FOS backs planner on advice

An accountant and his partner who went to the Financial Ombudsman Service (FOS) seeking to recoup losses incurred during the global financial crisis because of alleged inappropriate financial advice have had their case dismissed.

A FOS determination delivered in late April has revealed the circumstances behind a complaint levelled at a financial planner by an accountant and his partner who, in May 2007, declared they wanted to gear into shares and managed funds but specifically declined to apprise her of all their financial affairs.

Among the evidence considered by the FOS panel was that the accountant had declared he did not want to pay tax in the upcoming financial year and wanted to gear so that he could claim against the interest on his borrowings.

Despite receiving a letter from the financial adviser warning that their failure to fully declare their financial position would result in only limited advice, the couple determined to go ahead with leveraged investments ultimately amounting to $250,000.

At the same time the accountant provided a letter to the institution providing the margin loan stating that by liquidating some real estate assets he could quickly acquire liquidity of $770,000.

Less than a year later the couple pursued action against the financial planner for the losses they incurred on their investment, seeking to have her financial planning company reimburse them to the tune of nearly $129,000.

Among the reasons given by the FOS panel for finding in favour of the financial planner and determining that she had acted appropriately, was the fact that the complainants had consciously withheld information from her and that they had been warned that this would give rise to necessarily limited advice.

As well, the FOS panel found that the complainants were experienced in financial matters and understood the risks involved in their strategies.