In its latest Circular the Financial Ombudsman Service discusses its approach to financial advice disputes in which a retail client says they did not understand the advice in the Statement of Advice they received from the Financial Services Provider. In these disputes, the quality and clarity of the information in the SOA is a critical issue.
If the information in the SOA is not ‘clear, concise and effective’, then FOS might find that the client did not understand the advice and the FSP had failed to secure the client’s informed consent to take up the advice.
FOS provides a case study of a complaint by an elderly war widow who was advised to invest funds in a managed growth fund.
In that case the information in the SOA about capital volatility associated with the managed growth fund was generic in nature and was not likely to alert the client to the potential for capital loss. FOS determined that it would have been prudent to put these warnings in language the client was likely to understand.
FOS found that if the SOA had been expressed in language the client was likely to understand, she would not have made the investment. FOS ordered the adviser to pay compensation to her.
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Posted 20th June 2012 by David Jacobson in Corporations Act, Financial Services