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Financial Advice Case Studies

Case studies:

People wishing to obtain independent advice regarding claims against financial advisers or institutions or who are seeking further information about our financial negligence investigations should contact us as soon as possible.

  • Double Geared Investment Advice

    Slater and Gordon recently acted for a couple aged in their mid-50s who had three children.  The couple had modest financial goals and were primarily focussed on preparing for retirement.  Their financial advisor had provided advice to them over a 10 year period.

    At the time of receiving the advice that caused their losses, the couple owned their own home outright.  Their financial goals included ensuring they had an adequate income stream in their retirement and purchasing a new vehicle. 

    The advisor recommended that the couple take a loan against their home and use that money to purchase shares in managed funds.  He then advised that a margin loan be taken against the shares to purchase more shares.  This is sometimes referred to as ‘double gearing’ and put the couple’s home at significant risk.  Double gearing is typically only appropriate for high-income earners who have a high tolerance for risk, and who have many years of their working life remaining.  

    Despite the couple raising concerns their about the risks associated with the investment strategy in the early stages of 2008, their advisor underplayed the risks and recommended that they retain their investments as they were.  In mid-2008, as a consequence of the Global Financial Crisis, the value of the couple’s shares dropped dramatically and continuously, requiring them to meet multiple margin calls made by their margin lender. Eventually the couple opted to convert their investments into cash, but in doing so suffered significant losses.

    The couple lodged a complaint with the Financial Ombudsman’s Service (FOS).  FOS found in favour of the financial advisor.  The couple then sought advice from Slater and Gordon about the strength of their claims and the appropriateness of the advice received.  On Slater and Gordon’s analysis the couple had a strong claim against the advisor in negligence. Slater and Gordon’s views were endorsed by a financial services expert whose opinion was that the financial advisor had recommended a high risk strategy where a conservative strategy was appropriate to the clients.  Slater and Gordon was able to negotiate an out-of-court settlement with the advisor and their insurer that recouped the substantial part of for the couple’s losses.

  • Unauthorised investments

    Slater and Gordon acted for a client who had a protracted dispute with her financial advisor. The client had previously engaged other solicitors who had been unable to resolve the dispute. 

    The client approached the financial advisor for advice following the sale of her small business, which she had worked to build up over many years.  The proceeds of the sale represented her ‘nest-egg’ for retirement.  As our client was very concerned to protect the funds, she sought the advice of a financial advisor on how best to invest them.

    Our client had told the financial advisor that she wanted a reliable and stable income during retirement. She said she didn’t want the money being put into high risk investments and that she wanted to be able to access the funds in an emergency. She was uncomfortable with borrowing money to invest.

    The investments that were recommended did not meet these objectives. The financial planner put our client into investments that were risky and were not able to be easily accessed. Further, the financial adviser failed to properly explain the risks associated with the investment strategy.

    A number of the investments recommended preformed very poorly. Some investments were frozen. This placed our client’s plans for retirement in serious jeopardy.  Our client did not know that her money had been invested into risky products by their advisor. By the time that she realised her investments were in danger, it was already too late – significant losses had been incurred.

    As a result of the settlement negotiated by Slater and Gordon, our client is now enjoying a financially secure retirement

  • Loss of superannuation income stream

    Slater and Gordon acted for a retiree who was receiving a pension from his superannuation fund.   Our client wanted to supplement this income with a regular income stream and sought advice from a financial adviser. 

    Our client told his financial adviser that he wanted a conservative and diverse portfolio because he was concerned about losing his capital. He also wanted some flexibility to changes his investments to suit his personal circumstances.

    Our client’s funds were invested in a managed investment scheme (the Fund) that carried a risk of loss of capital and prevented him from accessing his funds until the conclusion of a fixed term.  After the initial investment term expired, our client rolled over his funds for a further term at the recommendation of his financial adviser.

    While his funds were invested in the Fund, the Fund ceased making distribution payments and all withdrawals from the Fund  were frozen.  This resulted in our client being unable to access his funds and the income stream from his investment ceased.

    Slater and Gordon argued that had our client been properly advised of the risks associated with the Fund, he would not have invested in the Fund or rolled his funds over for a further term.  Instead, he would have invested in a less risky product that protected his capital.

    When our client first contacted Slater and Gordon, he had lost almost all of his initial investment as well as the opportunity to invest his money in a more appropriate product or portfolio.

    Upon reviewing the claim, our lawyers identified that the financial adviser had breached a number of duties it owed to our client. In particular, the financial advisor failed to:

    • exercise reasonable care in providing financial advice to our client,
    • identify and advise our client of the risks associated with the Fund; and
    • assess whether the Fund was appropriate for our client having regard to his personal circumstances.

