Nicola Sladden said her office received a complaint from Kiri, whose surname was not disclosed, who had met a financial adviser from her bank, wanting to simplify her affairs.
She said she wanted a low-risk, accessible investment that offered returns that were competitive with term deposits.
She wanted to invest for less than three years and for the bank to manage the investment.
The adviser recommended she consolidate her term deposits as they matured and add the principal on maturity to a New Zealand-based low-risk managed mortgage trust. For the next four months, Kiri invested her matured term deposits in the mortgage fund.
Two years later, she discovered she was receiving a return of 2% a year.
She complained to the bank that she would have been better off keeping her term deposits. She sought the difference in returns between the mortgage trust and term deposits.
“We considered whether the mortgage trust was an appropriate product and concluded it broadly met her brief to the bank. However, we considered the mortgage trust was right for only 20% of her portfolio, in what was otherwise a well-diversified portfolio. We also considered the mortgage trust should have been regularly monitored,” Sladden said.
“We considered the bank should not have recommended Kiri move all of her money from term deposits into the mortgage trust because erm deposits are stable investments, and she had no previous experience of investments where the value could fluctuate, she was a relatively unsophisticated investor and relied heavily on advice, the extra risks were not clearly explained and the mortgage trust investment was sold without any regular monitoring process, meaning she wouldn’t know of any decline in its value and return until it affected her standard of living.”
Sladden said her office recommended the bank compensate the client for the difference between what she would have received from a 20% investment in the trust and what she actually received. Kiri took the compensation. She later sold her investment in the mortgage trust and reinvested the proceeds in term deposits.
| « Former Generate man taps into new service for advisers | Mann on a mission to diversify financial advice » |
Special Offers
No comments yet
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved