2 Comments 2 CommentsA woman complained to IFSO about the conduct of an investment adviser who worked with her family trust.
Between November 2017 and May 2018, her quadriplegic brother made five withdrawal requests, for a total of $189,100.
In June 2018, the woman told the adviser, who was an AFA, her brother had been the victim of a scam and the withdrawn money was gone. He had thought he was giving it to a woman who lived overseas and was going to move to New Zealand to marry him.
The woman said the adviser had breached a duty of care by allowing her brother’s withdrawals without questioning them or alerting her.
She said he did not provide financial advice because he did not discourage the withdrawals.
IFSO noted that the adviser’s scope of service said he was limited to providing advice about the trust's lump sum investment.
IFSO’s case manager said the brother was authorised to make withdrawal requests without his sisters’ agreement. The adviser was not required to check with her.
He was also not obliged to give any financial advice.
The case manager said, while he was vulnerable to a romantic scam, the case manager did not think there was anything in his previous interactions with the adviser that should have caused him to treat the requests with more suspicion than any other client.
He had been involved in all the investment planning decisions and was the person with whom the adviser reviewed the investment each year.
“While it was unfortunate that safeguards were not in place to ensure both trustees had to be in agreement about withdrawals, the case manager did not believe it would have been reasonable to require [the adviser] to question [the brother], or check with [the sister], without an agreement to do so having been put in place. In addition, [the adviser] had called [the brother] about the largest withdrawal request before proceeding with the instructions and he told him that he intended to repay the money soon.”
The case manager said the adviser only put the money into the trust’s bank account and had no knowledge of what happened to it after that. “It was unfortunate both trustees did not have oversight of the transactions from the trust’s bank account.”
IFSO said there was no evidence the adviser had not complied with his obligations or not acted with reasonable care and skill.
New Zealanders reportedly lost more than $4 million to romance fraud last year. The number of reports of romance fraud to Netsafe increased by more than 50% between 2018 and 2019.
| « More career progression likely in new advice world: Shanks | Mann on a mission to diversify financial advice » |
Special Offers
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved
Nothing untoward, but an adviser questions a withdrawal, the motive, the circumstances.
Imagine the howls of indignation, the allegations of conflicted interests - desperately clinging to FUM fees etc.