The high cost of advising inaction
Financial services organisations that issue documentation to clients or members saying things such as ‘at this time there is no action required by you’ are treading dangerous ground following a recent decision by the Superannuation Complaints Tribunal(SCT).
The tribunal recently dealt with a case where a member of a superannuation fund sought compensation from the fund because he had been placed in a cash investment option for 13 weeks rather than a more aggressive investment setting.
The bottom line of the complaint was that the member had been rolled out of a defined benefit arrangement and into a personal division of the fund and while he had been informed of the fact had also been told in a letter that “at this time there is no action required by you”.
Notwithstanding the fact that the same letter urged the member to read further information contained in the documentation, the SCT found that the correspondence “was liable to create a misleading impression in the mind of the recipient”.
The tribunal said it was satisfied that the words used in the context of the emphasis attributed to the sentence could easily have encouraged the recipient to take no action.
It said that given the difference between the returns from a cash option and other options available through the fund, the trustee should not have created the impression that inaction was an appropriate course of action.
AUTHOR
Mike Taylor
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
