Adviser firms and FAPs may risk having to account for the decisions of former advisers when they buy a client book, warns financial ombudsman service FSCL.
The FSCL was asked to look into the case of “Thomas and Tracy” who met with a financial adviser in 2018 that recommended they cancel their policies and move to a new insurer. They took his advice and agreed to a 100% loading on Tracey’s policy.
The couple saw a different adviser in 2021 who said they should not have changed their original cover as those policies were better. She complained to FSCL on the couple’s behalf.
Responding to the complaint, the financial advice firm said it was not responsible for what the adviser did because he was a contractor and not providing services on the company’s behalf.
However, the new adviser said the company must bear responsibility as the policies were written under its agency and it was receiving commission. She claimed the original adviser incorrectly evaluated the couple’s income, and recommended policies that were more expensive and provided less cover.
Following a review of the complaint, FSCL concluded the financial advice company should take responsibility. The company agreed to fully refund the loading on Tracy’s policy and offered the couple $3,500 to resolve the complaint.
FSCL states: “Advising companies/financial advice providers should be aware that they may be responsible for any advice shortcomings by previous advisers when they acquire an adviser’s clients or purchase a client book.”
Read the full FSCL decision here.