Growth fund that shrank prompts client complaint

An investor who put $8000 in a growth portfolio for his son, only to find that the balance had dropped to $7000 when he tried to access it 20 years later, has complained about the advice he received.

Friday, November 18th 2016, 6:00AM

by Susan Edmunds

Susan Taylor

Financial Services Complaints Ltd received the complaint this year.

The complainant said he had hoped the money would be useful for his son to buy a house or pay for his education.

He paid an adviser $1100 for advice and had intended that the investment would grow over time before his son needed to use it.

He had seen from statements that it was underperforming but had hoped it would recover over the long term.

His adviser had since sold his business but the purchaser offered to give him the $1000 he had lost and refund the fee paid for advice.

FSCL was unable to investigate because the incident was outside its six-year time limit. The complainant eventually accepted the offer.

FSCL chief executive Susan Taylor said the investment portfolio had reasonably high fees and, with a small amount invested, that had eroded over time.

“It had also gone through some rocky periods, 2008’s GFC and the 1998 tech stock drop. With that level of fees and returns being up and down the fund had decreased in value.

“While you can understand the father’s disappointment at the same time he was receiving at least annual statements and did have the opportunity to withdraw at an earlier point in time.”

She said if he had only just discovered the problem he might have been able to take his case to the courts.

“If we had been able to investigate the complaint we would have wanted to make sure the product [the adviser] recommended was suitable for his needs. If it was unsuitable we may have considered compensation appropriate. However sometimes, investment products underperform, or do not perform to expectations. It is a risk inherent in investment.”

She said one lump sum of $8000 invested in a fairly aggressive fund was often not ideal.

Tags: FSCL