing information rather than advice about what course of action to take.
The distinction is subtle, so it is advisable for participants to take file notes and/or recordings of conversations with consumers when giving information about what action to take with their investments.
