Adviser Withdraws Clawback Bill

A mortgage adviser has been asked to pay his former clients $2,000 compensation after it was determined he breached their privacy and caused them stress regarding cancelled life and health insurance policies.

In 2019 a financial adviser arranged life and health insurance for clients Noah and Dean with insurer ‘A’.

Needing a mortgage in 2023, Noah asked a different (mortgage) adviser for help. This adviser arranged the mortgage and convinced Noah and Dean to cancel their life and health cover with insurer ‘A’ and move it to insurer ‘B’.

A year later, their first adviser explained why they should revert to the cover he had previously arranged. Noah and Dean agreed, and cancelled the insurance with company ‘B’.

With this, the mortgage adviser faced a $2,500 clawback and sent Noah a bill to recompense him.

Noah and Dean complained to dispute resolution service FSCL that the mortgage adviser:

• Hadn’t followed a reasonable process when changing their insurance from insurer A to B
• Had placed undue pressure on them to keep their insurance with insurer B, by contacting them several times despite being asked not to
• Had breached their privacy by contacting third parties. Noah received messages from his colleagues, who the adviser was also giving advice to, asking him to contact the adviser and settle the complaint

The FSCL considered there were shortcomings by the mortgage adviser when he recommended Noah and Dean change their policies from insurer A to B.

The adviser’s continued contact after explicitly being told not to was unacceptable…

“We found that the adviser had placed undue pressure on Noah and Dean to keep the insurance with insurer B, by contacting them despite being asked not to,” states FSCL.

“Noah provided us with an email where he asked the adviser not to contact him anymore. The adviser’s continued contact after explicitly being told not to was unacceptable and did not meet the standard of good industry practice.

“It was also unacceptable that the adviser contacted third parties at Noah’s workplace to try and get Noah to withdraw the complaint. This breached Noah and Dean’s privacy and caused Noah stress and embarrassment.”

The adviser offered to withdraw the $2,500 invoice. FSCL recommended the adviser also pay $2,000 compensation, $1,000 for the stress and embarrassment caused by the breach of privacy, and $1,000 for the stress of the undue pressure.

FSCL states: “Financial advisers must consider whether their advice is suitable for their clients, under the Financial Markets Conduct Act. Particularly where replacement cover is being suggested, this includes setting out both the benefits and the risks of changing the policy. 

“This case is also a good reminder for advisers, and all financial service providers, to be vigilant in protecting clients’ privacy.”