Slater & Gordon is investigating compensation claims
on behalf of investors who
received financial advice from Commonwealth Financial Planning and
Financial Wisdom, subsidiaries of the Commonwealth Bank of
Australia. Slater & Gordon has extensive experience in acting
for people who have suffered loss as a result of poor financial
advice. Below is a recent example of a professional negligence case
run by Slater & Gordon.
Double Geared Investment Advice
At the time of receiving the advice that caused their losses,
the couple owned their own home outright. Their financial goals
included ensuring they had an adequate income stream in their
retirement and purchasing a new vehicle.
The advisor recommended that the couple take a loan against
their home and use that money to purchase shares in managed funds.
He then advised that a margin loan be taken against the shares to
purchase more shares. This is sometimes referred to as 'double
gearing' and put the couple's home at significant risk.
Double gearing is typically only appropriate for high-income
earners who have a high tolerance for risk, and who have many years
of their working life remaining.
Despite the couple raising concerns their about the risks
associated with the investment strategy in the early stages of
2008, their advisor underplayed the risks and recommended that they
retain their investments as they were. In mid-2008, as a
consequence of the Global Financial Crisis, the value of the
couple's shares dropped dramatically and continuously,
requiring them to meet multiple margin calls made by their margin
lender. Eventually the couple opted to convert their investments
into cash, but in doing so suffered significant losses.
The couple lodged a complaint with the Financial Ombudsman's
Service (FOS). FOS found in favour of the financial advisor. The
couple then sought advice from Slater & Gordon about the
strength of their claims and the appropriateness of the advice
received. On Slater & Gordon's analysis the couple had a
strong claim against the advisor in negligence. Slater &
Gordon's views were endorsed by a financial services expert
whose opinion was that the financial advisor had recommended a high
risk strategy where a conservative strategy was appropriate to the
clients. Slater & Gordon was able to negotiate an out-of-court
settlement with the advisor and their insurer that recouped the
substantial part of for the couple's losses.
People wishing to obtain independent advice regarding
their claims against Commonwealth Financial Planning and Financial
Wisdom or seeking further information about our investigation
contact us as soon as possible.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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