by Paul McBeth
Widow Beryl Breeze is unlikely to see any of the $259,000 in costs and damages awarded by Justice Simon France after VPFS was put into liquidation and had not operated for nearly two years. Institute of Finance Advisers President Lyn McMorran said the case highlights a continuing problem for investors across all sectors.
"A client can go through the whole process and still come away with nothing," said McMorran. "It's not just limited to financial advisers, it's a problem for anybody with an investment."
Government regulation introducing dispute resolution services are unlikely to avoid these kinds of problems, as "people have assets in different entities." Ultimately, it is up to individual advisers who have to sign up to, and pay to be a part of, the services, McMorran said.
"It's hard to see how clients are going to avoid these issues with or without regulation," she said.
McMorran said it would be too difficult and costly to force indemnity insurance coverage on advisers, and policy makers need to take a balanced approach.
VPFS director Ven Plummer chose not to defend the claim after his indemnity insurer QBE had withdrawn his cover before the case went to trial, and had stopped dealing with Blue Chip five months before its collapse in February last year.
Justice France ruled VPFS was negligent in its dealings with Breeze due to her age and the amount of risk involved in the investment.
Paul is a staff writer for Good Returns based in Wellington.
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Whilst the fact that the cupboard was bare by time the complainant had won her case is important, the critical issue here is that the Financial Planner was found to be negligent - probably doing what they have has always been doing.
This case is an important milestone for those financial advisers who don't know what they don't know, or who have been lead to believe that the "old way is the only way".
Unfortunately when an industry surrounds itself with ignorance or greed, then all those within the industry become exposed to its failings.
My advice to the advisory industry following the outcome of VPFS v Breeze: either find a better mousetrap or start protecting your assets.