    With the help of our legal team, our client resolved his claim against the financial adviser and received compensation for the financial losses he had suffered as a result of the financial adviser’s negligent advice. 

  • Single mother with no superannuation recommended to invest in high risk funds

    Our client was a single mother, with no superannuation and a limited income. When she received an inheritance, she sought advice from a financial planner to help her invest the lump sum amount in a way that would provide her with a limited income and a nest egg for retirement. In light of her aims, it was important to her that her funds be invested conservatively, in a way that minimised the risk of her losing her capital investment.

    Despite our client’s clear financial needs and objectives, her financial adviser invested her money in products that were much riskier than was appropriate. It was only after she lost a substantial amount of her capital investment, that she became aware of how risky those investments were.

    She tried unsuccessfully to seek compensation from her former advisor for the loss she suffered as a result of this advice. She then sought the help of Slater and Gordon, who were determined to fight for her until she received adequate compensation for her financial loss.

    The assistance of Slater and Gordon’s expert lawyers saw her succeeding in her Financial Ombudsman Service claim for compensation for the financial loss she suffered. She was awarded compensation for the loss she suffered, calculated having regard to how her money would have performed had it been properly invested in a conservative portfolio as she had originally wanted

  • High risk investments recommended to young professional

    We acted for a high income earning, young professional based in Sydney. For many years, she successfully managed her own investment portfolio. In 2007, she decided to arrange for a professional to manage her investments as she no longer had adequate time to personally manage them.

    Previously our client’s investment strategy had been relatively low risk and involved blue chip shares and managed investment funds. While our client used a margin loan to help maximise her investment performance, she always ensured that she had sufficient cash available to repay the margin loan in full if it became necessary.

    While she wished to grow her investments through engaging a professional financial adviser, she was not prepared to do this with a high risk strategy that could see her lose the money she had worked so hard to save.

    However, our client was misled by the financial advisor she retained, and her money was invested in a more risky strategy than what she had agreed to. This, combined with her financial adviser’s subsequent poor management of the investments saw her lose in excess of $100,000.

    Determined to recoup her financial losses, she came to Slater and Gordon for assistance. Slater and Gordon’s lawyers, upon analysing the claim, found that her financial adviser had incorrectly categorised her risk profile and did not have a reasonable basis for recommending that she acquire investments with higher management fees than her existing investments. The new investments recommended were highly leveraged, with the effect that our client risked losing her whole portfolio if there was a market downturn.  As the impact of the GFC became apparent over the course of 2008, our client’s advisor ought to have recognised that the investments were dangerously leveraged. Instead, he gave her misleading reassurances that her investment would be fine.

    Slater and Gordon were able to successfully settle the claim for an undisclosed amount before it progressed to a decision by the Financial Ombudsman Service. Our client was happy with this result because, by quickly settling her case, Slater and Gordon reduced her potential legal fees and enabled her to move on and begin a new investment strategy using the compensation that she received.

  • Inexperienced investors recommended to invest in complex, high risk investments

    Slater and Gordon previously acted for a couple in their 40s who made had limited investment experience and trusted that the advice they received would be appropriate to their circumstances.

    Our clients suffered a significant financial loss after following the advice of a financial advisor to invest in very complex and high risk financial products. 

    While the product disclosure statements stated the products were non-traditional investment products, carried extra risks, and were only appropriate for investors familiar with stocks, options, derivatives, and futures investments, the advisor recommended the product to the couple, who had no such experience.  Furthermore, the advisor failed to disclose critical risks that an expert financial planner later confirmed were likely to eventuate and represented that the investments were capital guaranteed, which in substance, they were not. 

    With the assistance of Slater and Gordon, the couple have now received compensation for the loss caused by the negligent financial advice.

  • Lost inheritance

    Slater and Gordon acted for a client who was bequeathed an inheritance which he wanted to invest in a way that would provide him with additional income. Our client engaged a financial advisor to assist him, from whom he received poor advice. The advisor recommended our client invest in a risky fund that has since been frozen. Our client lost a large proportion of his overall invested funds.

    Slater and Gordon brought a claim against the financial advisor, arguing that the financial adviser had breached the contract with our client by making recommendations that were not appropriate for our client’s financial objectives. It was also argued that the financial advisor gave our client advice without making proper inquiries about his personal circumstances.

    Slater and Gordon’s obtained a settlement that has restored our client’s future financial security.