ISO offers advice to adviser clients

Financial advisers’ clients are being told to keep all documents, read them carefully and ask questions of their advisers.

Tuesday, November 25th 2014, 6:00AM

The Insurance and Savings Ombudsman has produced a fact sheet about financial advisers.

Ombudsman Karen Stevens said most complaints about advisers could be avoided if there were more direct discussions between advisers and clients about the details.

“Financial advisers include mortgage and insurance brokers, financial planners, and people working for insurance companies who give advice. Complaints tend to be about the quality of advice, misunderstandings, fees and charges,” Stevens said.

A recent complaint to the ISO Scheme was from a couple who were charged a $2000 fee by their mortgage broker when they paid off their loan earlier than expected. “Their understanding was that the broker wouldn’t charge them anything, as he’d explained that the bank paid him a commission.”

But the broker explained that if the loan was paid early he didn’t receive his commission, and he would invoice his clients. This condition was specified on the broker’s Disclosure Statement that had been given to the couple. The authorisation form, which the couple signed, also referred to the Disclosure Statement.

“So although the fee was a surprise to the couple, they did have the information, and the broker was entitled to charge them,” Stevens said.

She recommended clients give full, accurate information to their advisers, keep all documentation, ask advisers about their fees and charges, ask them to explain how each product works and read their recommendations before making a decision, and to keep asking questions.

The factsheet tells adviser clients that it is important they understand the risk they are taking when they make an investment.

“‘Low risk' isn't the same as 'no risk'. You can still lose your money. Provided the adviser has explained this, the adviser is not responsible for future investment losses. Your adviser should provide you with written recommendations before you make the decision to invest.”

Clients are also told not to be complacent if their adviser is filling out an application form for insurance.

“Your adviser may help you to complete the application form, but it is your responsibility to make sure all the information on the form is correct. If the information is not correct, when you make a claim it could be declined or your whole policy cancelled If your adviser is completing the application form for you, take the form away and re-read it to make sure you have provided all the required information. If you are not happy with it, add more information or complete a new form yourself.”

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